The health landscape has changed dramatically and is continuing to do so at pace. The Five Year Forward View describes the challenges the health service is facing, with an aging population, a number of patients having multiple long-term conditions and a desire to move away from hospital based care.
This shift has put the onus on – and some may say, presented the opportunity to - GPs to deliver community based care in a cost-effective way. However, the solution is beyond the measure of any single practice and with the emphasis on collaborative working, this has resulted in the emergence of federations and GP provider organisations (GPPOs).
What is a GP provider organisation?
A GPPO is a group of practices coming together to provide services and to share resources and ideas.
Practices within the boundaries of a local CCG have a tendency to collaborate together. However groups also come together because they have historically worked well with each other and share a vision/philosophy for going forward.
A GPPO is distinct from the practices within it and the most popular legal structure is a company limited by shares.
How do you form a GP provider organisation?
If a formal legal entity is required, such as a company limited by shares, the practices within it would collectively have ownership of the company via the issue of shares. When viewed from the level of the individual practices, this would usually result in one partner within each practice holding the share(s) on behalf of all the partners in his practice.
The intention would be for the company, in its own name, to tender for and hold contracts for the provision of services. It could also employ staff, including administrators, consultants and other health care professionals. These could be from within the practices or from outside.
The practices would need to decide how the board of directors is to be formed and whether all directors are to be elected by the member practices or whether some places on the board should be set aside to fill skill gaps via external appointments.
The role of the board would be to manage and direct the company on a day-to-day basis. The board needs to be large enough to reflect membership, yet small enough to be effective and efficient.
Profits from GP provider organisations
There are three main ways from which practices and individuals benefit financially from a GPPO:
- Income by way of dividends
- Income by being employed or engaged by the GPPO
- Income at practice level for work carried out by the practice where the GPPO is the main contract holder.
The trend is for a GPPO to be set up with the flexibility to distribute profits to member practices as described above – although there is an alternative approach whereby the company is operated as a social enterprise, which reinvests most of its profits in the company or the community.
Where a company limited by shares holds certain NHS contracts it could also be an employing authority for the purposes of the NHS Pension Scheme (subject to the satisfaction of certain criteria) and thereby be a scheme provider for its staff. See here for more information on this.
Funding and costs
As a private organisation practice will need to have sufficient funds in the GPPO to meet the costs and demands of a new business until an income stream is developed. There will be immediate costs such as legal and accountancy fees and perhaps consultancy fees.
In some localities we have found that CCGs and LMCs are willing to support groups of practices seeking to create a GPPO, both in a financial capacity and a managerial capacity. While this initial support is undoubtedly advantageous, at some point the GPPO will have to fend for itself and it is therefore important to have a business plan - and a realistic idea of which opportunities the GPPO will target in the next twelve months, together with a budget in mind.
A strong, focused board of directors is invaluable in driving a GPPO forward.
The cost of time should also not be underestimated. GPs will need to spend significant time getting this project off the ground, resulting in time away from clinical sessions and families.
It must be recognised therefore that this is bound to impact upon a practice which has one or more of its GPs involved in the creation of a GPPO and plans should be made to accommodate this.
Disadvantages of GP provider organisations
A company is a very different animal from the comforts of a traditional partnership. This presents particular challenges for GPs who are officers of the company and who may not be familiar with the statutory requirements of the Companies Act, which attract both civil and criminal liabilities.
Perhaps most significantly, as directors, the GPs will need to manage their conflicts of interest with their own practices. Those who are also on the boards of CCGs may find that they face a conflict of interest both in their role at the CCG and as a director of the GPPO.
Whether or not this is a disadvantage is debatable, but this is the commercialisation of general practice and this may sit uncomfortably with some.
Benefits of GP provider organisations
Operating through a GPPO can give practices:
- Efficiency savings by sharing administrative functions and resources.
- Resources to develop education and training needs.
- Collaborative strength to compete for new contracts.
- Ability to cater for large patient numbers.
- Ability to work across a large geographical area.
Being a corporate vehicle also means the shareholders are protected by limited liability. The liability of shareholders (assuming a company limited by shares) is limited to the amount they have paid or are to pay for the shares they acquire.
The company then bears all the risk and the practices as shareholders do not have to contribute further to the debts and liabilities of the company.
Whilst the current commissioning strategy brings the promise of new income streams, the only real contenders for the provision of these services are grouped organisations with locality wide involvement. So, whilst these may be new and uncertain times for general practice, the message is clear: working independently is neither cost-effective nor efficient. The opportunities are available for scaled-up working. Practice stay in their silos at their peril.
- Neha Shah is a senior solicitor in the corporate team at medica specialist solicitors Hempsons