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NHSI guidance on wholly-owned companies ‘sets bar too high and adds another layer of red tape’

NHS Improvement (NHSI) has published new guidance for NHS providers over the creation of wholly-owned subsidiaries (WOSs) and the way they are reported and approved.

Responding to concerns over WOSs “setting the bar too high,” NHSI has produced the new regulatory process which “aligns our transaction review process” with more integrated support and assurance.

The new approach for providers will be “more streamlined with greater focus on early, more detailed engagement” with NHSI, will clearly set out the ‘red flags’ and risks over judging cases, and will require trusts to do further work and provide mitigations.

The new guidance comes after the regulator told trusts in September to pause all setting-up of private companies and transferring of staff to them whilst it consults on a new regulatory approach.

The consultation was opened by NHSI over how WOSs are approved and regulated.

Saffron Cordery, deputy chief executive of NHS Providers, which has previously stated that WOSs are not a backdoor to privatisation, said: “The guidance for overseeing the creation of WOSs set out today by NHSI rightly acknowledges that WOSs are an appropriate, legitimate and innovative way for NHS trusts to meet the challenges they face.”

But she added that NHS Providers’ response to the consultation was, like many others, warning that the regulation and oversight must be proportionate to the benefits they can bring.

“We are concerned that the level of detail and the steps outlined in the new review process go a long way beyond what is normally expected of trusts and what is required for other transactions and commercial activities,” continued Cordery.

“There are many reasons why a trust may choose to establish a WOS. These go well beyond just making tax savings. The process NHSI is choosing to adopt here sets the bar too high and introduces an unwelcome extra administrative burden into the sector.

“There is a danger that trusts will abandon innovative WOS plans and instead look to less preferable alternatives. Many will also see this guidance as part of a worrying trend where the decision-making power and autonomy of trusts and foundation trust boards continues to be eroded with more and more control shifted towards the centre.”

Top image: Sean Dempsey, PA Images


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