The first NHS foundation trusts

In December 2002, the Department of Health published A guide to NHS foundation trusts, in which it outlined in more detail the governance and role of the newly proposed foundation trusts (FTs), as well as more detail on the application process. A central objective for creating FTs was the desire to devolve power away from the centre.

The document suggested that: 'freedom from Whitehall control means freedom for the people who deliver care to develop services in a way that best suits patient needs. For high performing organisations, as NHS foundation trusts will be, the government can step back from detailed performance management. NHS foundation trusts will be able to concentrate on results that matter for local people rather than being managed from the centre.'

Role and purpose of FTs

FTs would become public benefit corporations – a form of socially owned institution similar to a cooperative society or mutual organisation.

Each FT would provide health and health-related services for the benefit of NHS patients and its community as well as upholding the values of the NHS.

Each NHS FT would be subject to a governance regime that replaced accountability to Whitehall with accountability mechanisms to the local population.

Each FT would be accountable to the local community through a board of governors and a management board, to the Commission of Healthcare Improvement (CHI) for the services they provided, and to Monitor for finance and governance.

A licence issued by the independent regulator of FTs would require the FT to uphold NHS standards and values. The independent regulator would have powers to intervene when necessary, where an FT was in breach of its licence conditions, and to safeguard the provision of essential services in the event of serious concerns. The licence would also require a strict cap on the provision of services to private patients, as well as requirements to participate in the education and training of healthcare staff in the NHS.

Application process

FT status would only be available to those providers that could demonstrate good financial performance, as well as management vision and leadership potential. For the first wave of FTs, only those trusts that had achieved a three-star status in the NHS performance ratings published by the Commission for Health Improvement (CHI) in July 2002 would be eligible to apply.

The application process would comprise three stages.

Preliminary stage: Applications would be assessed against:

1. responsiveness to patients
2. clinical standards and clinical governance
3. high quality leadership and management
4. effective partnership working and stakeholder support
5. support to clinical and other staff 
6. the financial position of the trust.

Second-stage application: A more rigorous process requiring stakeholder consultation. Applicants were required to submit:

1. a report stating how the new organisation would use the freedoms of FT status to improve services
2. an independent financial review
3. outline plans for new governance arrangements including proposals for engaging with the public
4. a statement agreed with staff outlining the terms and conditions of staff on transfer
5. a report setting out the strategic visions for the FT over the next 5 years, underpinned by robust financial data and service demand forecasts.

Establishment phase: Success in the second stage led to shadow FT status. The Department of Health and the independent regulator worked with the shadow FT to prepare for formal establishment. Detailed arrangements for governance, HR and the terms of the authorisation would need to be agreed and finalised during this stage.

First FTs

There were 24 applicants for the first wave of FT authorisations, 10 of which were granted licences and came into operation on 1 April 2004, with a further 10 being authorised later that year (the other four losing their three-star rating before authorisation). In later years there were far fewer successful authorisations, with only three trusts being authorised as FTs in 2013.