All NHS trusts will be obliged to become a foundation trust or merge with one by 2013, the Department of Health has announced.

In the latest of a series of consultations putting flesh on the bones of the recent white paper, ‘Liberating the NHS’, the DH says it will “drive progress” towards foundation status for all, while working with strategic health authorities and others to deliver financial stability.

The consultation on ‘Regulating Healthcare Providers’ says that if a trust cannot agree “credible plans” with its SHA or proves to be “unsustainable” the health secretary may use powers in the Health Act 2009 to have it taken over.

The consultation outlines new powers for foundation trusts, which will no longer face a cap on their private patient income or statutory borrowing limits.

However, in making it clear that the government wants a market in provider services, it hints strongly that trusts will be allowed to fail.

“All providers of NHS care should be able to compete on a level playing field, so they succeed or fail according to the quality of care they give patients and the value they offer to the taxpayer,” it says.

The paper says that Monitor will start regulating all providers of NHS care from April 2013, and also outlines the powers it will be given as an ‘economic regulator.’

Monitor will license NHS providers, regulate prices and promote competition. It will be able to fine or remove a licence from a trust that fails to comply with its licensing conditions and to step-in to safeguard services at failed trusts.

The consultation proposes that Monitor should fund its regulatory activities by charging fees; with central grants covering its other activity.

It argues that it is “good practice” for regulators to be fee-funded by their industries, because this gives them “true independence” from government and an “incentive” to make sure their regimes are “proportionate”.

The consultation asks for feedback on how and to where trusts should be able to appeal if they disagree with its licensing or pricing decisions. It also asks what role Monitor should be given in investigating anti-competitive behaviour by commissioners.

Health secretary Andrew Lansley said: “All NHS trusts will become foundation trusts and they will have greater freedom so they can concentrate on being more responsive to patients.

“Competition and choice will together improve services, stimulate innovation and increase productivity. Monitor will ensure a level playing field that rewards the best and most efficient providers that continuously improve the services for the people they serve.”

Some smaller and community foundation trusts may be encouraged to become social enterprises. But the consultation is clear that this wil not apply to large, acute service providers.

Link: Department of Health: greater freedom for the NHS