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New business models help GPs compete

Is a GP-owned company better than a co-op or doctors chambers? Carole Slingsby investigates.

The aim of setting up a GP-owned organisation or provider body may be to fend off competition from alternative providers, or enable local GPs to give practice-based commissioning (PBC) additional clout through working together.

Using the organisation to spread work around all its member practices could be the solution if individual practices were too small to offer a range of services. Whatever the motive, deciding on a legal structure for a organisation can be tricky.

Should you set up a limited company? Or is a co-operative worth considering given that GPs have a track record of successfully running out-of-hours co-operatives? What about a social enterprise?

This is a jargon term for any organisation that is trading for the public good, rather than to make profits.

By incorporating your organisation, it becomes a legal entity under which the owners' liability is limited: the people involved in it are not normally personally liable for its activities and debts.

On the South Coast, Worthing and Adur practices have opted for a limited company for their new provider body, Innovations in Primary Care.

Each practice is allocated shares to distribute to individual GPs.

One of its directors, Littlehampton GP Dr Tim Kimber, says the practices chose this model mainly for financial reasons. He points out that corporation tax at a starting rate of 19 per cent is lower than income tax on any profits.

Company law

'Company law suits this sort of set-up best in terms of division of shares. It allows the flexibility for each practice to distribute shares to their GPs as they see fit,' says Dr Kimber.

In contrast, East London Integrated Care in east London, that Tower Hamlets GP Dr Kambiz Boomla helped to set up, is a community benefit society - a type of social enterprise.

The organisation, formed to keep out the private sector, will launch in April as a vehicle for PBC and plans to become a provider later.

Dr Boomla says that local GPs wanted the organisation to be seen as standing for different principles to the private sector.

'It's a non-profit-making mutual,' he says. 'We don't welcome the introduction of the private sector into healthcare.'

The various bodies that GP providers could set up include doctors chambers, limited-liability bodies and co-operatives.

Central to deciding which legal structure to opt for is whether the GP owners are hoping to benefit personally from any financial return.

'A social enterprise would re-invest its profits for the public good,' says solicitor Lynne Abbess, a partner at Hempsons, who specialise in the medical sector.

She explains this is not the case with the most common type of limited liability corporate body, which is a company limited by shares. Here, the purpose is to make profits benefiting members in the form of dividends to shareholders.

'A traditional GP partnership is not a limited liability body and therefore the partners are directly liable for its losses,' says Ms Abbess.

'The members of a limited- liability body are not, in the normal course of events, exposed in this way because the limited-liability body is a "legal person" and so carries its own losses.'

Specialist medical accountant Laurence Slavin, a partner at Ramsay Brown and Partners, says that the social enterprise model is not at all appropriate unless practices are intending a partnership with the community or plan not to profit from the work undertaken.'

GPs will need professional help with the statutory and accounting formalities involved in setting up an organisation.

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