healthcare update - issue eight

Mergers and takeovers of NHS trusts – an investigation into the property perspective

The Department of Health (DH) and Monitor have requested that the NHS Cooperation and Competition panel launch an enquiry into how much control central government should retain over its NHS trust properties, following a merger with an NHS foundation trust.

Recently, the NHS Cooperation and Competition panel approved an NHS foundation trust takeover of an NHS trust. This merger included 40 properties which were used by the NHS trust for mental health services. 15 of these properties were deemed as being ‘key’ for the provision of the local mental health services.

Given the extra freedom that foundation trusts enjoy over their estate, there is concern within the DH and Monitor regarding the implications that might resonate from such a loss of control.

Poor service providers

If the commissioners or Health Secretary were not satisfied with the new service provided, they would struggle to introduce an alternative provider, which could be detrimental to the quality of care which the patients receive.

Value for money on future sales of properties

Following the foundation trusts’ take over and control of the estate, there may be non-key properties that could be disposed of to a third party. As the foundation trust is not subject to the same disposal obligations as an NHS trust, it may be that such future sales might not be value for money for tax payers.

There are also issues regarding future competition for the provision of services that are taken over by the foundation trust. There are usually a number of alternative third party service providers, all of whom could carry out the role of a new service provider. The merger might create an increased barrier to these alternative service providers wanting to enter the market in the future – the concern being that it would be more difficult to compete against the merged NHS entity with its ‘ready made’ property estate.

The panel, which helps to ensure that the principles and rules of cooperation and competition for the provision of NHS funded services support the delivery of high quality care for patients and value for money for taxpayers, agreed to the recent takeover because:

• A property ‘protocol’ was agreed between the two trusts which (in theory only, since it is not legally binding) gives the NHS trust’s commissioners a certain degree of influence over the estate, following the transfer to the foundation trust
• The concern in relation to the amount of control retained by the NHS trust’s commissioners would remain, no matter which service provider (third party or NHS) took over the trust
• The concern in relation to increased barriers to other providers would remain no matter which of the bidding foundation trusts took over
• The conclusion of the panel was that “the loss of control did not result in any detriment to the patients or taxpayers”

Further investigation

This recent merger was approved but it has highlighted the above concerns with regard to future situations where mergers or takeovers are considered, or where services are put out to tender. It might be that, although the intention is for foundation trusts to devolve decision making from central government, the Health Secretary needs to retain some influence over the future of NHS properties, for the interests of patients and/or taxpayers.

Subject to the Health Secretary passing a dissolution order, the merger will go ahead on 31 March 2010. Prior to this, the panel will be carrying out a Phase 2 investigation which is to start “in due course” and will look into the relationship between property, competition and cooperation within the NHS, with the hope of concluding this report by 11 January 2010.

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Paul Olliff 0115 908 4801 Solicitor