Section 5: Primary Care Trusts: provision of services etc.

100. This inserts a new section 18A into the 1977 Act, which confers various powers on Primary Care Trusts.

101. Primary Care Trusts will be able to enter pilot scheme arrangements to provide personal medical services and personal dental services under the Primary Care Act (see paragraph 88 of Schedule 4 to the Act). The new section 18A enables a Primary Care Trust also to provide personal medical services and personal dental services under sections 28C and 28D of the 1977 Act (see paragraphs 38 and 39 of the Background section of these notes for a brief explanation of these provisions and the Primary Care Act).

102. Section 18A also provides that a Primary Care Trust may arrange to provide any service, which it is able to provide to its own population, to other patients under an NHS contract (under section 4 of the 1990 Act). For example, if it is able to provide health visiting and district nursing to its population, and has the appropriate facilities and staff, it may provide those services to other patients under an NHS contract with a Health Authority or another Primary Care Trust.

103. Section 18A(3) provides a power to make premises available for GPs, general dental practitioners, pharmacists and ophthalmists. This power enables Primary Care Trusts to provide for the delivery of all these services from under the same roof.

104. The provisions in subsections (4) to (7) concern powers to recover from private patients the costs of accommodation and services, and to carry out other activities to raise additional income for the health service. The provisions are in line with similar NHS trust powers and are subject to the same restrictions. See the commentary on section 14 below.

Section 6: Delegation of Health Authority functions relating to pilot schemes and section 28C arrangements

105. Section 6 concerns the delegation to Primary Care Trusts of Health Authority functions relating to Primary Care Act pilot schemes.

106. The Primary Care Act 1997 introduced a new option for the delivery of some family health services and provides for primary care professionals to provide personal medical services (PMS) and personal dental services (PDS) (essentially the same as General Medical Services (GMS) and General Dental Services (GDS)) under agreements with Health Authorities known in the initial stages as pilot schemes with the option in the future for these services to be provided under permanent arrangements (Part II of the Primary Care Act 1997).

107. Paragraph 88 of Schedule 4 and subsection 18A(1) of the 1977 Act, as inserted by section 5 of the Act, make provision for Primary Care Trusts to take on the role of providing PMS and PDS under both piloted and permanent arrangements.

108. New section 17A of the 1977 Act, as inserted by section 12 of the Act, enables Health Authorities to delegate the power to make agreements as a contract holder with a PMS provider whether under pilot scheme or permanent arrangements. Section 6 inserts new section 8A into the Primary Care Act 1997 in respect of pilot schemes which provides for circumstances when such delegation cannot take place and makes provision for the transfer of rights and liabilities where parties to the contract change.

109. The circumstances when such delegation cannot take place are:-

• when the Primary Care Trust is the provider of PMS under the same agreement (subsection (b)) - this excludes the possibility of Primary Care Trusts managing a contract for services which they are also involved in providing; and

• in respect of agreements to provide PDS (subsection (a)) - responsibility for managing PDS is retained by Health Authorities in line with their responsibilities for making arrangements for the provision of dental services through GDS.

110. Sub-sections (c) and (d) also provide further safeguards to avoid potential conflicts of interest by preventing a Health Authority from delegating functions in respect of

• receiving applications from potential pilot scheme providers and turning these into formal proposals to the Secretary of State; and

• the provision of funds to meet potential pilot scheme providers' preparatory costs.

111. Section 6 also inserts new section 28EE into the 1977 Act and, taken in conjunction with paragraph 37 of Schedule 4 to the Act, makes similar provisions for PMS provided under permanent arrangements.

Section 7: Primary Care Trusts: trust-funds and trustees

112. Section 7 enables the Secretary of State to provide for the appointment of trustees for a Primary Care Trust to manage the trust funds held by the trust. Such trustees have a duty to ensure that the trust funds are used effectively and that the wishes of the benefactor are taken into account. The Act provides that Primary Care Trusts will be able to hold and manage charitable property and other property held on trust, and to accept gifts of money and land on trust, for the purpose of the health service (see paragraph 12(2)(c) of the new Schedule 5A to the NHS Act 1977 as inserted by Schedule 1).

113. In addition to this section, paragraphs 27 to 30 and 33(2)(b) of Schedule 4 to the Act extend to Primary Care Trusts the existing provisions of the 1977 Act relating to private trusts for hospitals, the transfer of trust property, and the accounts of trustees.

114. The Act provides that Primary Care Trusts are able to receive and administer the charitable donations. It is expected that this will concern mainly those Primary Care Trusts that provide as well as commission services, as these Trusts may inherit funds from NHS trusts.

Section 8: Payments relating to past performance

115. This section inserts four new subsections into section 97 of the NHS Act 1977, which is concerned with the funding of Health Authorities. The insertions enable the Secretary of State to increase the initial allocation he makes to a Health Authority where certain conditions are satisfied. The White Paper The new NHS signalled the intention to reward Health Authorities that perform well with modest extra non-recurrent funding.

116. A key intention of this section is to reward Health Authorities who demonstrate most progress in implementing their plan for improving health and health care, the Health Improvement Programme (see section 28 of the Act). Health Authority performance will be assessed against the achievement of targets and objectives set out in their Health Improvement Programmes. All Health Authorities - including those making good progress from a low baseline - will be eligible.

117. The new subsection (3E) enables the Secretary of State to attach conditions to the use of the additional funding. In the case of Health Improvement Programmes, for example, the intention is that these funds will be used to accelerate Health Improvement Programmes by bringing forward projects contained in the later years of these Programmes and to meet the targets associated with that action. The new subsection (3F) enables the Secretary of State to recover the additional funding, if a Health Authority does not meet the conditions attached to it.

Section 9: Indemnity cover for Part II services

118. Section 9 gives the Secretary of State new powers to make professional indemnity cover mandatory in the NHS. It enables the Secretary of State by regulation to require professional indemnity cover for all, or any, of the professions providing Part II services under the NHS Act 1977 (GPs, dentists, pharmacists and optometrists).

119. Neither doctors nor dentists are required to maintain professional indemnity cover. The NHS has made arrangements to indemnify those employed by them, but this does not cover practitioners providing Part II services, who are independent contractors.

120. New section 43C enables the Secretary of State by regulation to require all, or any, of the practitioners providing Part II services, to have approved professional indemnity cover provided by an approved body.

121. The regulations may make different provisions for different categories of practitioner or classes of case. For some practitioners, holding approved indemnity cover may be a condition of entry to and continued inclusion on the relevant Part II list. (Part II practitioners must be included on a Health Authority list if they are to provide NHS services in that Health Authority area.) For others it may be a terms of service requirement. This flexibility reflects the widely differing arrangements for the four professions.

122. Once a practitioner who is required to hold professional indemnity cover is included on a Health Authority's list, the Health Authority will need to review the indemnity cover held by that practitioner at regular intervals. Regulations under section 43C of the 1977 Act, as inserted by section 9, may therefore require practitioners to provide the Health Authority with evidence that they hold approved cover when requested. The result of failure to comply would mean removal from the list. Where practitioners are required to provide evidence, the section contemplates that there will be a period of grace to enable the practitioner to comply with the requirements, before the Health Authority removes him from its list.

123. In the case of dental and optical corporate bodies, the clinicians employed by these bodies must also be on the Health Authority list and are responsible for employed assistants within the company. Pharmaceutical companies providing community pharmacy, however, are themselves on the list of each Health Authority in whose area they provide those services. The provisions described above therefore apply equally to corporate bodies.

124. Subsection (3) provides that indemnity cover, which may be through membership of a defence society or a suitable insurance policy, is to be approved indemnity cover with an approved body. This enables the Secretary of State to ensure that the cover is adequate to meet the anticipated level of claims. It is intended that the regulations will ensure through the approval mechanism that cover will still meet claims that arise from events when the clinician was covered but only come to light later, even if this is after the period of cover has ceased.

125. The approved indemnity could also be required to cover other persons, such as employees, assistants or deputies of the practitioner. The intention is that the cover currently held by responsible practitioners should be quite adequate to meet any new requirements, and only those contractors who fall short of reasonable cover will find themselves affected.

126. Section 9 does not alter the law of tort or contract and accordingly does not confer on any person a right to recover compensation in any case in which he has no such right at present. Its purpose is simply to ensure that where a person does have such a right he will actually be able to recover the compensation.

Section 10: Remuneration for Part II services

127. Determinations of remuneration of family health services practitioners (GPs, dentists, pharmacists and optometrists) are provided for in sections 43A and 43B of the 1977 Act, which were inserted by section 7 of the Health and Social Security Act 1984. They provide for a regulatory structure for the making of determinations of professional remuneration. However, those sections have never been brought into force. Meanwhile, determinations of professional remuneration are validated by section 7(4) of the 1984 Act. The practice prior to 1984 was to make provision about remuneration through published statements (for example, the Statement of Fees and Allowances or "Red Book" for GPs) not contained in regulations. This practice has continued to the present day.

128. The continued reliance on section 7(4) of the 1984 Act as validating determinations is increasingly unsatisfactory. In particular, without sections 43A and 43B in force there is no power to make regulations under those sections and, thus, no explicit method of appointing a determining authority other than the Secretary of State.

129. The Government intends to give Primary Care Trusts the function of determining such GP remuneration as comes from cash-limited funds. It is intended that the Secretary of State will appoint Health Authorities as determining authorities in respect of such remuneration, and direct them to delegate this function to Primary Care Trusts through regulations made under section 17A of the 1977 Act (as inserted by section 12 of the Act).

130. Section 10 substitutes a new version of sections 43A and 43B in the 1977 Act. The purpose of these revised sections is to make new provision about determinations of remuneration. The new sections rely less on regulations and more on free-standing propositions than the sections they replace and, in particular, provide a new method of appointing Health Authorities as determining authorities which will, indirectly, enable Primary Care Trusts to determine remuneration in respect of certain payments to GPs. The provisions in new sections 43A and 43B derive largely from the existing sections 43A and 43B.

131. New section 43A provides for the Secretary of State to determine the remuneration (which includes payments of salary, fees, allowances or the reimbursement of expenses) of family health services practitioners or to appoint Health Authorities or other persons as determining authorities, subject to requirements contained in their instrument of appointment. It provides for regulations to make provision about determining remuneration (including consultation and publication requirements), and subsection (5) provides in particular for regulations to permit determinations to be made by reference to the remuneration of other persons, or scales, indices or other data. Subsection (6) provides that a determination may have retrospective effect provided that taken as a whole it is not detrimental to the persons to whom it relates.

132. New section 43B provides in subsection (1) for the Secretary of State to undertake consultation before making a national determination. The Secretary of State will therefore continue to consult the national representative bodies of each group before making changes to payments that potentially affect the whole of that group (these changes would be ones to the GPs' Statement of Fees and Allowances or equivalent for the other professions). Subsection (3) provides that determinations may be made in several stages, as is currently the case. For GPs, for example, the Secretary of State might make a first stage determination in respect of the profession as a whole and publish it in the Statement of Fees and Allowances, and subsequently Health Authorities might (within parameters set by the Secretary of State) make a second stage determination of claims for allowances or fees from smaller groups or individuals within that profession.

133. As mentioned above, currently determinations of remuneration are validated by section 7(4) of the Health and Social Security Act 1984. The changes to sections 43A and 43B are intended to reflect current practice in relation to such determinations. When the new sections are in force it will therefore no longer be necessary to rely on section 7(4) of the 1984 Act.

134. It is intended that when exercising the delegated function of determining cash-limited payments Primary Care Trusts will be subject to any requirements (such as consultation requirements) that apply to the Health Authority.

135. Primary Care Trusts will not be appointed as determining authorities in relation to remuneration for dentists, pharmacists or optometrists. The Act precludes them having any functions in respect of Part II services other than general medical services (see new section 17A(3)(d) of the 1977 Act, as inserted by section 12 of the Act).

Section 11: Local representative committees

136. This section amends sections 44 and 45 of the 1977 Act to enable Local Medical and Local Dental Committees to represent doctors and dentists other than just those on Health Authority lists. Where the Health Authority concerned agrees to recognise such a committee, the Local Medical or Dental Committee will be able to represent such doctors or dentists who work as assistants or deputies to those on the Health Authority list, or in personal medical or personal dental services, as wish to be represented.

137. Section 11 further amends section 45 of the 1977 Act to allow regulations to require Health Authorities to consult Local Medical and Dental Committees either in the exercise of their functions under Part II of the 1977 Act, or in the exercise of any of their functions relating to personal medical or personal dental services, but makes it clear that this is without prejudice to any other powers to require Health Authorities to consult these committees, such as in directions.

138. The section also amends section 45 of the 1977 Act to allow Local Medical or Dental Committees to apportion the amount of their administrative expenses between those who are on the Health Authority list and those who are not.

Section 12: Directions

139. This section restates the direction-giving powers conferred on the Secretary of State by sections 13 and 17 of the NHS Act 1977, expands section 17 to cover NHS trusts, and provides for a scheme of delegation under which Primary Care Trusts have their functions conferred upon them.

140. The new sections 16D to 17B provide a flexible structure under which the Secretary of State may arrange for the exercise of functions by Health Authorities, Special Health Authorities and Primary Care Trusts and determine the level to which functions are to be devolved while maintaining appropriate control over how those functions are to be exercised.

141. New section 16D restates section 13 of the 1977 Act. It enables the Secretary of State to delegate his functions in relation to the health service to Health Authorities and Special Health Authorities. In addition, it enables him to direct a Special Health Authority to exercise specified functions of Health Authorities or Primary Care Trusts. At present the Secretary of State delegates most of his functions to Health Authorities, and he will continue to do so. Schedule 1 to the National Health Service (Functions of Health Authorities and Administration Arrangements) Regulations 1996 (S.I. 1996/708) lists those functions which the Secretary of State has delegated to Health Authorities. For example, the Secretary of State currently delegates to Health Authorities the responsibility for securing the provision of hospital and community health services in their area (see section 3(1) of the 1977 Act).

142. In a similar way, the new section 17A enables Health Authorities to delegate their functions to Primary Care Trusts, subject to certain exceptions in subsection (3). Primarily, the functions exercised by a Primary Care Trust will consist of the commissioning, and in some cases the provision, of services under Part I of the 1977 Act for their local population. A Health Authority may delegate its Part I functions by directing Primary Care Trusts to exercise those functions. Such directions may encompass both functions delegated by the Secretary of State, and those conferred directly on Health Authorities by statute or by regulations. The Health Authority will be required to issue such directions where directed to do so by the Secretary of State. The Secretary of State will also be able to determine which functions may or may not be delegated to Primary Care Trusts (section 17A(4)), and the extent to which they may be delegated.

143. The practical effect of delegation under these provisions is that the function becomes the function of the Health Authority or Primary Care Trust to which it is delegated. Legal proceedings in relation to the exercise of the function will be brought by, or against, that body, rather than the person or body which made the delegation (see paragraph 13 of Schedule 5A to the 1977 Act as inserted by Schedule 1 of the Act and paragraph 15 of Schedule 5 to the 1977 Act as inserted by paragraph 39(5) of Schedule 4 to the Act).

144. The Act does not specify what services Primary Care Trusts will or will not commission. The intention is that responsibility for commissioning the majority of hospital and community health services will be delegated to Primary Care Trusts (with some exceptions such as some specialised services). With respect to the provision of services, it is envisaged that, initially, Primary Care Trusts will be able to provide and manage only community health services (i.e. those services which the Secretary of State has a duty to provide under sections 3(1)(d) and (e), 5(1) and (1A) and Schedule 1 to the 1977 Act). The Act does not restrict Primary Care Trusts to the provision of community health services, however. Any restrictions will be set out by the Secretary of State in directions or the order establishing a Primary Care Trust. This will provide the flexibility to change the functions of Primary Care Trusts where necessary.

145. Subsection (3) of the new section 17A prohibits the delegation to Primary Care Trusts of functions relating to high security psychiatric services, family health service functions under Part II of the 1977 Act other than general medical services functions, some functions in relation to PMS and PDS (see section 6) and certain other specified functions. A limited range of general medical services functions will be delegated to Primary Care Trusts. The delegation of such functions will be set out in regulations and will not affect GPs' independent status.

146. The Government intends to require Health Authorities to delegate to Primary Care Trusts the function of determining such GP remuneration as is to come from cash-limited funds. It will also consider requiring the delegation of certain other GMS functions: for example, making arrangements for the temporary provision of services where a GP retires or is suspended.

147. New section 17 extends the current powers of direction under section 17 of the 1977 Act (which currently applies to Health Authorities and Special Health Authorities) to include Primary Care Trusts and NHS trusts. This allows the Secretary of State to give instructions to any of the bodies concerned about how they are to exercise their functions.

148. New section 17B provides that Health Authorities will also be able to direct Primary Care Trusts about the exercise of functions they have delegated to them. Any Secretary of State directions under section 17 will take precedence. It is not intended that Health Authorities should use their powers to seek to control the detailed day-to-day operation of Primary Care Trusts.

149. The current direction-giving powers in respect of NHS trusts are conferred by paragraph 6 of Schedule 2 to the 1990 Act and relate to a limited number of very specific matters. The new section 17 replaces these powers of direction with a general power, in line with that relating to Health Authorities and Primary Care Trusts, which enables directions to be given in relation to the full range of NHS trusts' functions.

150. New sections 18(1) to (1B) specify how directions under sections 16D to 17B of the 1977 Act are to be given. Any directions given by regulations are subject to parliamentary scrutiny. The existing section 18 (and the new section 18(1A)) provides that regulations must be used to give directions delegating the Secretary of State's functions relating to special hospitals (see section 41 for further provisions relating to special hospitals) and any directions about the Secretary of State's functions regarding the establishment of Community Health Councils (section 20(1) and (2) of the 1977 Act). The new section 18(1A) also applies to any directions specifying that Health Authorities may or may not delegate GMS functions to Primary Care Trusts.

Section 13: Establishment orders

151. NHS trusts are currently established under section 5 of the 1990 Act. This states that the Secretary of State may by order establish NHS trusts,

• to assume responsibility...for the ownership and management of hospitals or other establishments or facilities which were previously managed or provided by Health Authorities (section 5(1)(a)); or

• to provide and manage hospitals or other establishments or facilities (section 5(1)(b)).

152. Sections 5(1)(a) and (b) therefore determine the functions that may be conferred on a trust. All NHS trusts were originally established under section 5(1)(a) of the 1990 Act, in recognition of the fact that they inherited property from Health Authorities or their predecessors on their establishment. Their establishment orders limited them to owning and managing property that had previously been managed by a Health Authority or its predecessors.

153. The section 5(1)(a) function has become increasingly out-dated, both in its reference to property previously managed by Health Authorities, and in its restriction of trusts to owning the property they manage. This is particularly true for trusts entering into Private Finance Initiative (PFI) contracts with private sector partners. These contracts typically involve the trust granting a long-lease on part of its property and receiving a sub-lease from the private sector partner or partners for the duration of the contract. The new public-private partnerships may also involve trusts acquiring brand new hospitals. Section 5(1)(a) does not allow a sufficiently wide power to be conferred to do either of these. It has therefore been necessary to amend individual NHS trusts' establishment orders where required, to give them powers under section 5(1)(b).

154. Subsection (1)(a) of section 13 replaces the current sections 5(1)(a) and (b). It provides for the Secretary of State to establish NHS trusts to provide goods and services for the purposes of the health service. Subsection (1)(b), by replacing the current section 5(6), enables the Secretary of State to confer in a NHS trust's establishment order a duty to provide particular goods or services at or from particular hospitals, establishments or facilities. The function of providing such goods and services includes managing such hospitals, establishments or other facilities. This enables the Secretary of State to specify a particular type of service (such as ambulance services, for example) which the trust must provide and a particular site or associated sites from which those services must be provided.

155. There has been some doubt raised as to whether the functions that may be conferred under the old section 5(1)(a) encompass all property arrangements entered into by NHS trusts to date. There has also been some doubt raised as to whether the functions conferred under section 5(1)(a) allow trusts to acquire new hospitals or facilities not previously managed by a Health Authority. The parties concerned have entered into these arrangements in good faith, so the Government wishes to put their validity beyond doubt. Subsection (3)(b) ensures that existing establishment orders remain valid despite the amendment to section 5(1). Subsection (4) provides that NHS trusts are to be treated as never having been restricted to managing premises previously managed by Health Authorities or their predecessors. In addition subsection (5) allows for amendments to NHS trusts' establishment orders and elsewhere in legislation to be made with retrospective effect where necessary to give effect to the section in practice.

Section 14: Exercise of powers

156. This section amends section 5(9) of the 1990 Act which places limits on NHS trusts' exercise of their charging and income generation powers conferred by paragraphs 14 and 15 of Schedule 2 to the 1990 Act. Section 5(9) currently provides that NHS trusts may only exercise these powers if this will not to a significant extent interfere with their functions as set out in their establishment order or their obligations under NHS contacts.

157. Section 14 extends the current provision to ensure that the restriction it imposes on the exercise of income generation powers applies in respect of all NHS trust functions, not just those conferred on an NHS trust in its establishment order. The exercise of an NHS trust's charging and income generation powers should not to a significant extent interfere with, for example, the trust's obligations under the duty of co-operation (section 26). It also allows the Secretary of State to specify in directions circumstances in which NHS trusts will also require his consent to exercise their charging and income generation powers. Directions could, for example, specify an amount of income above which his consent is required.