Date:

Mutuals in the NHS

We highlight the current support for mutualisation and ask if many of the benefits of this approach can be obtained without organisational restructure.

In the charge towards delivering transformation across the NHS, the concept of mutualisation has attracted support over recent years. There are many examples of social enterprises operating outside the NHS, but providing publicly-funded health services. According to Cabinet Office figures there are currently 53 mutual organisations providing some form of service to the NHS.

At the heart of this movement is the view that mutuals and social enterprises facilitate more effective staff engagement and involvement, the result of which will deliver service improvements. On the back of the recent King’s Fund investigation into the engagement of NHS staff led by Chris Ham, the Government has established a Pathfinder Programme. The programme is designed to help trusts consider the potential advantages of the mutual model and what it would mean for them, leaving them to evaluate the option and decide on potential models, with the Cabinet Office providing funding to support this evaluation process.

Defining mutual

The Cabinet Office’s definition of a mutual is broad, extending to structures such as charities, social enterprises, community interest companies, partnerships, and joint ventures. The scheme is searching for providers interested in exploring "whole organisational change".

Any NHS Trust or Foundation Trust (FT) wishing to adapt itself wholesale to fall within one of the options would face a number of significant challenges, not least would be the necessity for legislative changes to accommodate such a structural alteration. However, the need for transformational change is more immediate than this programme would allow.

Steps to transformation without mutualisation for clinical and non-clinical services

It is possible to consider taking steps which are aimed at delivering transformation which do not involve the "big bang" approach currently envisioned by government.

Although this is a complex issue with a number of influencing factors, it may help to sketch out a number of possibilities, particularly for FTs, at a high level.

In our thinking, we have drawn a distinction between clinical and non-clinical support services. We have done this because of:

  • the obvious sensitivities around clinical activity.
  • the clearer legal position in terms of structuring support services.

Both of these factors translate into an opportunity to develop a more complete or radical solution in respect of support services, whereas a more gradual approach may be more advisable in a clinical context.

Possible steps for non-clinical or support services

FTs have considerable flexibility as a result of their commercial powers in terms of the formation and ownership of an entity independent of the trust. As such, it is possible for an FT to form a subsidiary entity and to transfer some of its support activities into that entity. That entity could take a number of forms (e.g. a company limited by shares or guarantee, a limited liability partnership etc.) and could be owned solely by the trust or jointly by the trust with others (e.g. a commercial partner and/or the trust’s employees). Subject to its constitution and any agreements between the shareholders, it could also be a transferable asset.

Depending on prevailing procurement requirements, the entity could also provide services to the trust as well as third parties, thereby generating revenue as well as enhancing capital value. This approach has already been adopted by a number of FTs. 

In employment terms, there would be a TUPE transfer of all the trust’s staff involved in providing the services in question, although this would not be a significant issue.

Monitor’s requirements from a compliance point of view would have to be factored into the flow of the transaction under which the new body was created.

The structure would be underpinned by objectives, use of profit, share ownership, asset protection and governance provisions which would reflect general principles of social enterprise.

Possible steps for clinical services

Given the structure and activities of FTs, they are already forms of social enterprise, although the main thrust of share "ownership" has been towards their local populations as opposed to their employees. Any organisation-wide change in the emphasis of ownership will require additional powers to be provided to FTs.

There are currently issues around the legal powers of NHS Foundation Trusts seeking to treat individual clinical units or service lines similarly to the structure outlined for support services. Given the obvious sensitivities around the provision of clinical services and the sheer scale of the trust, it would be unwise to adopt a "big bang" approach without a demonstrably successful model.

With all this in mind, a more gradual approach (which could be described as "mutual-lite" or as a "virtual mutual") could be adopted which would allow a FT to identify an appropriate and scalable service unit which would be used as a pilot. The pilot would be used to test the benefits of adopting certain changes to current practices which would be more reflective of a mutual in terms of employee involvement in decision-making, wider governance and incentivisation.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Kevin Jaquiss

Consultant

I specialise in the development of new social enterprise structures for the delivery of public services.