Genuine popular ownership?

JONATHAN TIMBERS searches for the truth about foundation hospitals but is left with as many questions as answers.

The problem with the debate over foundation hospitals is that it seems to be full of opinion rather than fact. Many of us feel left in the dark by the media and politicians. Now the proposals are becoming reality, it is easier to take a view. The purpose of this article is to present the known facts about the structure of foundation hospitals, and the thinking that underlies them.

I have reviewed two documents. First, one from the Co-operative Party called Making Healthcare Mutual, which presents the case for foundation hospitals, and, secondly, the consultation document from Calderdale and Huddersfield NHS Trust, which proposes a foundation hospital trust for Huddersfield and Halifax. There are clearly other views and any conclusions drawn here are inevitably provisional. I welcome responses from those with different sources and opinions.

Making healthcare mutual

The Co-op Party pamphlet falls into three parts: an introduction by Peter Hunt of the think tank, Mutuo; a longer article on healthcare policy by Hazel Blears MP (Under Secretary for Health); and an informative essay by Cliff Mills, a solicitor, on the implications of both corporate and co-operative legal structures.

Peter Hunt’s introduction is full of ‘blue sky thinking’, or hype, as it is sometimes known. His argument is as follows:

• mutual structures will bring the health service closer to its users, whereas the NHS broke the link between hospitals and their local communities
• mutual services will be run as a business but with ‘the right interests in mind’
• they will connect more with stakeholders than proprietary businesses
• mutualism is an appropriate model for many state owned services.

There are quite significant differences in emphasis between Hunt’s views and those of Hazel Blears and Cliff Mills.

First, Peter Hunt puts much greater emphasis on the business aspects of mutuals than the other two do. In contrast, Cliff Mills even goes so far as to claim that the co-operative legal structure has the potential to remodel consumerist relationships within society, thereby reducing the culture of litigation (an important consideration for the NHS these days, alas). Hazel Blears feels that a shift to a mutually owned health service will protect it from privatisation. In other words, Hunt appears to be most enthusiastic about the private business model and, unless he has failed to express himself clearly, views mutualism as a socially inclined business model for public services.

However, he is also not entirely convincing. We know from the furore over Kidderminster hospital that some people do feel that their local hospital belongs to their community, so the NHS cannot have broken the link completely in all areas. Furthermore, he only recommends the mutual model for state-owned services and I find that suspect. If mutualism has the capacity to remodel social relationships, then perhaps we should be thinking of how to replace the corporate model in the private sector, not merely advocating it for state-owned services.

Structure of the NHS

By contrast, Hazel Blears’s arguments sit more easily with left wing thinking. She claims, somewhat strangely, that “the NHS civilised our country”. She then sets out the “core principles” of the NHS which she says have remained unchanged since 1948. The social realities which underpin these principles are explained: that sickness is expensive to deal with; that it reduces earning power; and that it occurs disproportionately among the poor.

Although these are untouchable, she claims “we have confused the values of the NHS with its structure”. Nationalisation was the ‘method through which the Left constructed accountability’. Accountability is one of the main aims of the Left. What it is and why this is so are not explained. Blears argues that because share ownership appeared to offer a closer “involvement” than a nationalised service, the Tories were able to push through privatisation.

“The only way to stop this in its tracks is to ensure genuine popular ownership,” she says. The terminology may be somewhat confused (is accountability just involvement, or something more?), but her argument is not without merit. However, if foundation hospitals are to achieve this aim, they must be examples of ‘genuine popular ownership’ – and that’s a very high standard indeed.

The minister goes on to say that although nationalisation of the health system was necessary at the time, the result has been to create “red tape, stifling local innovation and initiative”. The NHS is funded through national insurance, a kind of mutualism, but its structures are too abstract and distant from the staff and the users. Only if its structures are changed, only if they become mutual, will the NHS be protected from further Tory privatisations. Furthermore, she says, if people are involved with the provision of local health services, they will be more proactive about their own health. Although she does not say it, this is precisely the model which was so successfully put into practice by the Peckham Health Centre in the 1930s and ’40s.

Blears believes that all parts of the NHS, including primary care (GP practices) should be mutualised. She points to out-of-hours GP co-operatives, which are already running in some parts of the country, suggesting that the participation of patients in their governance is essential to “give them a real say” and “to change their experience of treatment itself”. This is consistent with her overall approach.

Foundation hospitals

Foundation hospitals, says Blears, “will own and manage their own assets and retain all proceeds from disposals as well as any operating surpluses”. When reading this, I wondered what was meant by ownership since the members cannot dispose of the assets. The relationship seems to be far more like that of trustees. However, as Cliff Mills points out, ownership means something entirely different in a mutual context. The community do not own shares in the assets; the assets are there to serve the social purposes of the community. A member does not have a share of the assets, instead she or he participates in the function on behalf of the whole community.

I am also concerned with Blears’s argument that privatisation is less likely under this method of governance. She says there will be a “legal lock” to prevent foundation hospitals being sold off. But legal locks can be removed. If individual societies own hospitals then is it not possible for a Tory government to approach privatisation in a piecemeal way, thereby making it easier? The assets of a foundation hospital in a wealthy area (or even in a place like Kidderminster, where people lost faith completely in the government’s management of their hospital) could be opened up to private investors, subject to the vote of the members.

Admittedly, there are two lines of defence against privatisation here, rather than one, but to privatise the NHS in its current form would require an all-out assault on all-fronts, *not just the surrepticious removal of a lock followed by localised campaigns*. [Neither of these is so strong]. That does not, in and of itself, rubbish the argument that closer participation by members will strengthen the NHS; it does suggest, however, that the issue of privatisation has been dealt with too lightly.

Blears goes on to talk about the form of foundation hospitals. There will be a board of governors (or “stakeholder council”), she says, which delegates tasks to a management board. Different groups of members could be represented on the stakeholder council (ethnic minorities, for example), or there could be sub-committees representing different locales and facilities (this is a little vague, I find). People in the area served by the hospital will be eligible for membership as will patients from outside the area.

She argues that similar structures could be applied to social care, although in the examples she cites she doesn’t say whether or how patients are involved in the structures. It may be an oversight, but she refers to the success of the businesses, not to the degree or quality of participation.

The legal arguments

Cliff Mills asserts that “state ownership [in the NHS] is effectively at an end”, because of the creation of foundation hospitals. As a result, he says, accountability will improve: the managers are accountable to the members and not to the minister through parliament. Clearly, this is a more direct form of accountability. The Department of Health will “still hold the purse strings” but will allocate funding “in accordance with targets agreed with local communities”.

Foundation hospitals ought to give their members the right to modify national targets to meet local conditions, but will that happen? No foundation hospital will be able to alter its constitution to defeat its social purpose and any alterations will be policed by the Financial Services Authority.

The author is clearly in favour of foundation hospitals, and demonstrates both his extensive involvement with mutuals and his commitment to their transformative potential. Certainly, the theory is there, and it does provide useful criteria with which to judge the practice. So let’s turn to the practice.

The consultation document produced by Calderdale and Huddersfield NHS Foundation Trust begins with a summary of the organisational changes the government has introduced over the last few years. Essentially, the existing structure means that both the GP practices (primary care trusts) and the mental health care trusts now commission work from hospital trusts.

One of the problems with foundation hospitals is that this arrangement will continue [in some cases]. The patients do not commission the procedures from the hospitals; by and large the PCTs do. As the hospitals are dependent on the PCTs for users, the PCTs’ institutional power is significant. The NEC of the Co-operative Party recognises that it would have been better to start by mutualising the PCTs and the mental health trusts, but conclude that some mutualism is better than none at all.

In future, the foundation hospital trust will be a public benefit corporation – in other words, it will be a co-operative corporation, owning its own assets. Local people, patients, carers and staff may become members of the corporation. A foundation hospital trust will be able to manage its own budget and decide what services people want in their community, subject to an independent regulator who can tell the foundation what it must provide and how much it can borrow.

Benefits and risks

The most significant benefits are:

• more ‘focus’ on what communities think they need in terms of services
• transparency (is this the same as accountability, or an aspect of it?)
• greater involvement from staff
• the freedom to keep budget underspends at the end of each financial year
• the freedom to access capital from other sources.

The most significant risks, according to the authors of this report, arise from the greater democratic element:

• “We might attract members from narrow interest or pressure groups,” they argue. “We would need to support (sic) such members to gain a broader perspective rather than be advocates for a single issue.” The last phrase is very telling – the trust is not worried about the SWP or the BNP, but about people with axes to grind about healthcare.
• Extra bureaucracy. Greater bureaucracy, they argue, may mean there’ll be a high degree of delegation to professional managers, taking control from the hands of the meddling public. We should point out that this is exactly the opposite of the Co-operative Party’s view, which is that foundation hospitals will reduce bureaucracy.

Those eligible to be members of foundation hospitals are:

• users or potential users
• people living in Calderdale or Kirklees
• current patients or carers
• former patients who’ve been treated during the last three years
• members of staff who’ve worked there for over 12 months
• employees of contracted out service providers
• volunteers with 12 months experience.

You are not automatically a member if you fall within one of these groups, but you can apply.

The members will elect a 30-strong board of governors, which will serve a three year term (governors can be re-elected two or three times). The board will be made up of 16 elected members, six members of staff, and eight appointed members. We are not told who will have the power to invite the appointed governors on to the board, but apparently the seats will be allocated after talking to everyone from the Department of Health to patients.

The powers of the board of governors will be:

• to be consulted by the board of directors about service plans
• to appoint auditors
• to receive copies of accounts and reports
• to appoint the chair of the trust and the non-executive directors of the board of directors (according to specified criteria)
• to set the remuneration, allowances and terms of office for the non-executive directors, who in turn set the remuneration for the chief executive and the executive directors.

The *Chair* [CEO] of Calderdale and Kirklees NHS Trust has also indicated that he believes that the board of governors would have to be consulted about borrowing arrangements (apparently, the options will include an NHS bank as well as private financial institutions).

More involved?

As the board will meet only three times a year, is this going to be “genuine popular ownership”? Throw into the equation the independent regulator, the Financial Services Authority, the Department of Health, and some financial systems which I will come to later, and it is hard to see how much more involved in their care the average patient will be under this model or, for that matter, how much more influence local communities will have over the services provided.

But that may be needlessly cynical. With the right governors, important debates could take place, and one cannot rule out the possibility that they may be able to influence some important decisions. The choice of chair of the trust is the most obvious one. My main concern about the democratic process derives from a comment the current *Chair*[CEO] made when I questioned him about governor support. He replied that: “Governors will be given a great deal of support so they know what they can and cannot do.”

But to get the right governors, they will have to be representative of the membership, and there will be a lot to do if significant numbers of members are to be recruited.

One other very important issue which has not been discussed in either document is how governors communicate with members between elections. I assume there will be an AGM, but it’s not clear how members can channel their concerns through governors at other times, nor what kind of interface there’ll be between governors and members.

In parallel to the board of governors, there will be a board of directors to make operational decisions. They are answerable to the board of governors and the independent regulator. In the transitional period, the current CEO, chair and non-executive directors will remain in place.

When the chair of the trust introduced these proposals, I noted down his opening comments. In paraphrase, he said there are three main changes the government is introducing to the NHS, and that foundation hospitals is the least significant. The other two are: “patient choice” (you can choose where you are treated), and “payment per procedure” (the PCT will pay the NHS Trust a fixed sum for every medical procedure it carries out). Also, salaries will be linked to the jobs undertaken. This appears to be a re-introduction of the internal market, and will clearly heavily influence the service plan.

I welcome the introduction of democratic elections, and giving people a representative voice on any official body is a step forward. But I wonder whether this can really be called “genuine popular ownership”.

Refs
*Making Healthcare Mutual published by Mutuo, edited by Stephen Hogan
*NHS Foundation Trust Consultation Document: Calderdale and Huddersfield NHS Trust