Foundation Hospitals

What are Foundation Hospitals?

'Foundation Hospitals' are hospitals that are run by NHS Foundation Trusts - a new type of NHS body introduced by the Health and Social Care (Community Health and Standards) Act 2003.

Foundation Trusts differ from mainstream NHS Trusts in a number of ways: firstly, they have greater freedom to decide how to meet local health obligations; secondly, they are intended to be more directly accountable to local people; and thirdly, they are authoritised and regulated by a separate Independent Regulator for NHS Foundation Trusts.

In all other respects, Foundation Trusts have the same responsibilities as NHS Trusts. However, they have a different legal basis, as independent 'Public Benefit Corporations'.

NHS Trusts can apply to become Foundation Trusts. The Secretary of State and the Independent Regulator then consider the application and the ability of the Trust to better fulfil its responsibilities to the public in the new form.

Only the best-performing Trusts that have achieved Three Star status in NHS Performance Ratings are eligible to seek Foundation Status.


Background

The NHS Plan published in 2000 proclaimed the Government's commitment to relaxing centralised control of the NHS as a means of improving services and providing greater choice to patients.

This policy, and that of Foundation Trusts, was fleshed out in the April 2002 document, 'Delivering the NHS Plan: next steps on investment, next steps on reform', followed in July 2002 by the 'Eligibility Criteria and Timetable'.

The legal basis for Foundation Trusts was provided by the Health and Social Care (Community Health and Standards) Act 2003.

In autumn that year, a pre-selected group of 29 Trusts' applications for Foundation status went forward, 24 of which the Government is supporting. The first Foundation Trusts begin to function in April 2004.


Controversies

Foundation hospitals have been one of the most divisive issues in contemporary domestic politics.

Central to the Government's plans is the concept of 'earned autonomy' - the idea that a Trust that performs well can 'earn' additional powers and funding. Among the extra powers earmarked for Foundation Trusts are powers to borrow money and decide on capital investment, powers to enter into contracts, and powers to diverge from national pay settlements.

There will also be a new 'payment by results' funding system to replace the 'block settlement' arrangements for Trusts, due to come into force in April 2004 for Foundation Trusts and in April 2005 for the rest of the NHS,

Opponents of Foundation status claim that the extra powers for Foundations and the new funding system will lead to the new Foundations prospering at the expense of other Trusts. They argue that the policy will widen the gap between the best NHS bodies and the worst, by rewarding the best-performing Trusts, and particularly by giving them the power to pay staff more than the rest of the NHS. The way to improve the NHS, these opponents argue, is by improving the levels achieved by all, rather than by favouring the high-performing few.

Similarly, it has been suggested that permitting Foundation Trusts to select their own local clinical priorities could lead to closures of expensive units, disposals of assets and other unwanted changes to services. Some are concerned that giving Trusts freedom to borrow and spend in line with their own priorities will result in the build up of large deficits and debts, underwritten by the Government.

Supporters of Foundation Hospitals argue that the new powers will ensure that hospitals are better able to respond to local health priorities, free from Whitehall interference and the "dead hand" of central bureaucracy. Dismissing the two-tier argument, the Government has said that it hopes to see all NHS Trusts become Foundation Trusts within five years.


Statistics

The first NHS Trusts to become Foundation Hospitals are: Basildon and Thurrock University Hospitals NHS Foundation Trust; Bradford Teaching Hospitals NHS Foundation Trust; Countess of Chester Hospital NHS Foundation Trust; Doncaster and Bassetlaw Hospitals NHS Foundation Trust; Homerton University Hospital NHS Foundation Trust; Moorfields Eye Hospital NHS Foundation Trust; Peterborough & Stamford Hospitals NHS Foundation Trust; Royal Devon and Exeter NHS Foundation Trust; The Royal Marsden NHS Foundation Trust; and Stockport NHS Foundation Trust

Statistic 1: (Source: Department of Health press release, 2004)


Quotes

"(1) An NHS foundation trust may do anything which appears to it to be necessary or desirable for the purposes of or in connection with its functions. (2) In particular it may- (a) acquire and dispose of property, (b) enter into contracts, (c) accept gifts of property (including property to be held on trust for the purposes of the NHS foundation trust or for any purposes relating to the health service), (d) employ staff."

Health and Social Care (Community Health and Standards) Act 2003, Section 18

"We are starting with the best managed because by definition they are best placed to run their own affairs. But we are not saying that poor hospitals will be left to sink or swim."

Prime Minister's Official Spokesman, March 2003

"It is not the principles of the NHS that need to be changed - it is how it works in practice. One approach is about ends, the other is about means. The Bill preserves NHS values and does so by changing NHS structures."

Alan Milburn, then Health Secretary, Second Reading of the Health and Social Care (Community Health and Standards) Bill, May 7 2003