Foundation Trusts seeking to take advantage of a potential loophole that could allow them to increase the amount of income they generate from private patient care are walking a legal tightrope according to health law experts at Browne Jacobson. Unison is seeking a judicial review unless Monitor, the Foundation Trust regulator, steps in to stop the growing numbers of Foundation Trusts setting up joint ventures, special purpose vehicles and charities to get around a legislative cap.
A number of Foundation Trusts have looked to use a perceived legal loophole which allows them to set up a separate legal entity to carry out private patient work. Monitor’s interpretation of the legislation is that income derived from this private work can be passed onto the Trust without affecting the cap that currently exists. Salisbury, North Bristol, UCLH and Chelsea & Westminster Foundation Trusts are either planning or already using this method of enhancing their income from private work.
Oliver Pritchard, a health law specialist at law firm Browne Jacobson, said: “Many Foundation Trusts would like to increase their income from private patients, and see this as an essential part of exercising the supposed greater autonomy and flexibility which Foundation Trust status was supposed to confer on them. But the principle of the cap is enshrined in the legislation and is also set out within each Foundation Trust’s ‘Terms of Authorisation’ so any changes to the level of the cap either for an individual Foundation Trust or generally would require new legislation. Not even Monitor has the power to alter the cap.”
Salisbury NHS Foundation Trust has also established a separate company limited by guarantee, Odstock Private Care Limited (OPCL), which it funded by means of a loan, to carry out private patient work using Salisbury District Hospital’s facilities so as to take advantage of the loophole. Salisbury Foundation Trust had hoped that OPCL would qualify for charitable status thereby benefiting from tax advantages. However, the Charity Commission has decided that OPCL does not meet the necessary criteria to qualify. This decision will call into question the plans of some of the other Foundation Trusts to use charitable vehicles.
“The combination of the threatened judicial review of Monitor’s guidelines by Unison, and the possible High Court challenge to the decision of the Charity Commission on Odstock, has created a climate of uncertainty. Any Foundation Trust which is currently considering incurring substantial time, effort and expenditure in setting up a separate legal entity to provide private patient care may be well advised to delay its plans until these arguments have been tested by the courts and the legal position has been clarified,” Pritchard concluded.
