Working at scale is a concept that most GP practices have had to at least consider in the last 12 months. Perhaps because of an approach from another practice, a development in a federation company, a push from the CCG or purely as a business opportunity.
From our conversations with GPs and practice managers about the options available to them, the questions I get asked the most are:
- Will this increase my profits?
- Will working at scale make my life easier?
Answering these questions is never simple. However, we are now in an environment where certain groups have been working at scale for some years, so we can look more objectively at some of the outcomes.
Be prepared for hard work
In terms of profit enhancement, my experience so far is that where several practices merge, there’s unlikely to be an immediate profit uplift.
This is due to the initial costs involved in executing the merger transaction, which may or may not be CCG-funded.
As with any change programme within a business, all parties have to work hard to make it a success. Without this hard work and commitment, the post-merger profitability will not happen.
That may seem an obvious statement but many mergers have struggled because of a lack of understanding of this point. After a merger, there are a number of areas where available cost savings are often not exploited.
Be prepared to make difficult decisions
In my experience, GPs generally find it challenging to face the difficult decisions that have to be made after a merger, meaning that planned savings remain an aspiration rather than reality.
Looking at mergers in other sectors, for example the legal sector, the key benefit is the reduction in staff overheads due to duplication in mirror departments. One example I saw recently was a merger of four surgeries, of which one had eight partners and 18 reception staff under varying part-time contracts. This was an inefficient way to operate.
Now, post-merger, the group is investing in a centralised virtual reception and significant savings will be achieved. This however is still the exception and not the rule.
Invest in business management
An enlarged merged business can be a complex organisation that requires high quality management, i.e. a strong business manager.
The merging practices often redeploy existing practice managers or reallocate tasks, but fail to consider whether the pool of existing resources is fit for purpose. There is a huge difference between managing a single-site surgery with four partners and managing a five-site practice with 20 partners.
I have recently seen a great example of five practices merging. Recognising the need for strong management, they set about finding a high quality business manager to drive the business forward. This clearly came at a cost to the new business, but the individual in question made it clear that they understood the need to make their appointment profit enhancing rather than diluting.
By looking at more efficient ways of working and driving new opportunities and revenue streams, business managers can drive a better work-life balance for the partners in the business and hopefully enhance profits at the same time.
Ensure there is cross-site co-operation
A lack of cross-site co-operation can also be a hurdle. A merger might have happened on paper, but in reality, each site may continue to operate exactly as they did before. Therefore, two plus two becomes four but is unlikely to become five.
In some instances, the merger model adopted is one of strong surgery-level autonomy. This is absolutely valid if it is part of a wider plan, but when it’s unplanned, it raises the question of whether the effort was worthwhile in the first place.
Don’t assume you will have new revenue streams
Merging practices or ‘at scale models’ often assume they will gain new revenue streams and include this as an expectation in their business plan. I would urge caution in this respect.
There are huge variations from one CCG area to the next in terms of ability and willingness to push additional funds into primary care. When advising on mergers we usually suggest that the base case business plan should include only the ‘known’ income streams, with any ‘potential’ streams being considered as an upside.
Have a business plan
This leads me onto an important conclusion. When considering an ‘at scale’ business model, it is hugely important to have a proper business plan in place. This means a financial model bringing together the practices concerned, along with a well thought through plan for post-merger actions to be taken, such as cost savings, recruitment and redundancy, new income streams, merger costs and so on.
The business plan should be detailed enough to assign responsibilities to individuals and provide details of how how you are going to monitor progress against the plan. Success does not just happen – you have to work at it.
- Martin Ramsey is assurance director at MHA MacIntyre Hudson