Newsflash: NHS Improvement publishes revised Transactions Guidance
NHS Improvement (NHSI) has published Transactions guidance – for trusts undertaking transactions, inlcuding mergers and acquisitions which replaces Monitor’s previous guidance supporting NHS providers: guidance on transactions for NHS foundation trusts (updated March 2015) and the NHS Trust Development Authority’s transactions guidance in delivering for patients: the 2015/16 Accountability Framework for NHS trust boards (June 2015).
Overall the guidance, whilst refreshed, remains substantially the same. The thresholds for reporting transactions and NHSI’s classification of transactions as either “small”, “material” or “significant” have not changed although there are now helpful examples of the types of transaction risk factors that will result in a transaction being classed as “significant”. These include CQC ratings and segmentation under the Single Oversight Framework.
The main shift is to reduce the stages in the process, doing away with the separate strategic outline case and outline business case, so that Trusts are required to produce a more detailed “strategic case” at stage 1. The stages for transaction reviews are under the new guidance are as follows:
- Stage 1 Strategic Case: NHSI will undertake a four week review to determine whether the trust(s) should proceed to the business case stage;
- Stage 2 Business Case: NHSI will undertake a detailed review lasting 10-12 weeks after which it will issue a transaction risk rating. This stage remains substantially the same as the FBC stage under the previous guidance;
- Stage 3 Approvals: Trusts will complete any necessary approvals and for statutory transactions, make their application to NHSI.
NHSI has also introduced within stage 1 “red flags” that if identified will require further work by the trust(s) before they may proceed to stage 2. NHSI has stated that if necessary it will use its formal enforcement powers to take action to prevent transactions from proceeding.
The guidance gives a high level summary of the Competition and Markets Authority (CMA) review process, confirming that NHSI expects a CMA review if required to be completed after stage 1 but prior to submission of the business case (stage 2), unless there are exceptional circumstances requiring a parallel competition and transaction review. This has the potential to lengthen the timescales for transactions, particularly if a transaction is referred to a phase 2 merger review by the CMA and should be factored into the planning of a transaction.
NHSI has also included learnings from past transactions as well as appendices setting out detail on the legal and regulatory requirements of different transaction structures, which will be a helpful starting point for trusts considering a transaction.
The transaction review process is potentially streamlined under this updated guidance, reflecting NHSI’s move towards a more flexible and pragmatic approach but Trusts looking to undertake a transaction will still require detailed legal, competition and financial advice in order to meet NHSI’s requirements.