Consultation on changes to NHS transactions guidance

NHS England and NHS Improvement have launched a consultation on changes to the NHS transactions guidance for trusts undertaking transactions, including mergers and acquisitions.

The main changes relate to the redefinition of what is meant by a “transaction”. The new definition includes significant service contracts; novel contentious or repercussive financing arrangements; and collaborative arrangements such as hospital chains where they “give rise to material risk for the parties involved” or are “difficult to unwind without introducing significant risk”.

Service contracts will be regarded as “significant” where NHSE/I determines that the contracts could expose the trusts, and the systems they are part of, to significant incremental risk. Examples given are contracts between trusts and non-NHS organisations that have risk/gain-share arrangements, and contracts that materially change the scale or scope of a trust’s activity.

Novel, contentious or repercussive financing arrangements are an interesting addition. The Treasury expects to approve such arrangements. The proposed change earmarks any financing proposal that is novel contentious or repercussive as a “transaction”, ensuring that Foundation Trusts are caught too, which had been a grey area.

A footnote explains: “Novel transactions are those of which the trust has no experience, or are outside the range of normal business activity. Contentious transactions are those which might give rise to criticism of the trust by Parliament, and/or the public, and/or the media. Repercussive transactions are those which are likely to cause pressure on other trusts to take a similar approach and hence have wider implications.”

Collaborative arrangements are also to be “transactions” where they may give rise to material risk. The consultation puts down a marker that it is considered that material risk may result from joint board posts and the development of “committees in common for which a significant proportion of strategy formulation and/or operational management of services has been delegated from the trust boards.”

However, it is not envisaged that every collaboration will need to be reviewed. NHSE/I says, “We expect that many provider collaboratives will be unaffected, although others – for example where significant joint leadership is proposed – may trigger a review under this guidance.”

All transaction proposals will need to meet a new overall test of whether the deliverable benefits to the population materially outweigh the costs and risks in the medium to long term. However, capital proposals will fall outside the transactions guidance and will instead be considered under the new capital regime with thresholds for FTs not in distress set at £50m (or £30m for digital cases) rather than being subject to the gross assets and revenue class tests of the transactions guidance.

The proposed changes also remove the requirement for independent accountants’ reports on transactions and seek to focus the gateway reviews on a wider range of measures, including looking system-wide at whether there are patient, financial and other benefits and disbenefits beyond the transacting providers.

Next steps and timeframes

The consultation closes on 21 December 2021. You can share your views on the proposed changes by completing the online survey here.

NHSE/I will consider the responses and publish a response summary, with the aim to implement the updated guidance from 1 April 2022, subject to any appropriate transitional arrangements.

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