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Is it necessary to ‘pierce the corporate veil’ in addressing patient safety in the public interest?

Nurses staffing











The impact of poor staffing on patient safety in the NHS cannot be underestimated especially now. Paul Sankey, Principal Lawyer (Partner) in Clinical Negligence at the law firm Slater & Gordon LLP, wrote this week as follows:

Paul Sankey Slater GordonAs hospital services are increasingly outsourced to the private sector, and as NHS Foundation Trusts themselves are financed at a corporate level through mechanisms such as the Private Finance Initiative (PFI), it has become necessary to consider the extent to which such private operations can be scrutinised through freedom of information (FOI) legislation. Generally, private bodies are excluded from FOI across a number of jurisdictions, and there has even be a sectoral approach under scrutiny. It is a well established principle that the company has a separate legal personality from its members. In very limited circumstances, the English courts can ‘pierce the corporate veil’, putting to one side the company’s separate legal personality and holding that its members are subject to the legal consequences of the company’s acts. Obvious examples might include product liability in breast implants (PIP implants), but more subtle is to consider the effect of staffing levels in the operation of private companies or indeed PFI-sourced NHS Foundation Trusts.

The RCN provide that staffing levels for nursing must be adequate:

“Attention is now focussed more sharply than ever on staffing. Public expectation and the quality agenda demand that the disastrous effects of short staffing witnessed at NHS hospitals such as Mid Staffordshire should not be allowed to happen again. Time and again inadequate staffing is identified by coroners’ reports and inquiries as a key factor. The Health Select Committee 2009 report states: ‘inadequate staffing levels have been major factors in undermining patient safety in a number of notorious cases’. In one year the National Patient Safety Agency (NPSA) recorded more than 30,000 patient safety incidents related to staffing problems.”

Indeed, as the RCN go on to say, staffing levels constitute part of the wider “business case”:

“The financial context means we need to ensure services are staffed cost-effectively. Many of the identified high impact actions and efficiency measures proposed rely on reducing costs by minimising the expense of avoidable complications such as DVTs (deep vein thrombosis), pressure ulcers and UTIs (urinary tract infections). But ‘avoidable complications’ are only avoidable if effective nursing care is consistently  delivered. This relies on having sufficient nurses with the right skills in place – which depends on robust planning in terms of nursing staff resources.”

The Health and Safety Executive provide the following useful information about staffing levels and safety:

“The term ‘staffing levels’ refers to having the right people in the right place at the right time. It is not just a matter of having enough staff, but also ensuring that they have suitable knowledge, skill and experience to operate safely.  Economic pressures to save costs and improve productivity, as well as organisational initiatives to delayer, multi-skill and enhance team working, have had the effect of reducing staffing levels. Reductions in staffing levels do not necessarily pose a direct threat to health and safety. Rather, the impact of changes to staffing arrangements on health and safety performance will depend on the quality of the planning, assessment, implementation and monitoring. Health and safety should be managed in the same planned and informed manner as all other elements of reorganisation.”

The issue of whether NHS Foundation Trusts are open to freedom of information requests is complicated.  Public authorities often enter into outsourcing and private finance initiative (PFI) arrangements with the private sector to run services or deliver capital projects. These are often the subject of complex requests for information under the Freedom of Information Act 2000 (FoI). Sometimes the private sector will hold the requested information and the public authority will have access to it but on restricted terms. The question arises: who holds the information for the purposes of FoI? Section 3(2) of the act states: ‘For the purposes of this act, information is held by a public authority if: (a) it is held by the authority, otherwise than on behalf of another person; or (b) it is held by another person on behalf of the authority.’

The guidance of exemptions from the Freedom of Information Act by the Ministry of Justice is extensive (“Guidance”). Section 43 exempts information, disclosure of which would be likely to prejudice the commercial interests of any person. An example of ‘commercially sensitive information might be a “trade secret”. Section 43(1) exempts information if it constitutes a trade secret. The FOI Act does not define a trade secret, nor is there a precise definition in English law. However it is generally agreed that a trade secret must be information used in a trade or business; is information which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret; and the owner must limit the dissemination of the information, or at least, not encourage or permit widespread publication. According to this Guidance, a department’s, or other body’s, commercial interests might, for example, be prejudiced where a disclosure would be likely to: damage its business reputation or the confidence that customers, suppliers or investors; it may have in it have a detrimental impact on its commercial revenue or threaten its ability to obtain supplies or secure finance; or weaken its position in a competitive environment by revealing market-sensitive information or information of potential usefulness to its competitors.

It appears that the research is consistent with the notion that unionised workforces can promote health and safety. For example in “Trade union recognition and the independent health care sector: A literature review for the Royal College of Nursing”, it is proposed that:

“A briefing produced by the TUC (2004) cited a wide range of national and international sources demonstrating the beneficial role played by trade unions in promoting health and safety at work. Workplaces with unions playing a safety role showed injury reduction rates of between 24 and 50 per cent. Observation of health and safety regulations was also shown to be substantially higher in unionised workplaces.”

The answers given by Jeremy Hunt about freedom of information thus far have been extremely unhelpful. See for example the Hansard report of Helen Jones’ question (Helen Jones is the Labour MP for Warrington North) on 11 June 2013 on the subject of “NHS Accountability”:

NHS accountabilityWhen the current language has been very much of “parity”, as per the “Fair Playing Field” review of the healthcare economic regulator “Monitor”, it is plainly counterintuitive that freedom of information will apply to some parts of the healthcare sector but not all. Logically, either the whole healthcare sector becomes opaque to freedom of information (as is currently the case), but this does not make sense when only this week Jeremy Hunt was singing the joys of “transparency” in the Commons Health Select Committee. The law generally has been slow to catch up with the formidable challenges in regulating against examples of pathological toxic cultures in the NHS. Clinical negligence can attempt to prove on the balance of probabilities breaches in a duty of care on the law of tort route, and indeed the clinical regulators can in theory encourage Doctors to report other people for a fall in acceptable standards, including adequate resources in hospitals. The law could even prosecute for misuse of public office in theory. However, all of these have proved to be impractical, and the number of sanctions or prosecutions has been relatively low. In this jurisdiction, and elsewhere (particularly the US), there has been a long narrative about whether it is possible to “pierce the corporate veil”, in a fashion of incremental judge-made law, but by far the easiest solution is for Parliament simply to legislate on this. The current Health Select Committee with its formidable membership is well placed to make recommendations to parliament. Certainly, the judiciary would presumably agree that manning a NHS ward with a safe number and quality of nurses is in the public interest, and rather than relying on the judiciary to remedy a suboptimal situation after the event (through intricate consideration of public interest disclosure and whistleblowing and other remedies), it might be more helpful if the legislature could do something before the horse has bolted. The savings in “the Nicholson Challenge” have been described as ‘bureaucratic’ in yesterday’s “Estimates” debate, and there is no sign of this abating (see for example the comment made by Stephen Dorrell MP, head of the Health Select Committee (HSC)):

“It is against that background that the Committee recommends in paragraph 16 of the report on health and social care:

“In our view it would be unwise for the NHS to rely on any significant net increase in annual funding in 2015-16 and beyond. Given trends in cost and demand pressures, the only way to sustain or improve present service levels in the NHS will be to  continue the disciplines of the Nicholson Challenge after 2015, focusing on a transformation of care through genuine and sustained service integration.””

As is generally the case in medicine, prevention is better than cure, and it would be most helpful if the law could adopt this approach too. However, the good news is that nurses can participate in the Nursing Times “Speak Out Safely” campaign: “to help bring about an NHS that is not only honest and transparent but also actively encourages staff to raise the alarm and protects them when they do so.” Their Twitter is @NursingTimesSOS.

This inevitably is a complex problem, but requires a solution fast.


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