Monitor’s Draft Risk Assessment Framework is issued for consultation

Topics covered: Ridouts professional advice

On 10 January 2013, Monitor issued its Draft Risk Assessment Framework for consultation.

Given that Monitor will be regulating a wider range of providers of NHS services its current Compliance Framework, which applies only to NHS foundation trusts, is being replaced with what is called the Risk Assessment Framework.

Adrian Masters, Managing Director of Sector Development at Monitor, states in the Foreward to the consultation document that:

“This new framework will enable Monitor to protect the continuity of key NHS services provided by both NHS foundation trusts as well as commercial or third-sector providers.”

Continuity of key NHS services

The focus is on the risk of financial failure rather than the overall financial position of the organisations that will be regulated by Monitor under the new licensing regime. NHS foundation trusts will be licensed with Monitor from 1 April 2013 and “other eligible NHS service providers from April 2014.”  The Department of Health is deciding on the terms of the exemptions (see our article in September 2012).

What is clear from the consultation is that Monitor intends to focus on the risk of providers of Commissioner Requested Services (i.e. those services that commissioners designate as needing to be protected in the event of a provider no longer being a going concern) no longer being a going concern. Therefore, those licence holders that do not provide Commissioner Requested Services will not be subject to the financial elements of the Risk Assessment Framework.  Commercial and third-party providers licenced with Monitor may want to consider challenging decisions by commissioners that they are providing Commissioner Requested Services if they think such designation is unmerited.  If there is capacity within the health market to pick up the services provided to the NHS by the commercial or third-party operator there is likely to go be a good argument that they should not be designated as Commissioner Requested Services.

If a provider is providing Commissioner Requested Services they will fall under the regulatory scrutiny of Monitor and be awarded a “continuity of service risk rating.”  This will be based on two financial metrics: liquidity and capital servicing capacity.  Ordinarily, monitoring will continue on a quarterly basis (rating 4) but if there are emerging or residual financial concerns that will lead to monthly reporting of the risk rating (rating 3). If there are escalating concerns (rating 2), Monitor can decide on whether an investigation is required into whether the provider is in breach of its continuity of services licence condition.  If Monitor considers that the provider is displaying financial concern, it can take a more active role in ensuring continuity of services, possibly using its enforcement powers (see our article published on 14.01.13).  In extreme cases, where Monitor decides there is financial distress, Monitor may initiate contingency planning and, ultimately, special administration.


The second element of the Risk Assessment Framework relates to assessing the Governance of NHS foundation trusts so will not affect commercial and third party providers of NHS services.

Monitor states that it will draw on 4 main sources of information:

  • The Corporate Governance Statement from each foundation trust confirming compliance with the governance licence condition at the date of the Statement and anticipated compliance with the governance condition for the next financial year, specifying any risks to compliance and any action proposed to manage such risks;
  •  A governance rating calculated by Monitor on  a range of governance indicators;
  • The NHS foundation trusts’ forward plans which may trigger governance issues;
  • Periodic external governance reviews.  The proposal is that these would be every three years and carried out by a third party on an approved panel maintained by Monitor.  It is proposed that these reviews would look at such matters as board capability, board effectiveness, the effectiveness of risk assurance processes and quality governance, assessed against Monitor’s Quality Governance Framework.

Governance rating for NHS foundation trusts

The factors which Monitor will consider in judging this rating are as follows:

  • Care Quality Commission judgements on the quality of care provided;
  • performance against selected national access standards in the NHS constitution and NHS mandate;
  • performance against selected elements of the NHS Outcomes Framework published by the Department of Health in November 2012;
  • relevant information from third parties;
  • staff and patient information pertinent to the quality of care provided by the NHS foundation trust; and
  • risk to the continuity of services.

We would highlight the importance of CQC judgements.  Under the proposed levels of governance concern, receipt of a CQC warning notice would be deemed a “material governance issue – potential use of formal powers – Amber Red” which is only one down from “Red – Formal action to address governance issues taken.”  It will be important for NHS foundation trusts to decide whether a warning notice can be challenged given that it may materially affect the trust’s governance rating if it remains in place.  Warning notices can be withdrawn by CQC and it is worth considering whether there may be a basis for making representations to CQC against the warning notice aimed not only at preventing publication but seeking its withdrawal.  At Ridouts, we find that CQC does not always investigate matters thoroughly and can arrive at judgements that are not supported by the underlying facts and/or are disproportionate given all the circumstances.

Concluding comments

While NHS foundation trusts will be familiar with the way in which Monitor assesses risk, it will be new for those commercial and third party providers of NHS services who will come on board for licensing from April 2014, subject to the terms of exemptions that are still to be issued by the Secretary of State for Health.

The consultation document can be found on the Monitor website at:

The deadline for responses to the consultation is 4 April 2013.

We will be reporting on Monitor’s response to the consultation when this is publicly available.

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