Consortia - Understanding statutory bodies

GP consortia are going to be statutory bodies, but what will this mean? Justin Cumberlege explains.

How will being statutory bodies make GP consortia different from other types of corporate bodies or companies, and will they be the same as the NHS statutory bodies we are used to?

Statutory bodies can only do what the 'statute' governing them allows them, while companies and individuals are allowed to do anything not prohibited by law.

The 'statute' may be an act of parliament, or the regulations and directions made under the powers given by acts. So being statutory means GP consortia will only be able to do what they are allowed by the Health and Social Care Bill when it becomes an act of parliament, and by the directions made under it.

Ultra vires restrictions
The NHS is no stranger to statutory bodies - NHS trusts, foundation trusts and PCTs are all statutory bodies. The constraints on them mean they must ensure their actions are in accordance with their powers. If a statutory body steps outside these powers their action will be 'ultra vires'. This means the action taken was beyond its powers, and, in the case of a statutory body, is not authorised.

Ironically, the consequences of acting ultra vires can be greater on the non-statutory contracting party than the statutory body (although directors may incur a personal liability), as a contract entered into ultra vires is void.

So, if, say, a statutory GP consortium was to take action outside its legal powers in agreeing the terms of a provider contract, the parties (consortium and provider) have to be put back into the position they were in before the contract.

In the past, this has strained relationships with joint ventures or funding with the private sector, as a contract found to be ultra vires means any sums paid to the private sector contractor must be repaid, even if services were provided.

Unlike most statutory bodies, under the Health and Social Care Bill as it currently stands, consortia will decide their own constitutions, subject to the approval of the NHS Commissioning Board (NHSCB).

The constitution must cover the points in schedule 2 of the Bill, and cannot include powers not in the statute or not permitted by directions. The minimum schedule 2 requirements are, among others, the name of the consortium, its members (GP practices), operating area and arrangements for discharging its functions.

These arrangements could include appointing committees and the committee members. The individuals may not be from consortium practices, but can be other stakeholders, such as the local authority or private providers.

What's the difference?
  Statutory body Private corporate body
Members Membership is pre-determined and approved by NHS Commissioning Board (NHSCB). Member practices may be imposed on consortium. Chooses members, and can accept someone as a member and expel members
Directors The 'accountable officer' is appointed/removed by the NHSCB.
Members can remove the directors.
Legal requirements
May act only in accordance with powers given to it by statute in its designated geographical area. Risk of ultra vires (see main text) is perilous. May carry out any actions unless prohibited by law.
Constitution The constitution must include the requirements in the statute governing it. Changes to the constitution only allowed with NHSCB approval.
The constitution is determined by membership of the company. Can change the constitution by vote of 75 per cent of the membership.
Expanding activities
NHSCB will have discretionary powers to vary the membership membership and operating area (which must not overlap other consortia).
Company may expand membership and area of operation and compete with other operators.
Use of funds
NHSCB may direct where expenditure is targeted. Cannot spend in one financial year more than money allocated or income generated. May apply to the commissioner for more funds. Strategic moves, investment and risk in expenditure permitted (may require members' support). Able to borrow against assets, future profits and value of goodwill
Profits Discretionary payment can be sanctioned by NHSCB for good performance. Constitution may permit distribution of profits.

Conflicts of interest
The constitution must state how it will deal with conflicts of interest - a particularly difficult area for which there is no definitive answer yet. It must provide for each member actively to participate in the consortium.This will be challenging in some cases and could incapacitate the consortium if the GPs cannot agree on a strategy or find a consensus.

Unlike other statutory bodies, there is some scope for a 'dividend' or bonus to be paid to member practices as a reward if the consortium has performed well. The NHSCB, not the consortium's management, will determine eligibility and whether this will be sufficient motivation for innovative GPs is difficult to gauge.

Being a statutory body may make pursuing commercial arrangements more controversial. For example, if a consortium wants to invest heavily in information/communications technology, it might consider:

  • Setting up and operating a company as a separate entity for this, thereby ring-fencing its liability in case of failure.
  • Raising the finance from the private sector.
  • Providing security for the lender against the consortium's assets.
  • Sharing the profits of the venture.

Will the NHSCB allow consortia to push the boundaries, experiment and innovate, and if so how far?

You may also find the consortium does not have the powers to initiate changes or that a private sector partner is not prepared to shoulder the risks of investing if there is no government backing.

  • Justin Cumberlege is the partner leading the healthcare team at solicitors Carter Lemon Camerons LLP,

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