Monitor may fail to fulfil its new responsibilities as the economic regulator for health care unless the government provides greater clarity about its role, according to a new report, Economic regulation in health care: What can we learn from other regulators? from The King’s Fund.

The Health and Social Care Bill gives Monitor, currently the regulator for NHS foundation trusts, wide-ranging new powers to act as the economic regulator for the health sector. Under the proposals, it will be responsible for setting prices for NHS-funded services, tackling anti-competitive behaviour, and maintaining essential services if providers become financially unsustainable. This will see it increase in size to 500 staff and acquire a budget of £82 million a year.

The report finds that:

• the large number of objectives Monitor has been set may cause confusion and risks diluting the focus of its work
• a lack of clarity about how it will work alongside other key health bodies including the NHS Commissioning Board and Care Quality Commission risks creating tension and making disputes harder to resolve
• there is a risk that Monitor’s independence will not be sufficient to protect it from ministerial interference given political interest in decisions about reconfiguring services and provider failure.

As Monitor takes on its new role, the new report looks at what can be learned from the experience of regulators in other sectors such as telecoms and utilities. The government’s proposals draw heavily on the regulatory framework developed in these sectors, perhaps stemming from Andrew Lansley’s experience in the mid-1980s when he worked as a civil servant in Norman Tebbitt’s office during the de-nationalisation of the public utilities.

The report identifies advantages in having a sector-specific regulator for health care but outlines a number of challenges Monitor will need to overcome if it is to succeed. It highlights the difficulty of hiring sufficient staff with the skills and expertise needed and the technical challenge of setting prices for such a large number of services, often on the basis of only limited information. Among a number of recommendations, the authors suggest that:

• the government should amend the Health and Social Care Bill to provide greater clarity about Monitor’s objectives and how it will work with other key NHS bodies
• the experience of other regulators indicates that objectives will need to change over time, so a clear process is needed for managing this and protecting it from political whim
• Healthwatch, the new body formed to represent the views of patients in the health system, needs to be a powerful consumer champion for patients and taxpayers and act as a counter-balance to provider interests.

The report concludes that economic regulation is unlikely to deliver significant changes in the short term, and that other key drivers such as commissioning and performance management will continue to play an important role for some time to come.

Anna Dixon, Director of Policy at The King’s Fund and the lead author of the report, said

‘Monitor has been set a formidable task with little precedent and supporting analysis, so the risks of failure are considerable. Unless economic regulation is designed and executed well, it may end up imposing more costs than the benefits it delivers. As the Health and Social Care Bill proceeds through the House of Lords, we hope that ministers will look again at the lessons to be learned from other regulators and make the changes needed to enable Monitor to succeed in its new role.’

• Read the Economic regulation in health care: What can we learn from other regulators? publication.
• Listen to Anna Dixon as she describes Monitor's new role and the challenges it will face.