There are now a substantial number of GP Federations and it is a model of working that is widely supported by CCGs.
GP Federations are normally the coming together of a group of general practices to create a single entity that has responsibility for delivering high quality, patient-focused non list based services for the wider community.
In the first of our blogs on this topic, we looked at the key issues you need to consider when establishing a GP Federation – How to set up a successful GP Federation.
In this, the second in the series, we’ll highlight some of the most common legal issues that can arise once a Federation is up and running and the steps you can take to mitigate them.
- Document responsibility for Service Delivery
Most GP Federations will need to bid to secure NHS contracts. Delivery of these contracts will usually be handled by individual member practices. It is important that the obligations of each member practice are documented in a subcontract, so that both NHS England and the other member practices are clear about exactly where responsibilities and liabilities will lie. It is also important to obtain consent from the commissioner before you sign these subcontracts.
- Confirm who needs to register with the CQC
There has been considerable debate about whether GP Federations need to register with the CQC and you can view specific guidance on this subject on the CQC website. The main point to remember, is that you only need to register a Federation if it will be a provider of services. If all services are being performed by the member practices through subcontracts, then they are the ones who need to register or amend their existing registrations.
- Decide how shares will be managed
If your Federation is successful and you’ve worked hard to build up its value, then you may soon find other practices are knocking on your door to join. This raises questions about the basis on which they should be permitted to buy shares. In an ordinary commercial business, you would obtain a professional valuation of the shares before any new shareholders were bought in or bought out. However, this is often impractical for a GP Federation, where partners in member practices will join and retire frequently, and may be undesirable if you decide not to value the goodwill or to operate as a social enterprise.
- Ensure your NHS Pensions are run correctly
This is a complex area, which often requires careful thought and planning. It is perfectly possible for income from a GP Federation to be pensionable, if you have made the necessary applications and designed the entity in the correct way. What you want to avoid at all costs is discovering, perhaps years down the line, that a mistake has been made with your staff pensions. Always take specialist advice to ensure you are on the right track.
- Always maintain the shareholder register
It is a legal requirement that the company share register is kept up to date. One problem faced by GP Federations is that they are not always notified when changes have, or should, have taken place. Examples of this include when a shareholding partner retires from their practice, or a member practice closes or merges. These events should all result in a share sale, transfer or buy-back but in our experience, few GP Federations have an up to date register of shareholders and a robust process for managing changes.
- Think about how you will govern your Federation
GPs often try to govern a Federation in the same way as they govern their partnerships. This will usually involve a board of directors, comprising of one partner from each practice. Whilst this may enable every practice to understand what is (or is not) happening, it doesn’t promote efficient decision making – particularly in larger Federations. Generally, a Federation will be dealing with larger, more risky contracts and needs to be organised in a much more corporate way. This means having board members with expertise in particular areas, perhaps hired externally. Every practice should have their say as Shareholders, but do not necessarily need day-to-day representation on the Board. Remember, the legal obligations of a director are always to the company – i.e. the Federation – and not to the member practices.
- Consider director service and employment contracts
GP Federations will often be set up with the aim of passing work through to the underlying practices and little thought will be given to service contracts for the directors. Directors may get paid little or nothing by the Federation for their services, simply relying on the Federation monies forming an additional income stream for the practice. The problem is that a GP can then be a partner, a shareholder and a director, and each of these roles has different legal responsibilities and different types of income for tax purposes. If the roles are not clearly defined within your legal documents, you may find that the Courts and HMRC take a different view from you, leading to some nasty and expensive surprises.
- Use restrictive covenants with care
Many Federations want restrictive covenants to be put in place that prevent member practices from competing with the Federation. Whilst this is understandable, you need to draft such clauses with care to ensure that they do not breach competition laws. It is also worth noting that restrictive covenants can have unanticipated consequences, such as preventing member practices from merging with a Practice in, say, a neighbouring Federation.
- Ensure you have bespoke NHS Articles
The NHS Regulations set out certain requirements around ownership and governance of a primary care entity which can affect a range of matters, including eligibility for NHS pensions. It is important that these rules are embedded in the registered Articles of the company, to ensure that you always remain compliant. If you bought an ‘off-the-peg’ company or used a non-specialist solicitor, these changes will not have been made.
The main point to bear in mind when you are running a GP Federation, is that you are responsible for a regulated entity which is distinct in many ways from both an ‘ordinary’ GP Practice and an ‘ordinary’ company. It is important to ensure that the correct legal documentation is in place. The requirements are often complex, so it’s advisable to retain specialist legal advice, both when establishing a Federation and once it is up and running.
We’ve summarised below some of the key legal documents a Federation should have in place:
At DR Solicitors, as well as providing expert advice on all legal aspects of running a GP Federation, we are also uniquely placed to be able to introduce our clients to an extensive network of healthcare contacts, including specialist accountants, surveyors, banks, and procurement consultants. We aim to help ensure the success of your new business venture.
For more information about GP Federations, or any other enquiries, please contact Nils Christiansen on 01483 511555 or email email@example.com
Premises funding is a complex area for any GP practice to navigate.
There will be times when you need to obtain prior consent from NHS England (NHSE) in order to secure funding, and other times when you are simply required to inform them of changes.
Failure to seek consent when it is needed or to notify certain changes can put future premises funding at risk, or even result in NHSE looking to recover any overpayments.
To help you understand what is required, we’ve taken a look at some of the most common events in a practice which may have implications on your premises funding and explain what you need to do:
Top trigger events:
1. Partner retirement
If an owning partner retires and is not bought out, he/she will cease to be an owner-occupier. This has implications if you are in receipt of notional rent, which is only available to owner-occupiers. In this situation, it’s best to inform NHSE well before the retirement date to confirm that they will continue paying notional rent for the whole building, while at least some of the partners remain owner-occupiers.
If you are in receipt of cost rent (borrowing cost funding) then you must make an application in writing to NHSE if you are looking to change your mortgage lender, or advise NHSE following a change in the rate of interest you are being charged.
3. Premises development
If you’re planning any building works for the development of your premises, then you must not start work without first agreeing the work with NHSE. Similarly, if you are purchasing a property with a view to using it as a surgery, then don’t sign anything binding, such as a purchase contract, without the prior agreement of NHSE. In both these scenarios, if you proceed without prior consent, NHSE are within their rights to refuse to consider any subsequent grant or funding application.
If you receive any tax allowances when developing your premises, these must also be disclosed to NHSE, who may off-set them against any premises development or improvement grants.
4. Sale and leaseback
Before agreeing a contract for the sale and/or leaseback of the surgery to a third party, ensure that you have confirmation from NHSE that they are in agreement with the arrangement. NHSE is not permitted to fund the rent reimbursement unless they have agreed the contract before it is signed.
5. Registering for VAT
If your practice is VAT registered – or you are considering registering – then you must disclose any relevant recovered VAT to NHSE so they can off-set such sums against your premises funding.
6. Rent review
Unlike most other applications for premises funding, rent reviews do not have to be agreed with NHSE in advance. In fact, you will first need to agree the rent review with your landlord, before seeking NHSE’s agreement to reimburse the new rent. Clearly, this leaves the practice at risk of a shortfall if NHSE do not agree with the amount of the new rent. This was a change introduced in the 2013 Directions and it continues to be controversial.
7. Lease renewal
NHSE needs to confirm that any new or varied lease represents ‘value for money’. All new and varied leases should, therefore, be sent to NHSE for their approval before they are signed.
8. Practice closure
Premises funding is tied to your GMS or PMS contract. If you close your practice, your premises funding will cease on the day your contract terminates. Your building related obligations will, however, normally continue. The mortgage must still be paid, the rent paid, and the heating system maintained. If you have received development grants, these may have to be repaid at least in part. Some leases permit the building to be sublet, but if not you may well be tied in for many years with no possibility of an income stream to offset the rent. We have written more about this issue here.
Practice merger discussions often tend to focus on the partnership elements, and ignore the premises. This is usually justified because ‘the buildings will stay as they are’ or ‘the buildings will be outside the new partnership’. This may seem like a simple solution, but can create multiple problems for the future which we will be considering in more detail in a future article. Specifically regarding the premises funding, it is common for mergers to change the legal nature of the occupancy of the surgery, perhaps by creating an undocumented lease arrangement where none existed before. Even where such arrangements are undocumented, they would normally still require the prior approval of NHSE.
The Premises Costs Directions require that you must give NHSE any information they ask for and may need, in order to accurately calculate the amount of financial assistance to be provided. If you are in any doubt as to whether you need to notify NHSE or not, we’d always recommend that you seek professional legal and/or surveyor advice.
For more information about premises funding, or any other enquiries, please contact Daphne Robertson on 01483 511555 or email firstname.lastname@example.org