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NHS Improvement publishes consultation on oversight of NHS-controlled providers

13 October 2017

This article is taken from October's health newsletter. Click here to view more articles from this issue.

NHS Improvement has recently published a consultation paper ‘Consultation on our oversight of NHS-controlled providers’. This outlines proposals for organisations controlled by NHS providers (such as wholly owned subsidiaries or joint venture companies) which are delivering significant amounts of NHS care to be overseen in the same way as NHS trusts and NHS foundation trusts.

Current position

NHS foundation trusts and independent providers are regulated by NHS Improvement through mandatory provider licences together with the Single Oversight Framework (applicable to foundation trusts) and the Risk Assessment Framework (applicable to independent providers). Whilst NHS trusts are not required to hold a provider licence, they are effectively regulated in line with equivalent conditions by virtue of the provisions of the Single Oversight Framework.

NHS foundation trusts and, to a more limited extent, NHS trusts, have the power to set up subsidiary companies and joint venture vehicles in certain circumstances. Commonly, these have been set up for the purposes of providing pharmacy, pathology or similar services. These NHS-controlled providers are not subject to the same regulatory oversight as NHS foundation trusts or NHS trusts, as they are currently classed as independent providers which are subject to a lighter touch regime.

The rationale behind the proposed change

NHS Improvement clearly sees the above distinction as an anomaly where the provision of NHS care is provided through entities ultimately controlled by NHS providers. With the advent of new care models in line with the Five Year Forward View, it is also acknowledged that subsidiaries and joint venture companies are likely to become increasingly common as a vehicle for holding contracts and delivering care, for example to deliver Multispecialty Community Providers (MCPs), Primary and Acute Care Systems (PACS) or Accountable Care Organisation (ACO) care models. In view of this, NHS Improvement is keen to see this anomaly rectified and wants to ensure that NHS-controlled providers are, so far as possible, overseen in the same way as NHS providers.


Under the new proposals, NHS-controlled providers would be overseen, as far as possible, in a way which is equivalent to the oversight of NHS providers. The proposed way of implementing this is to introduce a set of standard licence conditions for NHS-controlled providers which are based on those applicable to NHS foundation trusts.

The consultation proposes to introduce a standard set of licence conditions for NHS-controlled providers which will include all licence conditions which are currently applicable to licence holders as well as an additional licence condition specifically for NHS-controlled providers. This additional condition would cover governance expectations and would mirror the conditions applicable to NHS foundation trusts in relation to their governance arrangements in condition FT4 of the NHS foundation trust licence conditions.

The proposed new licence conditions would apply to all providers which are required to hold a provider licence and which are ultimately controlled by one or more NHS providers. The basis for defining 'Ultimate Control' has not yet been finalised and forms part of the consultation. The existing exemptions from the requirement to hold a licence (for example for small providers with less than £10m of applicable NHS turnover) would continue to apply.


If the proposals are approved, NHS-controlled providers will need to take steps to review their governance arrangements in order to ensure compliance with the new licence condition and all other relevant guidance and oversight tools applicable to NHS foundation trusts (which will generally be applicable to NHS-controlled providers unless it is not possible or appropriate for them to comply).

The consultation anticipates that providers will be asked to revoke their current licence and will be asked to apply for a new licence which will include the new NHS-controlled provider licence condition. The current timetable for this process is unclear but the consultation indicates that, subject to approval, the changes will be introduced from April 2018.

Next steps

The consultation closed on 13 October and NHS Improvement’s response summary is awaited. In the meantime, if you have any questions about the consultation and what this will potentially mean for your organisation, please do get in touch.

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