GP Practice incorporation – navigating the ICB approval process

If you are one of the increasing number of GP practices looking to incorporate, then you will probably have familiarised yourself with the pros and cons of incorporation and (hopefully) sought the advice of your accountant and solicitors. One of the next important steps is to gain the support and approval of your ICB. This can present its own challenges and in this blog, we look at how to navigate some of these to reach a successful outcome.

Starting out with GP Practice incorporation

ICBs have their own concerns with the use of companies as primary care businesses, but they seem to stem not so much from unfamiliarity as from them leading to the increased possibility of contract terminations. The concern isn’t totally unfounded – it is much easier for a GP practice to terminate its primary care contract if it is operating as a limited company because the business owners can avoid personal liability for staff redundancies, and may even avoid personal liability under their lease.

In order to ensure a commonality of approach amongst ICBs to requests for a GP practice incorporation, the NHS has adopted a framework, known as the Common Assessment Framework (CAF), for ICBs to use when assessing whether to allow a GP practice to incorporate. The ICB will ask a practice to complete a questionnaire, and then carry out a RAG (red, amber, green) analysis on various aspects of the post-incorporation practice. Aspects covered will include strategy & delivery, the company details, outcome for patients, care quality and finance.

In our experience, a RAG analysis of a company taking over a partnership that meets the following parameters, will generally lead to scores which are overwhelmingly green:

• the shareholders and/or directors of the company are the same as the current partners;
• the company has the right to operate from the current premises;
• there is no change to personnel or clinical procedures;
• the company is acquiring all of the material assets of the current partnership (this can be documented in a simple business transfer agreement);
• the current CQC rating is good.

The novation agreement

Assuming that the ICB approves the incorporation of the partnership, and the CQC grants a new registration in respect of the company (there is little reason for them not to do so if there is no change to personnel, location, operating procedures or business assets) then the ICB will prepare a novation agreement whereby the primary care contract is taken over from the current partners by the new company.

ICBs usually start with a template novation agreement as published by the NHS, and in our experience practice often just sign it on the assumption it is innocuous. However the template includes the possibility of a guarantee from the current partners in respect of the primary care contract, and in our experience that ICBs will often include this guarantee together with other restrictions. This has the effect of significantly reducing the limited liability benefits of incorporation.

It is important to understand that a template can always be varied, and in our opinion there is no reason why a guarantee needs to be provided in a novation agreement. We have successfully presented the arguments against including such a provision on behalf of clients, and have had the guarantees removed through an appeals process.

Conclusion

Practices decide to incorporate for many reasons, and limitation of liability is only one of them. It is worth bearing in mind that although the oft requested guarantee ‘only’ covers liabilities arising from the GMS/PMS contract, these can of course be significant. If they were not, why would the ICB bother asking for the guarantee in the first place?

It is important to remember that even when you are presented with a template document published by the NHS for use in a particular circumstance, it is still possible to negotiate its terms and you don’t just have to accept it as the ‘NHS standard’. Many of these documents have hidden ‘stings in the tail’ which you will at least want to know about, so you can decide whether or not you are prepared to accept them.

Our specialist team at DR Solicitors are here to advise you on your GP Practice incorporation journey. Whether you are just starting out or hitting the first hurdles to overcome, you are invited to call us for a free initial consultation about your incorporation plans. Please telephone 01483 511555 or contact us here.