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Analysing the decreasing income of GPs

Specialist medical accountant Russell Finn looks at the latest GP earnings and expenses figures published by the Health and Social Care Information Centre.

Official figures indicate a general trend of income not keeping up with expenses
Official figures indicate a general trend of income not keeping up with expenses

Published last week, the Health and Social Care Information Centre's release of the summary GP earnings and expenses figures for 2011/12 makes for depressing reading, representing the sixth straight year of dropping income for GPs.

In a year in which contract negotiations were supposed to deliver a freeze in GP pay, it actually resulted in a 1.1% decrease in the average income before taxation.

Most of this can be put down to the increases in practice expenditure in order to keep on top of workload.

This is demonstrated by the fact that practices now spend, on average, 61.6% of their income on practice expenses, the highest it has been since the introduction of the new contract.

General trends

It would appear from the distributions of partners’ incomes that the majority of the practices affected are in the middle of the earnings spectrum; it seems that very high earners and very low earners have been able to protect their incomes.

As the figures reflect both NHS and private income it is apparent that the GPs unduly affected are those who rely more heavily on NHS income or do not have any more capacity to take on more work.

Unfortunately, there seems to be general trend of income not remaining on par with expenses, as profits have been steadily eroded at a rate of 2% per year since the introduction of the new contract. It is likely to fall further in the coming years.

GMS practices

GMS practices received a 0.5% uplift in the year in order to cover inflation and fund pay increases for some staff under Agenda for Change (AfC). However, actual expenses far exceeded this increase and resulted in an overall decrease in GMS profits of -0.7%.

Looking into the figures, it appears staff costs actually increased by 2% while under a pay freeze, so the increase must be put down to taking on more staff to cover increasing workloads.

If this same increase in staffing cost was applied to the 2013/14 contract changes, using the DH’s contract uplift calculations with an additional increase for the 1% staff pay uplift, this would result in a 0.86% decrease in GPs’ income when they were supposed to receive a 1% increase.

If we were to couple this with the 1.4% increase in superannuation contributions, GPs’ net pay would drop by 2.26% putting income below what it was prior to the introduction of the new contract.

PMS practices

PMS practices, where income increases are agreed locally, only achieved a 0.2% increase but managed to reduce the full effect of the increase in staffing costs by employing more salaried doctors, who also suffered a dip in income of 1.3%. However, the net effect was a 1.6% decrease in practice income.

It should be noted that not evident in these figures is the significant loss of income due to PMS reviews. Given recent announcements of plans to equalise GMS and PMS funding from April 2014, we can only expect income to drop and expenses to be brought into line with GMS practices.

The biggest expense difference between GMS and PMS practices is the staff they employ. Realistically, the only way in which PMS practices will be able to achieve equalisation (without a significant impact on partner income to below GMS levels) will be to make staff redundant.

Geographical differences

There are wide variations in how the regions have been affected. England has been worst hit with an overall decrease of 1.5%; Scotland shows an income decrease of 0.67%; while Wales and Northern Ireland have increased by 1.08% and 5.42% respectively.

The differences appear to relate to the availability of new income streams in the regions.

Dispensing practices

Dispensing practices saw a drop of 2.4% in income as higher staffing costs and overheads overtook stagnant income.

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