NHS Improvement has launched its consultation on wholly owned subsidiaries. The consultation outlines proposals for a new framework that changes the way subsidiaries are reported to and approved by NHS Improvement. It does not affect the legal ability of providers to develop plans, but does clarify the required approval process before plans may be implemented.
The most significant proposed change is the requirement for a Trust-approved business case to be submitted for review by a panel within NHS Improvement comprising subject matter experts across a number of areas. This panel will decide whether the proposed transaction is ‘material’ or ‘significant.
For transactions that are classified as material the board will be asked to certify confirmation of a number of statements around the business case – for instance, that it stands in the absence of any VAT savings, that it creates genuine value for the Trust and that it has sufficient flexibility for future operations not to put the organisation at risk – before the subsidiary may be established.
Significant transactions, however, will require a full, separate review process, in addition to the board certification. If, following the review, NHS Improvement considers the business plan to be too risky it will require those risks to be addressed before the subsidiary is established. If necessary – for instance, if the board considers it is not possible to restructure the proposals to the satisfaction of NHS Improvement – it will use its regulatory powers to stop the transaction.
This proposed process will apply to new subsidiary companies as well as any future ‘material’ changes to existing companies. It will also apply to income-generating and non income-generating models. NHS Improvement intends to review these requirements after one year.
NHS Providers, which represents all 227 acute, mental health, community and ambulance Trusts, has welcomed the consultation as an acknowledgement that Trusts can consider wholly owned subsidiaries as a legitimate option to deliver services safely and more efficiently, help drive innovation and keep services within the NHS family.
It also welcomes the clear statement in the consultation that such companies have been operating largely without concerns since 2010.
However, NHS Providers argues that any mandated NHS Improvement approval approach on the creation of subsidiaries must be based on a clear set of rules to provide clarity. Without this, the consultation risks setting criteria which place the bar too high for providers to justify the legitimate need for subsidiary companies.
This process must also ensure that Trusts who have been asked to pause their plans subsidiary companies whilst the consultation takes place aren't required to start again from scratch as a result of any recommendations as this would be an unnecessary waste of public money.
Chief Executive of NHS Providers, Chris Hopson, says: "Trusts are now operating under huge pressure. Alongside a severe funding squeeze, they have had to contend with workforce shortages and challenges keeping the staff they need within the NHS. Trusts are also working hard to develop new ways of working and bringing health and care services together to improve how and where patients access the care they need.
"Wholly owned subsidiaries can be an appropriate and legitimate response to meeting these challenges. They are proven in delivering practical benefits for trusts, staff and patients, driving innovation and creating efficiencies.
"Misleading claims that these entities are about privatisation and tax avoidance overlook the sound business case behind subsidiaries which can help keep services, and staff within the NHS."
The consultation will close at 5pm on November 16, 2018 and will be published in December.
Click here to take part in the consultation.
