GP Federations and PCNs: Can they co-exist?

Some GP Federations and PCNs are working well together, some are in conflict, and others have nothing to do with each other. Why are there such marked differences around the country?

PCNs and GP Federations were both established as ways for Primary Care to work at scale. GP Federations were often ‘encouraged’ to form by dangling the carrot of CCG wide contracts – usually APMS contracts for extended access. The payment for delivering those contracts flows directly to the GP Federation, which has its own management structure and P&L. This has encouraged some practices to see Federations as arms-length service providers that have little or no relevance to the day to day running of their practice, regardless of how well or poorly the Federation delivers its service contracts.

PCNs, by contrast, do not generally have service contracts of their own and are normally much smaller than a CCG. They derive their funding from the PCN DES which is simply an extension of the GMS/PMS/APMS contracts of each of the core member practices – albeit held in a shared bank account. As a result, surpluses and deficits in the PCN translate directly into profits and losses in member practices, and a poorly run PCN would have a direct financial and regulatory impact on its members.

Whilst they have the same underlying member practices, most GP federations are also much larger than PCNs. PCNs comprise member practices with total list sizes of about 50,000, whilst the average GP Federation comprises members with total list sizes in excess of 200,000. 

Prime contractor vs sub-contractor

Because Federations had their own service contracts from the outset, they needed to be independent companies. These companies were set up with their own management which was responsible for deciding how to deliver the contracted services. Whilst many Federations decide to deliver their contracts in collaboration with their member practices, it is clear that the practices are sub-contractors providing staff and resources to the Federation.

By contrast, because PCNs receive their funding directly from NHS England, if they choose to work with a Federation it is the Federation which becomes the sub-contractor providing staff and services to the PCN. The difference is crucial because the prime contractor always chooses the sub-contractor and ‘sets the rules’, not vice versa.

Culture

As control of contracts moves from federations to PCNs, the role of culture becomes important. A prime contractor’s job is to ‘manage’ the sub-contractor as the prime contractor is ultimately responsible for delivery. As a result, Federations often needed to create a culture of ‘managing’ member practices. For PCN DES delivery it is the practices themselves who are the prime contractors, so they need to manage the sub-contractor GP Federation and not vice versa. This can get even more complicated when the Federation continues to have its own contracts which it subcontracts to GP practices, as the management and control then needs to go both ways. In our experience this role reversal can create a major cultural challenge as the practices and the Federation get used to their new roles and responsibilities.

A Shared Service Centre Mindset

At root, the PCN DES encourages member practices to share resources. This is not uncommon in business and is often called a ‘shared service centre’. Member practices obviously share ARRS resources, but there is no particular reason why they should not share other functions as well. This is where a Federation can really add value to PCNs. Shared service centres benefit from scale economies, so they often work better if they are larger – which Federations are. Federations can therefore develop to offer a menu of services to PCNs, and can perhaps provide these services more cost effectively than PCNs themselves because of the scale economies. This does however require that the Federation mindset changes from one of controlling work allocation to being a provider of high quality, well managed services to PCN member practices. This change in mindset will often also require a change in the governance model and the ownership model of the Federation to more closely align it to the PCNs it serves.

Conclusion

With CCGs disappearing into ICSs and extended access funding moving to PCNs, the original purpose of Federations is fast disappearing. Some Federations have other contracts providing them with an income, but these may also be under threat as ICSs consider commissioning at an even greater scale than CCGs. This leaves many Federations with a choice of either ‘scaling up’ to ICS size and remaining as a prime contractor, or ‘scaling down’ and becoming a sub-contractor to PCNs. It may be possible for a Federation to do both, but it should then recognise that there is a fundamental difference between these two roles which may be difficult to manage.

Many Federations are recognizing that this is a strategic decision they are going to have to make very soon. It is perfectly possible for PCNs and Federations to happily co-exist, but to do so many Federations are finding that they have to change their operating model.

We have worked with many PCNs and Federations to improve their joint working arrangements, and have deep experience of what works, and what does not. For more information please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com