Ridouts Monitor’s New Licensing Regime – another dose of regulation for the independent and voluntary sector

Topics covered: Ridouts professional advice

Under the Health and Social Care Act 2012, Monitor (until now the Independent Regulator of NHS Foundation Trusts) will have a new role as sector regulator for health and, at a later date to be agreed, for adult social care.  To provide NHS-funded services, providers will need to be registered with CQC and licensed by Monitor.

Monitor’s core duty will be to protect and promote patients’ interests by promoting the provision of services which are economic, efficient and effective and which maintains or improves the quality of those services.

Monitor will fulfil this core duty by licensing providers subject to conditions in respect of NHS-funded services in England in relation to three main areas:

  • Regulating prices
  • Enabling integrated care and preventing anti-competitive behaviour, and
  • Supporting service continuity.

The expectation is that the majority of the licence conditions will be “Standard conditions” applying to all licensed providers or particular types of licensed provider. Monitor will also be able to impose “Special conditions” applying to specific providers. Monitor issued draft conditions for consultation in November 2011 (which are available on its website) and a full statutory consultation will occur later this year on the licensing framework to include Monitor’s guidance that will underpin the licence conditions.

Monitor will collect fees from providers in relation to its licensing functions.

It will be a prerequisite for every licensed provider to maintain the necessary registrations with CQC. The Department has emphasised that “CQC will retain independent powers to inspect providers and take action to ensure patient safety”(Department of Health, Sector Regulation, 23 February 2012).

Getting licensed

The current proposal is for all NHS Foundation Trusts to transfer across to Monitor’s new licensing regime automatically from January 2013 (Department of Health, Sector Regulation).  The original intention was that all other providers of NHS-funded services would be required to hold a licence by April 2013. However, the current thinking is that the 100 or so NHS Trusts who are yet to gain FT status, will come within the new licensing regime only at the point they achieve FT authorisation from Monitor. The Government has given a commitment for all NHS Trusts to become FTs by April 2014, although in practice there could well be some NHS Trusts still awaiting FT authorisation as late as 2015 or 2016.

Quite when independent sector providers of NHS-funded services will be licensed by Monitor remains to be seen. The Department stated in its document Sector Regulation that non-FTs would come on licensing in April 2013, however, as noted above, there appears to have been a change of plan in relation to NHS Trusts.  It is also unclear which independent sector providers will need to hold a licence. The Department is considering which providers should be exempt from the requirement to hold a licence. It is anticipated that the Department will consult on this issue in the early summer.

Monitor is at pains to stress that the application process will be simple, straightforward and light-touch. So far as possible, Monitor will rely on information held by CQC. There may be issues for independent sector providers about the proposed fit and proper person test which will be set by Monitor as the suggestion is that it may look at linked organisations within a provider group.

If Monitor refuses to grant or revokes a licence there is a right of appeal to the First Tier tribunal.

Eventually, Monitor plans to operate a joint licensing process with the CQC for all new applicant providers who fall within the Monitor licensing framework. The indication is that this will be in place by 2014.

Regulating prices

Monitor and the NHS Commissioning Board will regulate prices in the best interests of patients. Monitor’s role will be to develop the pricing methodology and calculate prices, while the NHS Commissioning board will set the overarching framework. There is the possibility that providers will be unhappy about the way in which pricing is set in which case consideration may need to be given to challenging Monitor and/or the NHS Commissioning Board.

To support Monitor’s pricing role, it will have the power to impose a condition requiring providers to establish, maintain and use systems to obtain and record specified information in relation to NHS-funded services and to provide that information to Monitor on request. The information would support the setting of the National Tariff.

Licensees would also be required to follow Monitor’s guidance which is being developed and will be the subject of consultation later this year.

Integrated care

Under the Health and Social Care Act 2012, Monitor will be required to support the delivery of integrated services for patients where this would improve the quality of care or improve efficiency. Monitor will be able to set and enforce licence conditions for the purpose of enabling integration and cooperation in the provision of services. These will reflect the existing Principles and Rules for Cooperation and Competition (PRCC) which talk about providers and commissioners cooperating to improve services and deliver seamless and sustainable care to patients.

Preventing anti-competitive behaviour

Under the 2012 Act, Monitor’s role is to ensure that competition is fair and operates in the interests of patients.  Monitor will have the power to impose licence conditions to prevent conduct which undermines choice or restricts competition against patients’ interests. Again, the licence conditions will reflect the existing PRCC.  Commissioners will also be subject to the PRCC which Monitor will enforce through its take-over of the Cooperation and Competition Panel.


Securing continuity of services

Monitor will have the power to impose licence conditions aimed at ensuring that essential patient services continue to operate. Any NHS-funded services that are designated by commissioners as Commissioner Requested Services will be covered by Monitor’s licence conditions.  Mandatory services that FTs are required to provide will become Commissioner Requested Services. For other licensed providers the decision will be one for commissioners to make looking at local circumstances. The concern is that commissioners will try to define too broad a range of services as Commissioner Requested Services in relation to independent and voluntary sector providers. Monitor will issue guidance for commissioners on how they can go about setting (or removing) Commissioner Requested Services which will be issued for consultation later in the year. Arguably if there are alternative providers who have the capacity to provide essential services in the event of a provider being unable to maintain such services then that ought to mean those services do not require a classification as Commissioner Requested Services.

If a provider becomes insolvent, those services that must continue are to be called Protected Services.       

If a provider is unhappy about the services that a commissioner has included as Commissioner Requested Services, they will be able to challenge this. This may well be necessary given the significant commercial implications for providers falling within Monitor’s continuity of service framework.  In particular, Monitor “may impose controls over providers’ decisions to dispose of essential facilities (for example buildings and equipment) necessary for maintaining continuity of services, or it may impose requirements to maintain sufficient cash flow and avoid excessive borrowing so that, for example, the provider remains able to pay its staff and suppliers” (Department of Health, Sector Regulation).

If a provider is in financial difficulty, Monitor will have a power to require the provider to appoint turnaround experts.  As a last resort, Monitor will be able to appoint an administrator in relation to FTs or apply to the court for the appointment of an administrator in relation to other healthcare services subject to Monitor’s continuity of service regime.  The administrator will take control of the provider’s business to secure continued access to essential services.  Another area that may impact on independent sector providers is Monitor’s power to levy providers (and potentially commissioners) to create a risk pool for providing financial assistance to providers in special administration.  The concern is that independent sector providers may end up having to financially support failing providers of NHS-funded services (public sector or independent/voluntary sector).  Levies would be risk based and might be used for restructuring purposes.

There is also an issue about how the continuity of service regime fits in with CQC’s powers and duties. What if CQC were to consider a Commissioner Requested Service provided by a registered provider to be unsafe? If CQC were to take legal action to stop a particular service from operating that would appear to be cut across Monitor’s licence jurisdiction. The risk is that CQC might feel constrained from intervening even though patient safety concerns exist.

Sanctions for non-compliance

Breach of conditions would give rise potentially to civil sanctions rather than criminal sanctions.

Monitor will have a power to apply “discretionary requirements” in the event a provider breaches its licence. Monitor states that the “purpose of discretionary requirements would be to act as a general deterrent to infringing the licence, to ensure compliance and to restore the position, as far as possible, to what it would have been if there had been no breach”(Developing the new NHS Provider Licence: A Framework Document, 15 November 2011).

Section 105 of the Act outlines the “discretionary requirements” that Monitor can impose against licensees who breach their licence conditions. These include:

– a “variable monetary penalty” – to pay a monetary penalty (not exceeding 10% of the turnover in England of the person it is imposed upon – s.104(4).

– a “compliance requirement” – to take steps to ensure that the breach in question does not recur or continue – Monitor will specify the period of time allowed.

– a “restoration requirement” where the provider can be required by Monitor, within such period as Monitor sees fit, to restore the position, as far as possible, to what it would have been had there not been a breach.

There is also a power to accept “enforcement undertakings” from a licence holder. An undertaking will specify (a) the action to secure that the breach does not continue or recur, (b) the action to secure that the position is, so far as possible, restored to what it would have been if the breach in question was not occurring or had not occurred and (c) action to benefit any licence holder affected by the breach or any commissioner of health services affected by the breach. This could include payments to other licence holders or commissioners so affected.

Again, Monitor will be consulting on guidance as to the use of its enforcement powers later in the year.


A sceptic might question the utility of the licensing framework to be operated by Monitor. Will it really bite and effect meaningful change in behaviour, or will it be window dressing? Much will turn on the guidance which Monitor will issue to the sector and which licensed providers will be obliged to follow. There will be an issue about the impact the licensing framework might have on the attractiveness of the NHS- funded health sector to investors and independent sector providers faced with possible licensing constraints if they contract to provide such services. There will also be the issue of how the new framework interacts with CQC’s powers and duties. In addition, Monitor’s licensing framework does not apply to commissioners which may be perceived as a weakness in the system. Although clinical commissioning groups will need to be authorised by the NHS Commissioning Board, it is not clear on what terms that will occur.  Monitor will be absorbing the Cooperation and Competition Panel so it will exercise control over commissioners to that extent, as well as issuing guidance which commissioners will be expected to follow.

Given the complexity and enormity of Monitor’s task, it is inevitable that the framework will take several years to implement and bed down. It is encouraging that Monitor is engaging with the sector and planning to implement the application process on a phased basis.

At Ridouts we will be monitoring developments closely and publishing regular up-dates for the sector.  If you require any assistance please contact us on 020 7317 0340.

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