Why succession planning is vital for any GP partnership

When you’re busy dealing with the day-to-day responsibility of running a GP practice, planning for the future can sometimes take a backseat. But there is one area you cannot afford to overlook and that’s succession planning.

There will naturally be some level of movement within any GP partnership, from individuals moving on, to those retiring or choosing to leave general practice altogether. Indeed, figures from Health Service Journal reveal that more than 20 per cent of GPs are approaching average retirement age in some areas of the UK.

These ‘normal’ problems are however exacerbated by the current recruitment crisis in General Practice, such that in many areas it is proving near impossible to recruit new GP partners.

Knowing how you will manage losing a partner and taking steps to eliminate or reduce any potential issues, is a vital part of the process. Having a robust succession plan in place is key, for the protection of the practice, the patients, and the interests of partners.

Problems you may encounter when the number of partners declines include:

• Potential breach of lease – A surgery lease will often specify the minimum number of tenants, with the figure commonly set at two.
• Difficulty getting a mortgage – It may prove difficult for a practice with just a couple of partners to obtain a mortgage on a large/valuable building. As a minimum you can expect to face higher interest rates and have to contribute greater equity.
• Profitability at risk – Locums and salaried GPs are now frequently more costly than partners, so the loss of a partner may threaten the underlying profitability of the business.
• Increased pressures and commitment – Dealing with the management and regulation needed to run a GP practice is much easier when it’s shared between a number of partners. The fewer people involved, the bigger the commitment each partner needs to make.
• GMS/PMS contract issues – Once the partner to patient ratio becomes too skewed questions may get asked about your ability to deliver your clinical care obligations. NHSE can terminate a contract if they consider “that the change in membership of the partnership is likely to have a serious adverse impact on the ability of the Contractor or the PCT to perform its obligations”.
• Fear of the ‘last man standing’ issue – If the Partnership Deed obliges you to buy out a retiring partner, this can trigger a run as everybody tries to avoid being the ‘last man standing’. But even if you aren’t obliged, the result may be the surgery being part owned by people who have no interest in the business, which can create its own problems.

So, what can you do?

There are several steps you can take to try and reduce the risk of problems. They include:

1. Increase the timeframe within which partners must leave their capital in the business following a retirement – ideally, until a replacement has been found
2. Reduce the risk of a rush to exit by requiring a gap between retirements within the Partnership Deed. This should give you more time to recruit a replacement
3. Consider undertaking a merger to increase the size of the partnership
4. Make yourself a teaching practice and thereby more attractive to junior doctors who may be interested in becoming a partner in the future
5. Agree what will happen to the mortgage following retirement. For example, specify whether retirees will be liable for a percentage of any early redemption penalty
6. Consider promoting or recruiting a practice manager as a partner, to share the management load and further spread any risk
7. Open channels of communication with NHSE and establish what additional support may be available to you

Our recommendations

Prevention is always better than cure, especially when it comes to handling a retirement and the loss of a partner. It will always be far easier to plan ahead, than to deal with an issue should it arise. Taking time to consider all the potential implications and having a robust succession plan in place that is fully documented within the Partnership Deed, will offer you the greatest protection.

If you are facing any of the problems we’ve mentioned here, or for advice on undertaking a comprehensive succession plan, we’d urge you to seek the advice of an experienced legal team, who will ensure your interests are protected.

For more information about succession planning, Partnership Deeds, or any other related issues, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com