When is a GP practice merger not a merger?
A GP practice may consider undergoing a ‘merger’ for a variety of different reasons. One common trigger is that a single-handed GP is looking to retire. Alternatively, two practices may be looking to join forces to save costs, share resources and provide new services. Historically, all such transactions have been referred to as ‘practice mergers’.
However, if the two parties involved have no intention of being in business with each other for any longer than is necessary to transfer the GP practice to new ownership, then the transaction is really more akin to a takeover or acquisition than a merger.
NHS England (NHSE) recently published policy guidance on such transactions, which makes a distinction between a ‘merger’ and a so called ‘partnership change’. This has become an important issue for practices to be aware of since transactions which are in substance acquisitions are treated differently from those which are true mergers. NHSE will normally need to be involved in all ‘practice mergers’ at some point and if you start off down the wrong track it can be difficult and expensive to unwind things.
The difference between a ‘merger’ and a ‘partnership change’
One key difference between a ‘merger’ and a ‘partnership change’ is the interests of the parties involved.
If the substance of the transaction is an acquisition, such as our earlier example of a retiring GP, they will want to offload as many of their liabilities as possible – ideally all of them – while minimising any exposure to future risk. They’ll also be looking to maximise the value of their assets before they are transferred and will have no interest whatsoever in the acquiring business.
By contrast, in a merger, both parties will have a continuing interest in the other’s business, and will want to work successfully together in partnership. They will want to understand the risks and liabilities associated with each practice and important questions will need to be addressed, such as who will be liable if an issue emerges with one of the legacy businesses. Would it be the future partnership? Or one, or all, of the partners in the legacy practice?
Why is this important?
Historically, NHSE was content to ignore the differences between a merger and an acquisition and the details of how each transaction was to be structured was largely left up to the parties. NHSE largely confined itself to enquiring whether or not the GMS/PMS contracts were to be merged. However, in a paper published in January 2016, different processes were set out depending on whether the transactions was a ‘merger’, a ‘partnership change’ as well as whether the contracts were to be merged.
For GP practices, most of whom tend to refer to all such transactions as mergers and often head up their business plans as such, this can lead to problems. NHSE can insist on things happening that the parties may not want, such as requiring all partners go on each other’s contracts – not something that will be intended in the case of a retirement.
Seeking the right advice
NHS England will often ask practices to set out their merger plans in a business case. This is a key time to get advice to ensure the plans adopt the right language and align to the desired process.
The practices are also well advised to agree a ‘Heads of Terms’ at an early stage in their merger talks. This sets out the substance of the deal, provides an initial timeline, identifies the known key issues, identifies the correct NHSE processes, and ensures that everyone is aligned in their expectations before spending too much time and money.
Practices then need to consider other matters such as whether the staff need to be transferred under Transfer of Undertakings (TUPE), what changes are needed to CQC registrations, the implications for premises funding and more. Whether they are called ‘mergers’ or ‘partnership changes’ such transactions are complicated and are best undertaken with expert legal assistance.
For more information about mergers or partnership changes, or for any other enquiries, then please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
News
The dangers of having an out of date partnership deed
The pace of change in primary care has accelerated over the last few years and with so much going on it can be easy to forget to check you have the basics covered.
The Partnership is at the heart of most GP practices, and having a partnership deed that is up to date, valid and fit for purpose is vital if the interests of all partners are to be protected. Yet often a partnership deed may be forgotten, or only thought of, at times of major change or when a dispute arises.
Whilst most GP partnerships will be aware that having no deed at all is extremely risky, failing to keep it updated can also have serious implications.
Further reading: 4 legal issues to consider if one of your GP Partners “Burns Out.”
There are many reasons a deed may go out of date, or even be invalidated. So while you may feel you have everything already covered, if you haven’t looked over your deed recently then it’s probably time you did.
Some of the key issues you need to be aware of are:
1) A new partner has joined
While the retirement/removal of a partner won’t invalidate your current deed, the addition of a new partner does. Once your deed is invalid you are regarded as operating as a ‘partnership at will’. This is about the worst situation you can find yourselves in because it means your service contract and the entire practice is immediately at risk.
2) New income streams
An out of date deed will lack clarity, or won’t even deal with, the distribution of new income streams affecting a modern practice. How partners share any profits and losses is a frequent cause of disagreement, potentially resulting in a very expensive partnership dispute further down the line.
3) The sharing of risk
If your deed lacks clarity about the sharing of any ‘risks’ then it’s time for an upgrade. For example, what will happen if the CQC takes action against the Registered Manager? Does your CQC Manager pick up the liability, or will it be shared in some way by the partnership?
4) Asset valuation
We have seen an increase in the number of disputes arising out of the valuation of non-property assets owned by the practice. Examples include pharmacy shares, GP Federation shares, and even legacies. When a partner leaves, should they be bought out of their share of these assets, and to what extent is their value separable from the partnership? Your partnership deed needs to be clear about what happens in this event.
5) Lack of detail over property ownership
An out of date deed may not deal adequately with issues of surgery occupancy, the rights of the property owning partners, or how NHS Premises Funding and property related costs will be shared. This can be just as much a problem for leasehold as it is for freehold surgeries. Clarity is needed to ensure both owning and non-owning partners are appropriately protected and rewarded.
Futher reading: Beware the ‘Last Man Standing’ issue in GP Practices
To help you assess if your partnership deed is in need of an upgrade, we’ve prepared a checklist for you of some of the key issues that an up to date deed should cover. Take a look and if your deed doesn’t cover these points then it’s time to act and seek appropriate legal advice.
News
Burnout: 4 legal issues to consider if one of your GP Partners “Burns Out”
Partner burnout is a growing problem for GPs – up to 50 percent are at high risk due to stress, high demands and funding cuts.
If one of your partners is suffering from stress, careful consideration should be given to these four key issues:
- Disability discrimination;
- Professional conduct, including patient safety;
- Partnership obligations as defined in the partnership agreement; and
- Fulfilling one’s obligations under the core medical services contract.
1. Disability discrimination
If stress results in a partner being unable to carry out their work properly on a long term basis, an Employment Tribunal may decide that the partner is suffering from a disability within the meaning of the Equality Act 2010.
The Equality Act says that dismissing someone or subjecting them to some other detriment because they have a disability, or otherwise failing to make reasonable adjustments to allow that person to remain engaged, gives rise to unlimited liability for disability discrimination.
GPs are usually aware that the Equality Act protects partners as well as employees. They can then bring or threaten disability discrimination claims where they feel that their colleagues have forced their retirement because of stress related illness or are trying to engineer their removal for this reason.
As set out below, appropriate support should be provided to any partner who is suffering from stress. This will prevent their condition becoming a disability and/or limit liability for discrimination, should it become necessary to terminate their engagement.
2. Patient safety
If at any time GPs have concerns that a colleague’s condition affects patient safety, they are obliged to act in accordance with their obligations to safeguard patient and the GMC guidance on Good Medical Practice. This states that you must ask for advice from a colleague (e.g another partner or GP at the LMC), your defence body or the GMC. If you are still concerned you must report the matter in line with GMC guidance.
All practices should have a properly drafted whistleblowing policy to ensure that guidance and laws relating to the disclosure of what is likely to be confidential information is adhered to, with legal advice also being sought in this regard.
It is essential that any report should be carefully documented in case your actions are later alleged to be discriminatory or you are accused of acting in bad faith towards your partner.
Providing there are no concerns about patient care, in the first instance the troubled partner should see their own GP or otherwise seek specialist professional guidance. It would be appropriate for the senior partner colleague who has responsibility for HR issues to address such matters informally (but confidentially) with the individual, keeping themselves appraised as to progress made.
3. Partnership obligations
In situations where the stressed partner does not seek treatment, or their condition continues or worsens, you should consider their rights and obligations as defined in the partnership agreement.
At the outset, when faced with a partner suffering from stress, you should be wary of relying on any provisions in the partnership agreement allowing for compulsory retirement due to absence or a failure to carry out duties. You should first establish whether the partner in question has a disability and what steps might be taken to limit liability in this regard.
An appropriate independent expert (not the partner’s GP) should examine the partner, and provide a report that sets out:
- A diagnosis;
- The condition’s effect on the partner’s ability to carry out their duties;
- A prognosis;
- The steps that might reasonably be taken to assist the partner.
An independent health report may recommend that a partner take periods of rest and then return to work in a phased manner. A failure to allow for this, even if a threshold set out in the partnership deed providing for compulsory retirement after a given period of absence is crossed, or a provision requiring that all duties are carried out is breached, could give rise to a claim under the Equality Act for failing to make reasonable adjustments to allow for the partner to remain engaged
If a medical report provides evidence that supports a retirement on ill-health grounds, the partners may discuss the possibility of voluntary retirement. In situations where this is not agreed and legal advice has been sought to confirm that compulsory retirement would not constitute unlawful discrimination, then the partners would wish to rely on a provision allowing for compulsory retirement after prolonged absence. It is common to allow for compulsory retirement after a period of absence of between 9 and 12 months. Practices with partnership agreements that do not include such clauses will be unable to retire a partner in this situation.
In any event, compulsory retirement may well give rise to a partnership dispute, notwithstanding the provisions of the partnership agreement. A well-drafted partnership deed will include provisions allowing for dispute resolution. Arbitration is often preferred over the courts as it provides confidentiality and can be quite flexible, but if part of the dispute alleges discrimination this will be heard in a public employment tribunal. Disputes where there is no partnership deed allowing for private dispute resolution, however, must be heard in the courts.
4. Medical services contract obligations
An important consideration when a partner is unwell is the implication for the GMS/PMS/APMS contract. If you seek to terminate the relationship by dissolving the partnership, you risk terminating your contract too, so it is critical to follow procedures for retirement (link to retirement checklist post) set out in a valid partnership agreement. In the current environment, dissolution would almost certainly lead to your contract being re-tendered, possibly even the possible closure of the practice. You could also be sued for breach of contract.
If a partner’s condition has given rise to fitness to practise concerns, this could lead to a suspension or erasure from the register. The full consequences of this lie outside the scope of this article but this would prevent a GP from being party to a core medical services contract.
It is critical that this is considered in the partnership agreement. Practices are advised to check that the partnership agreement takes account of the consequences of burnout, as the problem is growing.
As with any legal agreement, it is always advisable to seek the advice of an experienced legal team, who can help with your specific case and personal circumstances.
For more info about this, or any other legal issue relating to your practice, please contact Daphne Robertson on 01483 511555 or d.robertson@drsolicitors.com.