The government's NHS reforms will not work without safeguards to prevent hospitals going bankrupt, the regulator of foundation hospital trusts warned yesterday.
William Moyes said measures he has introduced to prevent insolvency in the 32 foundation hospitals operating outside Whitehall control should be extended to all other acute hospital trusts.
Action was needed to avert instability under the new regime of patient choice that is being introduced by the health secretary, Patricia Hewitt, to create more competition among NHS healthcare providers.
"The present system is seriously incomplete," he told a seminar on regulating the NHS, organised by independent health thinktank the King's Fund.
There was no regime for dealing with the financial failure of a hospital if it could not attract enough patients, added Mr Moyes, the chairman of Monitor.
Measures should be in place to put a hospital into "special administration" to allow it to continue treating patients while its affairs were put in order. This was preferable to letting it go over "the cliff edge of insolvency," he said.
Under current rules it was hard to see how NHS commissioners purchasing healthcare from hospitals and other providers were accountable to parliament, he added.
The Department of Health should take direct responsibility for managing these purchases. It should stop behaving as if it was the headquarters of a conglomerate providing services and start behaving like "the headquarters of a major insurance company".
Mr Moyes said: "There was a time when all providers were state-owned and the Department of Health could control them. It was like a holding company.
"Now the voluntary sector is a big provider of care and the government also wants the private sector to become a bigger provider to the NHS.
"The government needs to redefine its role: it is no longer dealing with one organisation it can bark orders at and instruct. I would be saying to the Department of Health that you are in charge of £100bn and you have to get the best possible care you can for that money."
Mr Moyes was speaking before Monitor issued a consultation paper calling for the NHS to be regulated by two bodies - one responsible for the quality and safety of heathcare and the other for its economic regulation.
The economic regulator would set the price the NHS would pay hospitals for each type of operation, set rules for competition between providers and police entry and exit from the NHS marketplace. "I want to be that economic regulator," he said.
"With greater autonomy and freedoms given to local health organisations, strong and independent inspection and regulation is essential. Separating the inspection and regulation functions is a tried and tested approach across a range of public services.
"Splitting the two functions avoids the conflict of interest that could arise in a single body where quality of care might be compromised in the name of economy," he added.
