OREANDA-NEWS. June 09, 2015. The announcement that National Health Service regulators are to take control of health care services in three English regions supports our view that NHS Foundation Trusts (FTs) benefit from strong regulatory oversight, Fitch Ratings says. This will become more important as the FT sector comes under growing operational and financial pressure.

Pressure on health services is having a growing financial impact on FTs. In FY15 the sector recorded an aggregate deficit for the first time, of GBP349m (compared to a planned deficit of GBP10m) and 0.8% of operating revenues. This was partly due to the greater use of agency staff in A&E. Meeting FY16 targets will be even tougher after the Health Secretary announced NHS budgets would have to deliver substantial savings.

The announcement shows that the relevant authorities maintain strong regulatory oversight and a willingness to intervene to safeguard patient services if FTs are thought to be failing. This is consistent with previous action. For example, in 2013 Mid-Staffordshire FT was dissolved and its two hospitals transferred to two other trusts, demonstrating that the regulator was capable of safeguarding FTs' assets, protecting the interests of patients and taxpayers, and underpinning FTs' creditworthiness.

This intervention also spurred other FTs to strengthen governance and delivery of patient care.
Monitor has recently announced measures to help FTs adopt better financial practices. Practical support to improve operational performance will include advice, "buddying" arrangements and leadership training. We think this is positive for FTs.

The level of oversight and support provided by the regulator and other Department of Health bodies will remain an important part of our credit assessment. It is already part of our FT rating approach, which combines a standalone assessment using our not-for-profit hospitals and health systems rating criteria and public-sector entity criteria, and an uplift to reflect the strong regulatory oversight.

The chief executive of NHS England said this week that regulators would work more closely together to make improvements in health services in three regions - Essex, North Cumbria, and Northern, Eastern and Western Devon. These are the first large regional interventions under the new "success regime". They aim to tackle perceived system-wide failures in patient care caused by financial problems, staff shortages and long waiting times. NHS England, the sector regulator Monitor, and the NHS Trust Development Authority will all be involved.

We affirmed Northumbria Healthcare NHS Foundation Trust's 'A'/Stable rating in November.