Can foundation trusts survive and where do their loyalties lie?

Can foundation trusts survive and where do their loyalties lie? Foundation trusts are based on two visions of how they should operate and the 2012 Health Act is not helping.

The polite word is 'hybrid'. The less polite is 'incoherent'. Either way, NHS foundation trusts are based on two contradictory visions of how they should operate and who should call the shots, and the 2012 Health Act is increasing the tension between them.

Ten years ago, Labour had a wacky idea. Instead of making primary care – the part of the NHS closest to people — more accountable, it would inject democracy into the providers of healthcare in the hospitals, ambulance, and mental health services. They, not the GPs, would have elections. The notion is now looking odder and odder, partly because of the competitive pressures stoked by the Cameron coalition's health act and partly because it's commissioning that needs accountability most.

No wonder, then, you start to overhear backstairs conversations asking whether the foundation trust (FT) model can survive. One half of the hybrid is the community, the people using the service, staff and patients themselves and it is they who elect FT governors. Alan Milburn, the Labour health secretary, dreamily talked of mutualism – but then set up a regulator, Monitor, to enforce strict business principles on FTs.

So the other half of the FT model is hardheaded commerce, profit and loss and earnings before interest, depreciation and amortisation. FTs are meant to behave like businesses, going for growth and profit. How are governors meant to square their desire for a local service with the FT board's concern to balance the books by closing a clinic here or a much-loved ward over there?

Democracy and profitability may be fated to war. Paul Hackett, director of the Smith Institute, notes 'all public institutions face tensions between representation and effectiveness', including school governing bodies and councils themselves. Smith, a centre-left thinktank, has just teamed up with the Association of Chartered Certified Accountants to paint a picture of FT governance.

It's healthier than might have been thought, confirming surveys by Monitor. Total numbers involved have actually been growing though FT governors tend to be older and retired; half their elections are not contested. Still, many thousands of people, embedded in local areas across England (the experiment did not extend to the rest of the UK), contribute vast amounts of time and energy to their mental health, community and hospital services through membership of a trust.

The Smith report warns against generalisation – FTs vary widely in their levels of activism, and in how close governors get to board decision-making, especially in matters of finance. A yawning gap in many areas lies between the governors and the non-executive directors, who are not representative of the area but on the board to ensure trusts operate efficiently and effectively.

The Tories, embarrassed at the complete absence of accountability from their original ideas for clinical commissioning by GPs, inserted more powers for FT governors in the 2012 act; they now shadow many of the decisions taken by FT boards, without being paid and without the support apparatus boards tend to have.

Ahead lie problems. Governors are the public and want to operate in the open.

But how can FTs compete with private providers if their cost schedules and profit assumptions are declared in advance? Virgin of course has no governors. Its shareholders are institutional investors who play no part in executive decision taking unless profits go down. What if governors, responsive to staff and patients, opt for a lower rate of return than the board, mindful of competitive pressures? Who should have the last word?

If governors represent one area, what role should they play if an FT acquires healthcare responsibility in another area and the notion of 'local' gets stretched? In London, the executives of better-performing FTs are supposed to lend a hand to trusts in difficulty (most of them still in the notional pipeline to becoming FTs): governors might object to 'their' managers being distracted from serving the local area.

Do governors have any role in bidding for contracts from clinical commissioners? Or from councils? Now that public health has shifted to councils, some FTs are fighting for contracts from the town hall: is the local authority or the FT governing council more 'representative' of an area? The better FT governing councils are those that include elected councillors, but where now do their primary loyalties lie?

David Walker is a non-executive director of a foundation trust; the views expressed here are his own Guardian Professional.