Do hospitals respond to

greater autonomy?

Evidence on Foundation Trusts

Rossella Verzulli, Rowena Jacobs and Maria Goddard

Centre for Health Economics, University of York

rowena.jacobs@york.ac.uk

Health Policy Seminar Series, Nuffield College, Oxford

17 November 2011

Foundation Trusts

• Not-For-Profit independent public benefit corporations

• Required to meet national targets, but more freedoms how to achieve standards

• Incentives to develop business - greater autonomy expected to bring benefits

• Subject to less central monitoring and control, free from StHA performance management; regulator – Monitor

• Applying for FT status is voluntary but dependent on performance

• Government expects all NHS providers to become FTs by April 2014

Accountability of FTs

FT membership

• NHS staff, local citizens share governance through

membership rights

• Total membership approx

2.03 mill (2011/12)

• Average number members

per Trust 13,962 (Mar 2011)

• Governor election turnout rates: 48% (2004) 25% (2010)

• Average number candidates per governor seat: 3.63

(2004) 2.76 (2010), most difficult to secure staff seats

• Average uncontested seats: 23% (2004) 47% (2010)

• 10% staff, 14% public, 16% patients “active” members

Southern Health NHS FT

Governors’ statutory roles

• Appointing, removing and deciding terms of office of

chair and other non-executive directors

• Approving appointment of chief executive

• Reviewing annual report and accounts and auditor’s

report at general meeting

• Appointing and removing the auditor

• Expressing view on Board’s forward plans in advance of

plan’s submission to Monitor

Foundation Trust freedoms

• Don’t have to break-even every year, retain financial

surpluses

• Manage assets, invest in buildings and services (quicker

access to capital investment), borrow public and private

sector

• Recruit and reward staff with more competitive salaries,

control over appointing directors, set local pay

agreements

• Form partnerships with the private sector and other

hospitals, or specialise in selected services

FT investments

• FTs invested to expand capacity and develop new services

– New paediatric facility at Moorfields Eye Hospital - Richard Desmond Children's

Eye Centre (RDCEC)

– Cambridge University Hospital major refurbishment and IT equipment

– University Hospital Birmingham – new leukaemia centre

FT investments

– New cardiology and surgical unit at Stockport

– Papworth Hospital – cardiothoracic biotech incubator

– Guy’s and St Thomas’ Hospital – new respiratory unit, new fracture clinic

• In practice FTs have tended to deliver less capital expenditure than planned (71% of plan 2009/10)

Introduction of FTs Acute Specialist MH Ambulance Total

2004/05 21 4 - - 25 (18%)

2005/06 5 2 - - 7 (5%)

2006/07 18 4 5 - 27 (19%)

2007/08 12 2 16 - 30 (22%)

2008/09 14 1 11 - 26 (19%)

2009/10 3 3 8 - 14 (10%)

2010/11 4 - 1 2 7 (5%)

2011/12 2 1 - - 3 (2%)

Total 79 / 146

54%

17 / 20

85%

41 / 60

68%

2 / 11

18%

139 / 237

59%

Risk ratings 2010/11 Acute Specialist MH Total

Governance

Green (low) 47 12 36 95 (74%)

Amber-green 17 4 4 25 (19%)

Amber-red 6 - - 6 (5%)

Red (high) 3 - - 3 (2%)

Finance

5 (low) 1 1 - 2 (2%)

4 21 9 23 53 (41%)

3 48 5 17 70 (54%)

2 1 1 - 2 (2%)

1 (high) 2 - - 2 (2%)

Deriving the financial risk rating

Deriving governance risk rating

Escalation, breach, intervention

Potential significant breaches

Aim of this study

• Examine whether new freedoms enjoyed by FTs have

produced difference in performance of FTs compared

with non-FTs since introduction of FT policy in 2004/5

• Previous analysis suggested no significant change in

financial performance of FTs (Marini et al, 2007)

• We add to evidence by:

updating previous estimates of impact of policy on financial

performance with inclusion of larger number of FTs operating

over longer period of time

examining differences between FTs and non-FTs on quality

and staff satisfaction

Methodology • Difference in performance between FTs and NFTs pre-

and post- introduction of FT policy

FT policy

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

FTs Treatment

NFTs Control

Pre-treatment Treatment

DID methodology

• Difference in difference (DID) methodology to test

difference in performance of FTs and NFTs as response to

FT policy:

where yit is the performance indicator for Trust i in period t,

FTi is a dummy for FT status, Dt is a year dummy with

baseline year 2003/4, and Xit is vector of covariates

𝑦𝑖𝑡 = 𝛽0 + 𝛽1𝐹𝑇𝑖 + 𝛽2𝑡𝐷𝑡 + 𝛽3

6

𝑡=1

𝑋𝑖𝑡 + 𝛿𝑡𝐹𝑇𝑖𝐷𝑡 + 휀𝑖𝑡

6

𝑡=1

DID methodology

• DID method relies on crucial assumption that assignment

of Trusts to treatment and control groups is random

• Assumption is violated as Trusts can volunteer for FT

status (subject to performance requirements)

• Mimic a designed experiment – assumes random

assignment to treatment

• Use propensity score matching method (logit model) to

match control group on pre-treatment observable

characteristics

Methods

• Use two control groups

– All non-FTs (86 Trusts)

– Matched non-FTs (79 Trusts)

• Estimate variety of panel data models

• Pooled OLS, fixed effects (FE), random effects (RE)

• RE model is preferred specification - Hausman test

supports RE against FE

• Results provided by simple pooled OLS specification

qualitatively similar to RE

Data • Acute and specialist Trusts in England: 2002/3 to 2008/9

• Measures of financial management: retained surplus

(deficit) as proportion of total expenditure, Reference Cost

Index (RCI)

• Measures of quality of care: MRSA infection rates, mean

waiting times, staff reports of “near misses” and errors

• Measures of working environment: staff job satisfaction,

intention of staff to leave

• Explanatory variables: measures of activity, efficiency in

use of resources, capital inputs, case-mix, key targets,

type of Trust

Results: propensity score matching

Inpatient days per spell -0.449 (-2.04)**

Financial management 1.022 (3.64)***

Hospital cleanliness 0.973 (2.65)***

Percent inpatients waiting less than 6 months 0.079 (1.68)*

Percent outpatients seen in 13 weeks 0.057 (2.27)**

Constant -13.970 (-3.14)***

Observations 173

R-squared 0.265

t statistics in parentheses

* Significant at 10%; ** Significant at 5%; *** Significant at 1%

Retained surplus hypothesis DID (+)

-0.10

-0.08

-0.06

-0.04

-0.02

0.00

0.02

0.04

0.06

0.08

0.10

97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05

NFTs (all) FTs

Retained surplus (deficit)

Results: Retained surplus (deficit)

RCI hypothesis DID (-)

92

94

96

98

100

102

104

97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05

NFTs (all) FTs

Reference Cost Index (RCI)

Results: RCI

Results for financial performance

• FTs expected to achieve higher financial performance by

enjoying greater control and flexibility over financial

matters

• Results suggest policy per se has made no difference to

the financial performance of FTs relative to NFTs, as

measured in terms of surplus and RCI

MRSA rates

Results: MRSA rates

Mean waiting time (days)

Results: Mean waiting time (days)

Witnessing potentially harmful errors

Results: Witnessing errors

Job satisfaction of staff

Results: Job satisfaction of staff

Intention of staff to leave

Results: Intention of staff to leave

Results for quality and staffing • With greater control and flexibility over financial,

organisation, and reward policies, FTs expected to be

more responsive to patients’ needs and meet national

quality targets

• Results suggest FT policy has made no impact on quality

of patient care as measured by MRSA rates, waiting

times, witnessing near “misses”, and staff job satisfaction

• Positive and significant impact on staff intention to leave

suggests that, to the extent such intentions reflect quality

of environment and care provided, FT policy may have

had positive effect, albeit very small

Conclusions

• Little evidence superior performance of FTs inferred from

simple comparison is true reflection of FT status

(exception of staff intention to leave)

• Not much evidence FT policy has made a difference –

there are longstanding differential trends

• Important policy implications about whether extra costs

involved in setting up and regulating FTs are justified –

annual running costs of governance arrangements £25m

• Evaluation of FT policy is of importance beyond UK

context and for all systems currently experiencing similar

transitions, or which plan to in future