The unprecedented pressures on General Practice combined with the age profile of the profession are creating a wave of partner retirements. What should you be thinking of before drawing your pension and booking your extended holiday in the sun?
1. Transferral of your NHS contract
The way you go about transferring your NHS contract will depend on your contracting route. A GMS contract can only be transferred through a partnership agreement, so it is important there is a valid partnership agreement in place on your retirement date. If you are a single hander, you will need to go into partnership with another eligible person in order to transfer the contract to them. Changing to and from a single hander requires 28 days’ notice to NHS England.
A PMS contract can only be transferred with the consent of all parties, so NHS England will have to agree to it in writing, and they are able to refuse regardless of anything written in a partnership agreement. Remember that if you remain named on a primary care contract after retirement, you may find yourself held responsible for its delivery.
If you are planning a ’24 hour retirement’, you will need to ensure that you and your partner are both able to come off the contract and come back onto it again afterwards. This will require a carefully drafted partnership agreement and, in the case of a PMS contract, the consent of NHS England.
If you cannot find anyone to take over your contract upon retirement, you may ultimately need to give notice to NHS England. You should generally ensure that this is a minimum of six months’ notice.
2. The surgery
The next major issue is usually the fate of the surgery. A freehold surgery will probably need refinancing, and a lease will need assigning (transferring). Both transactions can be time-consuming and problematic as they require the consent of the bank or landlord. This may not be forthcoming unless you are able to find an acceptable replacement partner to take over your obligations.
An option being explored by many practices is a sale-and-leaseback, but these transactions take time and are not suitable for everyone. Legal assistance should always be sought for any transfer of property, and early planning is vital to minimise the tax implications of the transaction.
Remember to always get a professional valuation of a freehold disposal to avoid any allegations of a sale of goodwill, and ensure your name is removed from the land registry and any property ownership deeds or declaration of trust.
3. Other valuable assets
If you and your partners own any other valuable assets, such as shares in a GP Federation or an interest in a pharmacy, you may well also need to transfer these. These will need to be valued in accordance with your Shareholders’ Agreement, and finance may need to be raised to buy you out. You will then need to complete and sign a stock transfer form.
4. Your accounts
You will want to instruct your accountant to draw up a final set of accounts, and take particular care around the cut-off date used for annual payments such as the QOF, which should normally be spread equally over the year. It’s important to ensure that you have agreed who is liable for settling debts (or collecting credits such as superannuation overpayments) which fall due after your departure.
Last but not least, you should ensure that you are no longer ‘held out’ as a partner by coming off the bank mandate, the website, the letterhead and the nameplate, and you may want to seek an indemnity from the ongoing partners against any future problems being attributed to you.
Once you have made sure that any other Partnership Agreement obligations are complied with (such as for example transferring appointments where possible), you can return the keys, attend the retirement party, and bid a final farewell to patients and colleagues.
For more information about GP retirement and any other related issues, please contact Daphne Robertson on 01483 511555 or email email@example.com
If you’re a GP in an NHS Property Services Company (NHSPS) owned building, then this blog is relevant to you. You may recall that we referred to an imminent NHS Property Services ‘standard lease template’ in our recent blog post on surgery lease negotiation. That ‘last man standing’.
What we are less keen on: Summary As you can see, we regard the template lease as something of a curate’s egg. Presumably the NHSPS see it the same way, as they are putting in place a number of carrots and sticks to persuade practices to sign up. In addition to the VAT ‘stick’ explained above, we understand they will be making a time-limited offer of reimbursing a tenants’ legal fees and SDLT.
What we are less keen on:
As you can see, we regard the template lease as something of a curate’s egg. Presumably the NHSPS see it the same way, as they are putting in place a number of carrots and sticks to persuade practices to sign up. In addition to the VAT ‘stick’ explained above, we understand they will be making a time-limited offer of reimbursing a tenants’ legal fees and SDLT.
Overall, the template lease is broadly consistent with an ‘ordinary’ commercial lease, but will need to be negotiated carefully. The underlying issue is that many GP practices in NHSPS buildings are not on ‘ordinary’ commercial leases to start with, so moving to one is a big and potentially very expensive step. Remember that most NHSPS buildings are currently loss making, but an ordinary commercial lease sets out to ensure that this cannot happen.
The most important question for you to ask is, ‘Is it in my interests to enter into a negotiated version of the template lease?’ The answer depends on your individual circumstances, but for many practices the answer may be ‘no’. There is no ‘one lease fits all’ position so we can only reiterate the disclaimer published on the front page of the template lease, namely that you take independent legal and professional advice before you sign anything presented to you.
For more information about the NHS Property Services standard lease and any other related issues, please contact Daphne Robertson on 01483 511555 or email firstname.lastname@example.org
Over the last few years, we’ve been experiencing an increased number of practice mergers. Some of these are borne out of the desire to gain scale locally by forming ‘super partnerships’, while others are aimed at resolving problems. Either way, there are important steps to consider before a practice merger takes place.
Apart from the belief that ‘bigger is better’, practice mergers are typically motivated by seeking to resolve one or more of the following problems:
Merger or acquisition?
Whatever the motivations, GP practice mergers usually fall into one of two categories: true ‘mergers of equals’ and acquisitions.
The difference is important, because a true merger creates a business which is different from the original practices whereas an acquisition simply make one of the practices bigger.
Due to the regulations, both mergers and acquisitions will use the legal mechanism of going into partnership, and both will almost always be referred to as merger. However, it’s the reality on the ground is very different.
In an acquisition, the acquiring practice will impose their own systems, processes, management, controls and so on. Partners from the acquired practice will either be in a minority in the new, bigger practice, retire, or possibly become salaried. This scenario is most common when a single hander is retiring and looking to dispose of their practice, or when one of the practices is much larger than the other.
In a merger, however, all of these things will usually be looked at before selecting the ‘best from both’, The partners from both practices will generally stay on as partners in the new partnership with a shared vision for the future. Often this will involve new ways of working such as a management board to make day to day decisions in the enlarged partnership.
Caveat emptor (buyer beware)
Whether your practice merger is a true merger or an acquisition, there are risks and problems inherent in the process. GPs often seem to believe that a merger or acquisition is simply a question of drafting a new partnership agreement. Not so.
If you’re considering merging with or acquiring another GP practice, remember to ensure that you take the time to fully understand the other business. This process is known as due diligence, and encompasses identifying the actual and potential issues inherent in each practice, and deciding what the new merged practice will look like. Potential issues could be financial or legal so you should be looking at both the accounts and the various contracts and legal obligations.
For example, we’ve seen mergers that resulted in the transfer of large dilapidations costs on buildings, mortgage redemption costs, long forgotten pension fund liabilities, and legal disputes with current and previous employees. When these later crystallise in the merged practice they can come as an expensive surprise.
Download our step-by-step guide to ensure you don’t miss anything out when preparing for and executing a merger or acquisition.
For more information about practice mergers and acquisitions and any other related issues, please contact Daphne Robertson on 01483 511555 or email email@example.com
- Difficulty in recruiting partners
- Lack of potential buyers of a surgery
- Too much time spent dealing with regulations and paperwork
- Current partners approaching retirement
- Inability to provide a broad enough range of services such as 7-day opening
The ‘last man standing’ issue refers to the concern that one or more partner(s) will be unable to retire from a GP practice when they want to, because they are unable to divest themselves of the various liabilities and obligations of the practice.
The issue tends to arise when there are problems in recruiting GP partners, significant numbers of GPs looking to retire or emigrate, or when there are particularly onerous practice liabilities.
The most common type of last man standing problems are associated with surgery leases and mortgage redemption penalties, but they can be triggered by any onerous contractual obligation or unfortunate event such as a death in service or a property market crash.
How the ‘last man standing’ issue destabilises practices
A useful analogy is with a run on a bank. Normally you are happy to deposit your money, confident in the knowledge that you can get it back on demand. However, if enough people want to withdraw their money at the same time the bank cannot raise enough cash to pay them all out and it goes bust.
Similarly, if a GP partner gets concerned that one or more of their partners may be considering leaving and there is no obvious succession plan, they will start thinking about the likely costs of closing the practice and consider leaving while they still can.
Well-drafted partnership agreements normally seek to restrict their ability to do so by requiring a gap between retirements. If a retiree is not replaced in that gap or a partner leaves on other grounds however, the remaining partners may find themselves part of a rush to be the next to resign.
Once this process starts, it is difficult to get confidence back. It becomes even harder to find replacement partners, and ultimately the accountants start wondering whether the business is still a going concern, i.e. able to survive. They may then decide that it is prudent to accrue for the potential liabilities, worsening the financial position of the practice and hastening its demise.
Look after number one: beware the ‘last man standing’
There are multiple ways to reduce the risk of a practice suffering the last man standing problem:
- Be part of a larger practice; small practices only need to lose one or two partners to be at risk, whereas larger practices offer more room for manoeuvre
- Ensure the partnership agreement defines a minimum 6 month gap between permitted retirements
- Maintain a sinking fund for repairing obligations under the lease and other unfunded practice obligations
- Try to negotiate a break clause in your surgery lease for events such as termination of the GMS/PMS contract, but remember enforceability of such clauses can be an issue
- Ensure that you are always in compliance with the terms and procedures of your lease or mortgage; particular risk points are the arrival or departure of a partner
- Take out insurance against specific risks such as an inability to pay the mortgage
- Consider a practice merger to share and thereby reduce the risks
If the last man standing issue appears to be rearing its head in your practice, seek professional advice early. The sooner you get help, the more likely you can prevent it. Once it starts, it can quickly become like catching a falling knife.
Reducing the risk of the ‘last man standing’ is one of the issues which need to be considered when negotiating a surgery lease. Other issues are identified in our free guide, Top 10 Tips When Agreeing a Surgery Lease.