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Thursday 20th October 2016

NHS Foundation Trusts

16th April 2007

What is an NHS Foundation Trust?


NHS Foundation Trusts are NHS Trusts that have been authorised to manage themselves, free from any intervention by the Secretary of State or their Strategic Health Authority. They have shown that they are financially viable, and can competently manage their own affairs. Foundation Trusts were established in law in the Health and Social Care Act, 2003, as independent legal bodies known as Public Benefit Corporations, inspired by the mutual and co-operative movement where organisations are run by and for their members. Foundation Trusts are still part of the NHS - obliged to provide a range of patient services to set standards, with their assets (such as land and buildings) protected from acquisition by other parties, a cap on the amount of private patient activity they can do, and with a duty in law to co-operate with partners in the local health community. But they are run entirely locally by an appointed Board of Directors that works with a Board of Governors elected from the Foundation Trust’s membership - its patients, staff, local residents and carers. Foundation Trusts are one of the main ways in which the government is decentralising responsibility for managing, making decisions about, and setting priorities for local health services.

Why become a Foundation Trust?

Foundation Trusts have been given some attractive financial freedoms to help them determine their own future, improve services, innovate and become more entrepreneurial in the healthcare sector. They can

  • keep and reinvest any surplus they make.
  • borrow capital from public or private lenders without having to go through the normal authorisation process, as long as they can afford to repay any loans.
  • retain the proceeds of any assets they sell.
  • develop commercial or other types of partnerships eg with private healthcare providers or academic bodies.
Foundation Trusts are also able to attract work (and with it income) from a wider patient market than NHS Trusts are able to. Patients needing hospital treatment can now choose from any Foundation Trust in the country as well as from the small number of local NHS Trust providers nominated by their GP.

What is Monitor’s role?

Whilst the Secretary of State has no control over Foundation Trusts, Monitor - an independent regulator accountable directly to Parliament - has been set up to oversee their activities. Once the Secretary of State has given her support for an NHS Trust to be considered for Foundation Trust status, Monitor assesses the Trust’s readiness to self-govern and its long term financial ‘liquidity’. If Monitor authorises Foundation status, it sets out terms of authorisation, including the Trust’s borrowing limit for any loans it wants to take out, private patient activity cap, and a list of protected services and assets. It then monitors the Trust’s compliance with its Terms of Authorisation, and intervenes if there is significant non-compliance. Intervention can range from issuing warning notices, stipulating management action to be taken, removing directors and governors (as was the case at Bradford Teaching Hospitals), through to dissolving the Foundation Trust.

Foundation Trusts are still inspected by the Healthcare Commission to check they meet standards of patient care, safety and financial management.

How many Foundation Trusts are there?

The first Foundation Trusts were authorised in April 2004. As of April 2007 there are now 62, including six foundation mental healthcare trusts. The 62 trusts have a combined income of £12bn, and provide 30% of specialist and acute services between them.

There is a further long list of 33 Trusts approved by the Secretary of State to apply for FT status and awaiting assessment by Monitor.

What impact have Foundation Trusts had so far?

Foundation Trusts are, on the whole, performing better than the rest of the NHS (generating a surplus between them of £75m by the end of the third quarter of 2006/07 according to Monitor’s latest figures), and there are a growing number of examples where they are using their new freedoms to improve services. Over 645,000 people are now involved in running their local hospital having signed up as members of a Foundation Trust. There are signs that the financial and governance regime that Foundation Trusts are subject to improves performance more rapidly than the usual NHS approach, with the trusts where Monitor has had to intervene showing strong recovery in a short space of time.

However, Foundation Trusts are still subject to a large number of national performance targets which leave little scope for local priority setting. And continued pressure on the national tariff, as well as increasing interest rates, will make it increasingly difficult for Foundation Trusts to make surpluses and fund their investment plans.

What does the future hold?

Encouraged by the impact that the Foundation Trust financial and governance regime has had on performance, the government plans for all NHS Trusts to be ‘offered the opportunity’ of foundation status by 2008. They may also extend the opportunity to community service providers with incomes over £30m. The basic entry requirement of three stars was lowered to just two stars in 2005 to make it easier for trusts to apply. Monitor and the Strategic Health Authorities assessed the preparedness of all remaining NHS Trusts in 2006, including the capability of their wider health community to make local governance work. They are all working to action plans now to raise their performance to levels expected of Foundation Trusts, but it is still unclear what will happen to those that cannot make the grade by 2008. The possibility of mergers and acquisitions by successful Foundation Trusts is increasingly looking like a possibility for trusts left behind. The Secretary of State has just approved the acquisition of Good Hope Hospital NHS Trust by Heart of England NHS Foundation Trust from 8 April 2007 following a public consultation period. This was seen as the only way of stabilising Good Hope’s financial position and side steps the question of what to do with a trust that had no prospect of making the foundation trust grade.

Latest developments

  • SHAs will nominate trusts for assessment by the Secretary of State and then Monitor at four different times each year as the programme to get every trust to foundation status accelerates over the coming years.
  • The Secretary of State has put a stop to the mental health trusts that run England’s three high secure hospitals becoming Foundation Trusts, as she does not want to see the special hospitals leaving the Department’s direct control. The move could see the three special hospitals run separately once again, in a move that reverses changes made a few years ago when they ceased to be stand alone special health authorities and became integrated with other mental health services.
  • If the merger of Hammersmith Hospitals Trust, St Mary’s Hospital Trust and Imperial College goes ahead, NHS London has given approval for the new trust to apply for foundation status. This will be the first time that a non-NHS organisation (Imperial College in this case) will form part of a NHS Foundation Trust.
  • Monitor has just published the latest compliance framework for Foundation Trusts (www.monitor-nhsft.gov.uk/publications.php?id=932).

More information

For more information about Foundation Trusts go to:






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