The national template Primary Care Network Agreement has just been published by NHS England. As readers should be aware, the new Network Contract DES requires participating practices to form their PCN and submit various information by 15 May 2019. A completed ‘initial’ Network Agreement is the most substantial part of this submission and use of the national template is mandatory. The Network Agreement must then be finalised and signed by latest 30 June 2019.
What is needed by 15 May?
The initial submission does not require the Network Agreement to be in final form. All that is required by this date is:
- Names of the member GP practices (in the front of the agreement)
- Details of the Network Area, the Clinical Director and the nominated payee (in schedule 1 of the agreement)
This is the information which most practices will currently be discussing with their LMC and CCG. From a legal perspective the most important decision at this stage is the nominated payee, as this will determine who receives the DES monies in the first instance and this has significant tax, pension and control implications.
What is needed by 30 June?
The Network Agreement must be negotiated, agreed and signed by all PCN participants by 30 June. In addition, all PCN member practices must ensure they have in place a data sharing agreement and, if appropriate, data processor agreements (both using the national template which should be published soon). Each PCN must confirm to the CCG that these documents are in place before the PCN will be considered established, so if the 30 June deadline is missed the PCN will not be able to start providing services and any payments due will be rebated.
What is in the PCN Agreement?
The PCN Agreement is a legally binding document. As such it is important that practices understand the rights and obligations which they are signing up to. It incorporates four elements:
- Mandatory fixed clauses. These cannot be changed other than by direction from NHS England.
- Mandatory extendable clauses. These clauses must apply, but can be supplemented with additional wording. Examples of this include the clauses relating to information sharing and confidentiality, and processes for joining and leaving the network.
- Replaceable clauses. These are suggested default clauses, but can be modified or replaced entirely at the discretion of the PCN. Examples of this include the clauses on variation and dispute resolution.
- Locally defined clauses. PCNs can add their own clauses to the Agreement, so long as these do not conflict with other parts of the document. Examples of additional clauses which PCNs might wish to consider include indemnities and limitations of liability, since the basic template agreement does not limit liability and many practices will be hesitant to sign without this.
Do PCNs need help to complete the Agreement?
PCN member practices could in theory simply fill in the information needed for 15 May, and sign the template PCN Agreement in un-amended form plus the data sharing agreement once this becomes available. This may work for a very simple PCN, but is probably not advisable for the majority of PCNs. Key information such as decision making and how revenue and costs are to be shared is missing, and the template Agreement cannot easily be varied once signed. The default position is that all changes must be agreed unanimously, so a single member could prevent all the others from making the changes they felt were needed once the PCN was operational.
The PCN Agreement is a legally binding document which will govern an increasing share of the services to be provided by General Practice. Given that the future development and direction of PCNs is still unclear, it would, as a minimum, be advisable to increase the flexibility of the variation provisions, specify the financial arrangements and extend or modify a number of the legal provisions in the template. It is hard to see how this can be done without involving specialist accountants and solicitors who understand the tax, pension and legal implications both on the PCN and on the underlying practices.
Conclusion and Next Steps
Time is short. A limited amount of information must be submitted by 15 May, and PCNs should think particularly carefully about the nominated payee (i.e. who the PCN monies are paid to) and take advice on this from a specialist accountant in the first instance.
The information required for 30 June is much more extensive. PCNs are unlikely to have the legal and accountancy expertise required to modify and extend the Agreement template, but most PCNs will want to make changes to the template before signing the legally binding document.
We strongly recommend that PCNs now engage ourselves, alongside specialist medical accountants, to assist with developing their PCN Agreements and to ensure that they are in the best position possible for the 30 June deadline.
Practices have, in principle, always been able to use a limited company as a business vehicle, but few have done so because it requires the consent of NHSE to migrate the core contract into the company. We’ve noticed a recent increase in the number of practices successfully persuading NHSE to provide consent, so we have set out in this blog some of the opportunities and challenges associated with running the practice through a limited company.
Most obviously, running the practice through a limited company limits your potential liability to the capital which you have invested in the company, plus any undistributed retained profits. This can be attractive to partners concerned about the unlimited liability in an ordinary partnership.
Because a limited company separates out ownership and management (shareholders and directors), senior staff can have a management role without needing to contribute any equity or take any ownership risk. Company directors do not need to be shareholders, so are free to manage the business without putting any personal capital at risk. Likewise, the shareholders can put in capital, but do not need to have any day to day involvement in the practice.
There can also be tax and pension advantages with limited companies. These depend on individual circumstances and advice should always be sought, but they include the ability to target a particular income number to manage your tax liabilities and ensure that you do not exceed the annual pensions allowance. Other tax reasons include the different tax structure for ltd companies and certain tax allowances which are only available to limited companies.
Differences between a company and a partnership
In a company, all staff including the directors are employees and therefore have employment rights. The partners in a partnership are self employed and have very limited employment law protection.
Companies have to make certain information publicly available, such as their accounts, the company constitution, the directors and people with a significant interest in the business; whereas in a partnership, everything is confidential.
Limited companies have no concept of capital accounts for each shareholder. As a consequence, there is no obvious way to ring-fence an individual’s capital or ensure that they are able to withdraw it upon leaving the practice. This needs to be thought about carefully from the outset if that is what you are seeking to do.
There is no automatic mechanism for expelling a shareholder from a company. In a partnership you can expel a partner, but you cannot normally take away a person’s shareholding.
Partnerships dissolve automatically on the retirement of any individual unless the partners agree otherwise, which is one of the main purposes of a partnership agreement. A limited company, by contrast, continues indefinitely until somebody decides to wind it up. This means that once a GMS/PMS contract and a surgery building are held by a limited company, they do not need to be varied as partners/shareholders come and go.
Now that NHSE are becoming more open to limited companies, we expect to see their use in primary care increase significantly. However, GPs should be aware that there are major differences between partnerships and companies, and they should take advice from specialist accountants, solicitors, and their bank and IFA before attempting to make the change.