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News archive - November/December 2011

Economic regulator needs clear remit or risks failure

Economic regulator needs clear remit or risks failure

MONITOR, currently the regulator for NHS foundation trusts, is to have wide-ranging new powers to act as the economic regulator for the health sector. However, the scale of the objectives it has been set could lead to more confusion in the NHS and risks “diluting” the focus of its work, warns The King’s Fund.

Under the proposals contained in the Health and Social Care Bill, Monitor will be responsible for setting prices for NHS-funded services, tackling anti-competitive behaviour, and maintaining essential services if providers become financially unsustainable. But a lack of clarity about how it will work alongside other key health bodies including the NHS Commissioning Board and Care Quality Commission could create tension and make disputes harder to resolve, the King’s Fund believes. Furthermore, Monitor’s independence may not be sufficient to protect it from ministerial interference given political interest in decisions about reconfiguring services and provider failure.

The King’s Fund has produced a new report (1) on economic regulation in healthcare, looking at what can be learned from the experience of regulators in other sectors such as telecoms and utilities. The Government’s proposals appear to draw heavily on the regulatory framework developed in these sectors.

The report identifies the advantages in having a sector-specific regulator for health care, but outlines a number of challenges Monitor will need to overcome if it is to succeed. This includes the difficulty of hiring sufficient staff with the skills and expertise needed and the technical challenge of setting prices for such a large number of services, often on the basis of only limited information. Among a number of recommendations, the document suggests that:

  • the Government should amend the Health and Social Care Bill to provide greater clarity about Monitor’s objectives and how it will work with other key NHS bodies
  • the experience of other regulators indicates that objectives will need to change over time, so a clear process is needed for managing this and protecting it from political whim
  • Healthwatch, the new body formed to represent the views of patients in the health system, needs to be a powerful consumer champion for patients and taxpayers and act as a counter-balance to provider interests.

The report concludes that economic regulation is unlikely to deliver significant changes in the short term, and that other key drivers such as commissioning and performance management will continue to play an important role for some time to come. Anna Dixon, Director of Policy at The King’s Fund and the lead author of the report, said: “Monitor has been set a formidable task with little precedent and supporting analysis, so the risks of failure are considerable. Unless economic regulation is designed and executed well, it may end up imposing more costs than the benefits it delivers.”

(1) Economic regulation in health care: What can we learn from other regulators?



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