Commentary on Sections Part 3 - Regulation of Health and Adult Social Care Services Chapter 6 – Financial assistance in special administration cases
943.These sections require Monitor to set up effective mechanisms for providing financial assistance to providers in health special administration. This means companies in health special administration and NHS foundation trusts in trust special administration. Funding would be issued to the special administrator and could be used to finance the costs of ensuring the continuity of NHS services, both to meet the costs maintain continuity of services during a period of administration and to fund any one-off costs of securing continuity of NHS services upon exit from special administration. The intention is that providers and commissioners of such services will fund this financial assistance through financial contributions, or other financial mechanisms, determined by Monitor, for example, on the basis of risk. The Government expects that one effect of the new arrangements will be to shift the burden of funding unsustainable providers away from high-performing commissioners and providers. Under the current arrangements, the NHS has typically funded the costs of failure through the re-allocation of surplus funding, generated by efficient provision, or by clawing-back funding from allocations to commissioners. Monitor will decide the detail of the new financial mechanisms, but the Government expects it will take account of the risks presented by individual providers and the extent to which commissioners are dependent on one or very few providers for the provision of NHS services.
944.A special administrator may, during a period of special administration, use financial assistance to cover operating costs associated with maintaining continuity of services. This might include the continuing costs of operating services, costs of restructuring the provider to ensure a sustainable future organisation or any indemnities for the administrator and other relevant persons for liabilities incurred, or loss or damage sustained in connection with the exercise of the administrator’s powers and duties. Restructuring costs could include, but would not be limited to, renegotiation of service contracts, restructuring of debts, or payments made to a new operator to establish viable provision.
945.The financial mechanisms are not intended to provide long-term funding for organisations experiencing temporary liquidity issues, nor are they intended to provide long-term funding for services that are otherwise uneconomic to supply at national tariff because of market factors or special service requirements. The Government envisages that providers will secure capital from other sources (eg the Foundation Trust Financing Facility or other loans) to address temporary liquidity issues. In addition, the national tariff will include a process and methodology for increasing the prices payable to a provider, in individual cases, where necessary to sustain continuity of services required by commissioners that would otherwise be uneconomic to provide.