Opportunities and Challenges of using limited companies for NHS primary care
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.
Why convert?
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.
Conclusion
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.
For further information about the use of limited companies, please contact Daphne Robertson, d.robertson@drsolicitors.com or Nils Christiansen n.christiansen@drsolicitors.com
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Primary Care Networks: Legal Considerations
One of the big initiatives in the new contract is the Primary Care Network (PCN) DES. PCNs must be geographically contiguous and comprise practices with total list sizes of 30-50,000 patients. The DES will provide funding for additional resources at a network level, who will then be expected to work within the member practices. Initial funding will be for one clinical pharmacist and one social prescriber per network, and later funding streams are expected to support other types of resources such as physiotherapists, physician associates and more. The workforce and network will be led by a Clinical Director, chosen from within the GPs of each network.
What do practices need to do?
To become a network, practices will need to apply to the CCG by 15th May 2019. The application should include: names and list sizes of member practices; a map of the network area; the name of the clinical director; the name of the single provider who will receive the funds; and a signed Network Agreement.
The first and most urgent step is to identify and agree the network area. For some PCNs the area will be obvious and practices will already be working closely together. In other places agreeing an area will be more challenging, but it is clear that any practices which do not join a PCN will not benefit from any of the associated new funding, and indeed risk losing existing funding since the extended hours DES will also move to the PCN. Further guidance should be available shortly from NHS England, including a template Network Agreement.
Legal Entities
It seems likely that PCNs will become an important part of the primary care landscape, but with so little known about how they will develop, practices would be well advised to keep their structures as flexible as possible at this stage. As such, whilst it may make sense for some PCNs to establish a separate provider entity at some point, practices should probably look to use existing provider entities for now. There may however be particular reasons why this will not work for some PCNs, so if you are in any doubt you should take advice.
Legal Concerns
PCNs give rise to a number of particular concerns which will need to be considered by practices:
- Employment. The DES anticipates the employment of new resources who will work across the network. It is likely that whichever practice receives the funding will also employ the new resources, but consideration should be given in their employment contracts to the basis under which they will work in the other PCN member practices. There are a number of options, but it is important to think these through and document them properly to avoid tax and legal problems later.
- Governance. Over time, significant amounts of money will be flowing to the PCN. How will decisions be made between the PCN members, how will disputes be resolved, and how will liabilities be shared? Key questions such as these are unlikely to be in the template Network Agreement and will need to be documented separately.
- Pensions and Tax. Will income from the DES be pensionable, and how will it be taxed? The answer to this question will depend on both the legal entities involved in the PCN, and the contractual nature of the relationships. To avoid future problems PCNs would be well advised to discuss this at an early stage with professional advisers and properly document the various relationships.
Conclusion
PCNs are a significant new part of the primary care landscape and practices should be preparing now. They should familiarise themselves with the information on the DES available from NHS England and the BMA, organise into geographically coherent areas, and ensure that they register in time.
In parallel they should take specialist advice on the best way to organise the funding flows and the contractual relationships to minimise the risk of future tax, pension and legal problems arising.
If you have any questions about PCNs, please contact Nils Christiansen at n.christiansen@drsolicitors.com or call 01483 511555
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Tips on successful recruitment of new partners
Some factors which affect your ability to attract new partners and are outside of your control, such as locality; housing; access to good schools; public transport etc, but there are many things you can control. Prospective new partners will always undertake some form of assessment of your practice, and you can take steps to help ensure your partnership stands out from the crowd.
Transparency
Prospective partners will want to be sure that they’re joining a well managed and financially viable partnership. You can evidence this early in negotiations by providing a ‘due diligence pack’ including:
- Partnership Agreement. Ensure your partnership agreement is up to date and fit for purpose (our free checklist will help you);
- Property documents. If the premises are freehold and owned by some or all of the partners, include the Title documents and the agreement by which the partnership can occupy the premises (this may be in the Partnership Deed or a separate licence or Declaration of Trust). Also, check the Title documents are not still in the names of retired/bought out former-partners. If you are a tenant in leasehold premises, include a copy of the lease and check that it has been properly assigned and that you are compliant with it. Document any issues.
- Contracts: Include a copy of your GMS/PMS contract as well as any another key sources of practice income such as public health or network contracts Partnership accounts for the last 3 years. Include an explanation of key movements
- Disputes and contingent liabilities: Prepare a list of known potential liabilities, such as service charge disputes with your landlord, employee disputes, patient complaints etc, and explain what you are doing to mitigate them. Every practice has a few ‘issues’ and it is much better to be upfront about these rather than pretending they don’t exist and risk a partnership dispute later.
- Regulatory Reports. Include the latest CQC report as well as any relevant correspondence from NHSE or indeed the GMC
Just make sure that your prospective recruit has signed up to your confidentiality agreement before you provide him or her with the due diligence pack!
Affordability
Many new GP partners are reluctant to invest significant capital when they are already saddled with student debt, mortgages and other financial commitments. Having a realistic expectation as to what they can afford to invest into the business is important. If you oblige new partners to buy into the surgery or commit large sums of working capital on or near admission, you will inevitably put some good candidates off.
It is often a good idea to invite a potential partner to talk through the Partnership accounts with your accountant. The accountant can produce forecasts of their likely future income which will also help to build their confidence in you.
Culture
In the end, most partners join a new practice because they feel there is a ‘good fit’. Due diligence and other checks are really just ways to confirm a preliminary decision that has already been made based on gut instinct. Many people regard this as outside of their control, but it can be managed. The trick is to have a clear culture in the practice and ensure everyone subscribes to it. Could you succinctly describe the culture in your practice? Would the receptionist describe it in the same way? Would the patients also recognise it? Think about promoting your own ‘vision & culture’ statement. Articulating the culture you are aiming to achieve will help the business deliver it. The culture will be different for each practice and it can be supported by policies. Importantly it should apply from the most junior employees to the most senior of partners, but if everyone clearly works towards the same culture there is a much greater chance that you will attract someone else who ‘fits’.
And Finallyâ
Being prepared before you start the recruitment process can save you many hours of valuable management time when speaking with potential new partners, as well as putting your practice in a strong position to attract the best available candidates. We can provide assistance in assessing the health of your business documents, and a strategy to mitigate any potential problem areas so please do get in touch with one of our experts.
Remember that you need to ‘sell’ the practice just as much as potential new recruits need to sell themselves.
For further information, please contact Daphne Robertson on 01483 511555, info@drsolicitors.com
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The NHS Long Term Plan: How will GP practices be impacted?
There is a tendency when new plans come out of the NHS for people to say they have seen it all before. Would this be a wise response to the Long Term Plan?
Pleasingly, there is an acknowledgement of the many issues in primary care and a commitment that investment in primary medical and community services will grow faster than the overall NHS budget. Spend should be at least £4.5bn higher in 2024, but the extra money will come with strings attached. If applied consistently, this will mean further change is coming for many GPs in England.
The Network Contract
A new ‘Network Contract’ will route the additional monies and will also incorporate local enhanced services currently commissioned by CCGs. This Network Contract will be in addition to existing GMS, PMS and APMS contracts. ‘Primary Care Networks’ (PCNs) will be responsible for these contracts and will typically cover 30-50,000 patients. Each network will be responsible for expanded community multidisciplinary teams along the lines of the Integrated Care Vanguards. The obvious question is, who will actually hold (and deliver) these contracts? In some parts of the country GP Federations are sufficiently developed to do so, and could then subcontract services to member practices or to other service providers as appropriate. In other areas super-partnerships are sufficiently large and geographically contiguous to do so, though they may be concerned about using their unlimited liability partnerships to do so. Elsewhere again, it is possible that existing community health providers may look to lead.
What is clear is that the Network Contract is supposed to facilitate ‘integrated community-based health care’ and all new money in primary care will flow that way. We are told that practice participation will be voluntary, but it is hard to see how practices will remain financially viable in the medium term if they do not participate.
Online GP consultations
Digital-first primary care will become a new option for every patient. Over the next five years every patient in England will have a new right to choose telephone or online consultations instead of face to face consultations. The plan states this will be ‘usually with their own practice or, if patients prefer, with one of the new digital GP providers’.
The plan goes on to say that a new framework will be created for digital suppliers to offer their platforms to primary care networks on standard NHS terms. It is therefore unclear whether the digital providers enabling online consultations are supposed to be suppliers of services to networks of GPs, or will be able to hold patient lists themselves.
Our recommendations
It has been clear for some time that any increases in funding will go to practices working at scale. Scale working has now been formalised into PCNs . In those areas of the country where there is already an obvious PCN in existence, the immediate focus should be on working out which approach to use for online consultations. Where there is not currently any single obvious PCN, practices would be well advised to reconsider their local joint working arrangements: be that though through federations, mergers, primary care homes or the like.
Remember that the new Network Contract will need to be held by an appropriate business vehicle (there is no indication yet of any restrictions on who could hold them) so you will need to consider who will be the local prime contractor.
We would be delighted to discuss how we can help practices and PCNs prepare for the imminent changes. Please contact Nils Christiansen in the first instance for a no obligation conversation about how we can assist.
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The advantages and disadvantages of LLPs and Mutuals in Primary Care
There are currently only four types of business vehicle permitted to hold GMS contracts. These are:
- Individual GPs (who have unlimited liability)
- Unlimited liability partnerships including at least one GP (the most common structure)
- Limited partnerships including at least one GP
- Companies limited by shares including at least one GP shareholder
There are statutory mechanisms enabling a GMS contract to be transferred between types 1, 2 and 3, but no statutory mechanism enabling a transfer to or from type 4. The rules for PMS are slightly different, but given the right of PMS contractors to return to GMS the difference is not material for the purposes of this note.
The current options for practices to limit their liability are restricted. They could transfer a GMS contract into a limited partnership, but these entities require at least one partner to have unlimited liability for all the risks of the business. Since only a subset of the partners have limited liability, this would create obvious difficulties in a GP partnership. Using a Company limited by shares would limit the exposure of all the shareholders to the value of their capital, but this is not normally available to practices as there is no mechanism to transfer the GMS contract into the company.
Limited Liability Partnerships (LLPs)
LLPs retain the central feature of partnerships, being that partners both own and manage the business. In a company, by contrast, ownership and management are split between the shareholders and directors. Partnerships are often the preferred business vehicle in the professions because the alignment of ownership and management encourages close collaborative working. This in turn facilitates the transfer of tacit skills and good risk management on which the reputation of the profession relies.
LLPs bring several advantages over other kinds of partnership:
- LLPs are registered legal entities and are therefore capable of contracting in their own name. This means that important assets such as the surgery freehold or lease can be held in the name of the LLP rather than individual LLP member’s names. When a member joins or leaves an LLP, there is no need to change the lease or the land registry title, because the member is not named on it. Discussions amongst members would then change from being whether or not to ‘buy-in’ to the surgery, to whether or not to contribute capital to the LLP.
- The liability of LLP members is limited to their capital contribution. There are ways this can be circumvented such as by a mortgagor requiring personal guarantees, but members know that their liability is limited except where they have agreed otherwise. By contrast in traditional partnerships all partners have unlimited liability except where they have agreed to limit it. The most common ways of doing so are to take out insurance (such as professional indemnity cover) or to have contractual limits to liability in service contracts. In this way it is possible to create structures which arrive at similar levels of risk, but they start from opposite extremes
- In an LLP a member is not responsible or liable for another member’s misconduct or negligence. This is an inevitable consequence of the limited liability status since this removes the joint and several liability inherent in an unlimited liability partnership. Some argue that this can reduce the level of collaboration between LLP members, but this has not generally been the experience of other professions.
- There is considerably more formality around LLPs. Unlimited liability partnerships can be created and dissolved with no documentation, whereas LLPs cannot exist unless they are registered at Companies House. This increased formality eliminates some of the uncertainty around whether a partnership has been created or dissolved, which is at the heart of many GP partnership disputes. However, Companies House requires LLPs to file and disclose information about their membership and accounts which is normally kept private in an unlimited liability partnership.
Mutuals and Social Enterprises
There are a variety of legal structures which enable employee and community ownership of, and involvement in, a business. These are usually known collectively as social enterprises. The only form of social enterprise which is currently open to primary care is a Community Interest Company Limited by Shares (“CIC-CLS”). Since the same ownership rules apply to a CIC-CLS as to an ordinary company limited by shares, it is not possible to use it to broaden employee and community involvement in the practice.
If other social enterprises were to be permitted to hold GMS and PMS contracts, they would most likely include Companies limited by Guarantee (“CLG”), Community Benefit Societies (“BenComs”) and Industrial Provident Societies (IPS).
The primary difference between the various different types of enterprise comes down to who they ultimately seek to benefit:
- Partnerships and LLPs look to provide financial benefit (profit) for the partners/members
- Companies limited by shares look to provide financial benefit (profit) for the shareholders
- CLGs look to provide financial and non-financial benefit to a defined purpose and are often charities
- BenComs look to benefit the community
- IPS’s seek to benefit their members
If social enterprises were able to hold GMS and PMS contracts, they would have similar advantages to LLPs. They all generally have legal personality and so can hold assets and contracts, they have limited liability by default, and they are regulated and must be registered. Social enterprises come with the additional disclosure requirement beyond those of LLPs, to ensure that their social purpose is being complied with.
A further possible advantage with social enterprise is that it might make it easier to integrate across other elements of healthcare, since it would be easier to involve the care and voluntary sectors in a social enterprise such as a BenCom.
Transitioning issues
If LLPs and mutuals were permitted to hold GMS and PMS contracts, this would not resolve the question of how to move existing GMS and PMS contracts into them. As LLPs and mutuals are distinct legal entities, they would suffer from the same procurement problem as Companies limited by shares currently do. This is that procurement law states that public bodies must tender all contracts above a certain value. Because GMS and PMS contracts do not generally have a fixed term, their cumulative value normally exceeds this threshold. Since moving a contract from one legal entity to another is technically a termination and re-grant, the re-grant would by default have to occur through a tender process. There are exceptions to the public tender rule, but it is a matter of some debate whether these exemptions can be applied to GMS and PMS contracts.
If you have any questions or for more information, please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com
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Leasehold dilapidations – how to prepare and protect yourself
Leasehold Dilapidations – how to prepare and protect yourself
Many GPs are apprehensive about becoming a named tenant on a leasehold surgery. There are of course a number of liabilities that could be imposed on a tenant under a lease, and you may have read our previous blogs on the subject of last man standing and the importance of agreeing a break-clause. Another issue to consider is the obligation to maintain and repair the premises both during and at the end of the lease term. Almost all surgery leases will impose an obligation on the tenant to repair the premises to some degree or another. ‘Dilapidations’ is the terminology used when a landlord seeks to enforce the repairing lease obligations.
When might the dilapidation liability occur?
In practice, most leases allow the landlord to serve a schedule of dilapidations on a tenant at any time during the lease term. This is because the tenant’s obligation to repair the premises is an ongoing obligation. If the premises are starting to fall into disrepair and the tenant is not complying with their lease terms to maintain them, the landlord needs the ability to force the process during the lease term. Whilst this right exists in most leases, unless there are significant ongoing problems relating to the tenant’s lack of maintenance in practice it is not often used by a landlord. It is far more common for a landlord to be concerned about repairing obligations when the lease is coming to an end. At this point, the landlord’s mind will be on future tenants and the rent they might achieve: the better the condition of the premises, the more valuable they are and the easier it will be for the landlord to charge a higher rent. They will therefore look at whatever rights they have available to them to improve the condition of the premises.
How much is it likely to cost?
The extent of your liability as tenant will depend on how your lease is drawn-up. For example, some leases may limit the tenant’s repairing obligation to keeping it in no better a state of condition than it was at the start of the lease term. Other leases may be what we call a ‘full repairing lease’, in which case the obligation is to repair all parts of the premises whether or not you caused that disrepair in the first place. Before you enter into a lease, it is very important to assess at the outset what your likely dilapidation liability may be at the end of the lease. You should seek legal and surveyor’s advice, so you understand the condition of the premises and what the language in the lease will mean in terms of your obligation to repair.
Be aware that dilapidation settlements are inevitably a horse trade between the landlord and the tenant. In our experience, a landlord will often seek to recover more in the first instance than they are entitled to and use this as a negotiating position to work down from. There are also important protections at law for tenants that can in some instances cap the amount they are required to pay. If you do receive a dilapidations demand from your landlord, you should consider taking surveyor’s advice as to whether the amount is appropriate and legal advice to establish whether the sum has been lawfully demanded.
How to manage the risk
Understanding your leasehold obligations will allow you to plan as a business how to avoid large and unwelcome bills from the landlord. It is good advice to accrue an amount year on year towards the costs of these liabilities. You may do this by setting up a sinking fund, into which each Partner contributes an agreed amount towards future dilapidations. You will need to set out how the sinking fund is created and managed in your Partnership Deed, so do make sure you have an up to date Partnership Deed that allows you to do this. A sinking fund also helps mitigate the risk of partners seeking to avoid a large dilapidations bill by retiring just before the end of the lease term.
In some circumstances, some of the dilapidations liability may be reimbursed through your CCG. This may be paid by way of a top-up element to your monthly rent reimbursement , in which case it is prudent to pay such sums straight into a sinking fund so it is available when you might need it. Funding may also be available at the end of a lease term, particularly where you are relocating to alternative premises with the support of the CCG.
Summary
Be prepared – adopting some relatively simple financial management during a lease term can pay dividends at the end. Make sure your partnership deed is up to date and documents how dilapidations costs will be shared and financed. Finally, if you do receive a dilapidations demand from your landlord: don’t panic; don’t just agree it at face value; and always seek professional advice.
If you have any questions on dilapidations or any other NHS premises related queries, please contact Daphne Robertson on 01483 511555 email info@drsolicitors.com
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Will you pick up future liability for a final pay control charge?
Have you checked whether your practice has an NHS Pensions liability for “final pay control”? Final pay control can involve very large sums payable to NHS Pensions by a practice. We are aware of liabilities in excess of £100,000 arising as employees and partners retire.
What is final pay control?
Final pay control was introduced by NHS Pensions to discourage practices from paying inflated earnings in order to secure their staff a higher pension.
It is applicable to all Officer and Practice Staff members of the 1995 Section of the NHS Pension Scheme, including 1995/2015 transition members. In practice, this means non-GP partners and practice employees may fall within the rules. If, during the final four years of employment or partnership, a member receives an increase to pensionable pay that exceeds a defined ‘allowable amount’, the practice is liable for a final pay control charge.
Who has to pay the charge?
When the member draws their pension, NHS Pensions will calculate the charge and invoice the practice. Interest and penalties apply for late payment.
Where the member is or was an employee, the partners will be liable for the charge.
Where the member is or was a partner, the partners will be jointly liable, but who actually pays the charge will be determined by their partnership arrangements.
Key concerns
The charge may arise many years after an employee or partner has left the practice, as it is only triggered when the member draws their pension. The partners at the time the invoice is issued will have to pay the bill and then seek to recover monies from former partners if their partnership arrangements permit them to do that.
Although the rules are clear that an employee must not be made to pay the final pay control charge, they are less clear about non-GP partners. NHS Pensions will seek to recover the charge from all the partners jointly but how this cost is allocated between the partners is a matter for their partnership agreement.
The charge can seem unfair for non-GP partners who share in the profits, as these are inherently variable. For example if, four years before retirement, the practice had a poor financial year but this was successfully turned around, a charge may well be incurred. If four years ago there was an unusually profitable year, there would probably be no charge.
What can you do?
- When an employee or non-GP partner leaves the practice, you should check whether they are a member of one of the relevant schemes and calculate whether a final pay charge would be due. To do this, you will need to go back over the past four years of pensionable earnings, including any earnings paid by a former NHS employer during that period. If a charge is due, you should discuss with your accountant whether to accrue it in the partnership accounts.
- Where a non-GP partner is a member of one of the relevant schemes, you should consider updating your partnership agreement to make it clear how any final payment charge will be shared. We would be happy to check your partnership agreement for you.
- When merging with or acquiring another practice, as part of your due diligence exercise you should enquire about potential historic and future final pay control liabilities and ensure that it is clear who will be paying them. This should be set out in any GP practice merger or acquisition agreement which we can check for you.
- When a partner joins or leaves the practice, you should pay particular consideration to whether the final pay control charges should be accrued in the joining/leaving accounts.
Conclusion
If you are in any doubt about your situation, then give us a call. Contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com
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Integrated care provider contracts – opportunity or threat?
NHS England is currently consulting on a new Integrated Care Provider contract (ICP). This seeks to commission services on a whole population basis by providing primary, secondary and possibly tertiary health and care services together through one contract. This would result in one single provider being responsible for the majority of healthcare delivered to a locality. Here, we share our views on the impact the ICP contract could have on GP practices.
As currently drafted, it is a condition of the ICP contract that primary care services are included in the scope of the contract. It allows for two routes to delivery: partial integration or full integration.
1. Partial integration
Practices will retain their current GMS/PMS contracts and independent status, but will sign a legally binding ‘integration agreement’ with the ICP provider to support them in the delivery of integrated services.
The idea with this model is that it doesn’t fundamentally change the way that primary care operates today, so is likely to be much easier to achieve. Practices simply formalise the obligations on all parties necessary to achieve a better functioning, more integrated healthcare system, and agree to share the risks and rewards.
There is an implicit assumption by NHSE that a local Trust will hold the ICP contract and that GP practices will be happy to sign the integration agreement with the Trust. In reality, practices would be well advised to obtain legal advice before signing such an agreement, since the current template contains some surprising clauses, such as unlimited liability in the event of certain things going wrong. Any changes should be negotiated with the ICP provider during the tender process, as signed integration agreements are a pre-requisite to winning the ICP contract so this is when practices would have most negotiating leverage.
2. Full integration
In this variant, GP practices would ‘suspend’ their GMS/PMS contracts and instead either be acquired by the ICP provider or subcontract to the ICP provider on terms to be agreed directly between the parties.
This is clearly much more radical than partial integration as it moves primary care towards being a salaried service. There is provision in the standard ICP contract for salaried GPs to be on BMA model terms, but this is unlikely to be much consolation for those that wish to remain as independent contractors. If GPs find that the new arrangements do not work, there is an option to un-suspend their GMS/PMS contracts, but it is not, at present, clear how this would work, since most practices in an integrated model will cease to exist as independent businesses in any meaningful sense.
Other significant changes in a full integration model include:
- Practices will no longer negotiate with NHS England, CCGs or Local Authorities. They will either be subsumed into, or contract with, the sole ICP provider. This largely removes the statutory role of LMCs.
- Whilst there appears to be an assumption that Trusts will usually be the ICP contract holder, there is no reason why this should be the case. Indeed, CCGs will be obliged to offer the ICP contract for competitive tender. This puts primary care in the driving seat, since it is not possible to win an ICP contract without the support of primary care. This makes it highly possible that well organised GP federations or super-partnerships could successfully tender in due course for ICP contracts, or agree to partner up with other public or private partners to do so. Hospitals and other community care providers would then have to subcontract from GPs, not vice versa. This would be an interesting situation as it could provoke accusations of privatisation.
Conclusion
The imminent arrival of ICP contracts has already prompted change up and down the country. We’ve seen hospital Trusts acquiring an interest in local GP practices, which could be a first step towards a fully integrated model. In some areas, the whole locality is actively preparing for the partially integrated model.
One thing is clear, and that is the fully integrated model in particular would represent an enormous change to the way primary care has always worked. Whilst change always presents an opportunity for some, it will inevitably present challenges to others.
If you would like to discuss the ICP contract or any other matters with one of our specialist solicitors, please contact Nils Christiansen on 01483 511555, n.christiansen@drsolicitors.com for an initial chat.
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How to support improvements to primary care premises
The surgery premises are generally the biggest asset and the largest liability within a GP partnership. Suitable premises are a critical part of delivering high quality care, but they are widely considered to be in crisis. There has been a longstanding lack of government capital funding, and GPs are increasingly unwilling to shoulder the burden of long term leases or to invest in developing their own freehold surgeries. This is a key driver of the ‘last man standing’ problem.
Recognising the issue, NHSE have asked for solution proposals in their General Practice premises policy review. It is important that any ‘solutions’ are achievable, affordable, and address the differing issues for freeholds and leaseholds. We have set out below some of our ideas which we have formally submitted in response to the policy review.
Leasehold surgeries
The biggest concern on leasehold surgeries is whether a GP can walk away from the lease when they want to retire, or if for some reason the practice has to close. The lease is a bit like riding a bicycle: so long as you keep pedalling the bicycle will stay up. From the perspective of the NHS a long lease is only a small risk: the NHS has an obligation to provide services to all patients so premises will always be needed and someone has to keep pedalling. From the perspective of an individual GP or GP practice the risk is much larger: at some point they will want to retire and if they cannot find a person to take over their lease obligations they will have to keep pedalling themselves. The NHS, rather than retired GPs, are more likely to have legs strong enough to keep the wheels of the bicycle turning and as such, an obvious opportunity is to transfer this risk from the individual GPs onto the NHS. There are no significant financial implications for the NHS in doing so, because one way or another the NHS would have to fund the premises in order to ensure continuity of patient care. From a legal perspective there are a couple of ways this could be achieved:
We believe a decrease in the risk associated with commercial leases should encourage more GPs to sign up to them, or to join partnerships which operate out of premises leased in this way. In turn, this should improve recruitment and retention of GP partners, and also drive up investment and innovation in primary care premises from third party investors due to an increase in demand for the space.
From the public body’s point of view, any small increase in risk can be managed by a proper estates strategy: the proposed guarantee would only be extended to surgeries which were consistent with the estates strategy, thereby speeding up the closure of those buildings which are no longer fit for purpose. The policy might even have the effect of reducing rental costs by improving the ‘covenant strength’.
Freehold Surgeries
Whilst one obvious ‘solution’ on freeholds is for the NHS to offer to buy them, we have assumed that this is unaffordable. An alternative is therefore to reduce the risk of them ever standing empty with no funding stream.
One way to do this would be for the NHS to agree a ‘put-option’ whereby the freehold owner can require a short-term lease to be entered into with a public body in the event of a core contract coming to an end. This would not only give owners the comfort of an income stream if the contract comes to an end, but again provide the public body with certainty of premises to provide continuity of patient care in the event that a practice folds. This is what usually happens anyway, but by providing certainty in advance to all parties GPs would be more inclined to invest in their surgeries. If the worst happened, freehold owners would have the time to plan what to do with their investment rather than be forced into a ‘fire-sale’
Once again, the expected result of our proposal is that it should drive up investment in primary care premises by reducing risk for GP practices. There would be an incentive on the NHS to develop premises strategies to determine which buildings should benefit from the put option, and the approach should be cost neutral for the NHS since this is generally anyway what happens in practice.
Conclusion
If the ‘last man standing’ risk can be reduced in the ways proposed, buying into a freehold premises and taking on long leases will be a more attractive option for GP Partners. This will lead to more stable partnerships and more investment in the development and construction of new, fit for purpose, medical centres. We also believe this can be done in a way which is at little or no cost to the NHS. With practices under so much pressure, now is the time to act.
If you would like to discuss any particular concerns you may have relating to surgery premises, then please contact Daphne Robertson, info@drsolicitors.com
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What can GP Partnerships learn from other professional practices?
What can GP Partnerships learn from other professional practices?
Although we are very supportive of the GP partnership model, we believe that it needs to evolve to meet changing demands. The ongoing GP Partnership Review has issued a call for evidence and we are delighted to respond in this blog with further thoughts on some of the ‘Key Lines of Enquiry’. We would encourage our readers to also respond to this important review.
We explained in our previous blog why we believe partnerships have proven to be good business models for the professions, and also our belief that LLPs should be permitted for GPs – as they already are for solicitors and accountants.
Some of the challenges faced by GPs are industry specific, whilst others are not. Those common to all the professions include a very significant increase in female participation rates; a perception that Millennials have different values compared to previous generations; an increased demand for work-life balance; a changing competitive and regulatory environment; and a feeling that technology is on the verge of disrupting the profession. Challenges which are more GP-specific include the need to move towards more integrated models of care; the risks involved in financing increasingly expensive and specialised buildings which cannot easily be re-purposed; and a chronic shortage of GPs.
What are some of the key differences?
GP Partnerships are surprisingly homogenous in their structure. They generally comprise partners who jointly run the practice on profit shares reflecting sessions worked; employed GPs on BMA model contracts or similar; and locums on call to fill sessional gaps. This has been the model for as long as anyone can remember, albeit that the balance between the categories has altered significantly over the last decade.
Other professions have sought to develop multiple career paths, and more varied remuneration models. Senior partners will be responsible for management of the business, but other partners and senior staff will have little direct management responsibility and instead be focused on matters like ensuring technical expertise or service delivery. More junior staff will have the opportunity to develop their skills through close working with a variety of partners, and through a structured career progression path. This path may change over time as someone focused on technical expertise may, for example, later decide to move into business or delivery management. In essence, they are seeking to turn generalist professionals into specialists.
Reward typically comes in the form of both recognition and pay. Recognition is typically in the job title, and there have historically been many levels both below and within the partner grade. Pressure from the Millenials is leading to flatter structures, but there is generally still a clear structure. As the structures have flattened, variation in total pay at each grade has increased significantly. This has been helped by an increased focus on performance related pay – at level of the individual, the department, and the business.
In this way other professions seek to encourage and reward developing particular deep skills, and to recognise that business management is a separate career path which requires appropriate training and experience to achieve. By offering multiple roles and career paths, it becomes easier for individuals to see paths for personal development as well as options for changing their role as their life situation and their personal definition of work-life balance changes.
How could this be translated into Primary Care?
Whilst many of the models common in other professions are easier to achieve in larger practices, the GP partnership model will not survive unless being a partner is considered aspirational, and the rewards reflect both the importance of the role and the real risks and commitment required to do it well. At the moment all too many GPs have no desire to become a partner and who can blame them when the job can be little different from being a salaried GP or locum but with lots more risk and responsibility?
Part of the answer is to find ways to reduce real and perceived risk. Permitting LLP structures could help, as could carefully constructed working-at scale models. However, the biggest risk is usually the surgery building, and it is hard to see how this risk can be reduced without the State acting in some way as guarantor of last resort. Whilst this might upset some ideological purists who would argue that this ‘benefit’ is not afforded to other professions, it is in reality more a recognition that the buildings are increasingly specialised and the State will therefore be funding NHS services from the building whoever happens to be occupying it from time to time.
The other part of the answer is making the role more attractive by disrupting the current uniformity. Larger practices (or potentially innovative GP Federations) could develop more varied and interesting career paths as routes to develop through the organisation, and smaller practices could be encouraged to innovate by, for example, sharing clinical resources, developing specialisms, involving non-GPs in the running of the practice, and encouraging greater staff involvement in the business (sometimes described as the John Lewis model). Practices could also experiment more with performance related pay, particularly for salaried staff. Over time a variety of models for a career in General Practice would develop, and practices with the more successful approaches would find it easier to attract and retain staff.
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