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Critical areas for CPD #4: foundation trusts

27 March 2009

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Independent Healthcare Consultant

Director of Primary Care
National Services for Health Improvement

Steve is a former Royal Navy Officer, and joined the health service as a chief management accountant in 1984. He has worked at all levels of the NHS. He was an associate tutor at the Institute for Health Policy Studies at the University of Southampton and has worked for the professional development committee of the Institute of Healthcare Management

“NHS foundation trusts (often referred to as ‘foundation hospitals’) are at the cutting edge of the government’s commitment to the decentralisation of public services and the creation of a patient-led NHS.”(1)

Foundation trusts are designed to be at the forefront in shaping a patient-led NHS. They are no longer bound by control from central government and are free to exercise local policy and preferences in the delivery of patient care.

However, these trusts are recognised as being part of the NHS family and therefore their prime responsibility is to continue to provide NHS care to patients based on need and not ability to pay. The introduction of foundation trusts has been managed since 2004, with new waves being authorised each year.

Boards of governors, who are elected from local representation, work closely with board directors. Between them, they are responsible for deciding how local services will be provided. Foundation trusts are not privately owned businesses, and there are rules in place that prevent services becoming privatised.

However, their accountability structure now means that decisions can be made more effectively. Some say that these decisions do not allow proper consultation with the rest of the NHS family, particularily when considering change of services or ward closures.

Put simply, foundation trusts work within an agreed accountability framework and have to work within legally binding contracts with their commissioners. They are governed by Monitor, which is an independent body that has been set up to regulate and oversee all foundation trusts (see Resources). Monitor has the power to intervene where it considers that a trust is failing. It also ensures that a trust does not concentrate on too few specific specialities.

With the introduction of Choose and Book (see Resources) and the extended choice network, these trusts can effectively market their services and compete with other providers to carry out work. The level of work undertaken is not governed by a contract stipulating the level and value of work, but instead each procedure or episode is paid for according to the rules of Payment by Results or the national tariff.(2)

The legislation passed to enable the trusts to exist was the Health and Social Care (Community Health and Standards) Act 2003. The first foundation trusts were formed in 2004. The number has increased in the last couple of years, and the new waves have been extended to include not only the acute sector but also mental health.

There is a view that eventually all trusts will be given the opportunity to reach foundation status. Most of their contract work continues to come from the local primary care trust (PCT) and, in accordance with local agreements, trusts continue to be inspected by the Healthcare Commission in respect of quality standards (see Resources).

In the future, there is likely to be one inspectorate for both healthcare and social services, and foundation trusts will be governed by inspections similar to that used in education.

Growth and funding
One of the key differences for foundation trusts is that they can look to raise capital from both the public and private sector. However, there are clear rules with regard to the amount of borrowing at any one time. These are governed against projected cash flow forecasts and historic achievement. So it follows that if a trust can attract new work and improve upon its existing capacity, then it will allow future reinvestment and growth into potentially excellent centres for acute and secondary care.

The NHS plan of 2000 recognised that there would be ever-changing patient needs for the future and that services would have to be available and delivered at the point of need at no cost to the patient.(3) It recognised, of course, that it was likely that costs would continue to grow and put a further strain on already limited resources.

The 10-year plan, which is being replaced by Lord Darzi’s NHS Next Stage Review,(4) included foundation trusts as being a means of local ownership and greater commitment to providing the best possible services. For the first time, the local community has a real stake in the way that patient services are delivered in the community. Wherever possible, foundation trusts will look to appoint local representatives to act on the board of governors so there is true local representation.

One of the immediate drawbacks of the new freedom made available to the trusts is the fact there is insufficient funding  to pay for the full range of services being carried out. Therefore, a foundation trust may still have available capacity or, indeed, may have issues with waiting times as a direct result of local funding issues. This might seem a paradox, but in fact this phenomenon was identified as early as the 1980s, when the first waiting lists were published and monitored at district hospital level.

However, it does allow the foundation trust the option to demonstrate that it is able to remain in financial balance and produce financial surpluses by good management and planned use of available resources. Included within this is the ability to assess and reward its employees in accordance with how well the trust is performing. This allows the trust to see its employees as an integral part of achieving success.

Trusts and primary care commissioners
From the point of view of general practice, it is important to look at foundation trusts as one type of provider that can deliver specialised services. With the introduction of polyclinics and GP-led health centres, another part of the Darzi review, the interest of the patient becomes paramount. More accesible and local services means that trusts will be in competition for the provision of certain services.

In some cases, they may choose not to provide certain specialities in order to concentrate on other areas. Cost should not be a driving force, although certain services provided in the community can be achieved at a significantly lower cost.

In the future, we should expect to see quality as a factor that will drive the commissioning process. If a foundation trust can offer an acceptable level of service then it will be able to attract referrals from patients directly when they start to exercise true choice.


1. Department of Health. NHS foundation trusts [internet homepage]. Available from:…
2. Department of Health. Payment by results
[internet homepage]. Available from:…
3. Department of Health. The NHS Plan: a plan for investment, a plan for reform. London DH; 2000. Available from:…
4. Department of Health. High quality care for all: NHS Next Stage Review final report. London: DH; 2008. Available from:…


Choose and Book

Healthcare Commission