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Making the change from PMS to GMS contracts

Jenny Stone and Lynne Abbess discuss the financial implications and legal issues involved in PMS-to-GMS transfer.

Jenny Stone explains the financial implications for practices transferring to the national contract and how to compare PMS and GMS funding.

Faced with cuts to their funding together with the uncertainty of new contracts and targets, many PMS practices are considering returning to GMS.

Former health minister John Hutton stated in June 2003 that 'PMS practices will be able to move to GMS and vice versa and financial arrangements for such transfers will be fair for PMS practices in relation to GMS practices.'

However, practices weighing up reverting to GMS may feel they will lose out financially whether they stay with PMS after their PCT has reviewed their contract or move to GMS.

When the GMS contract was introduced, global sum funding alone meant practices would earn less than they had under the old Red Book rules. The MPIG correction factor was introduced to ensure they received at least the same funding.

However, PMS practices returning to GMS do not have the right to the MPIG correction factor. There are other funding issues too.

Click here to see Funding Loss Examples

PMS baseline vs global sum
For most PMS practices, their baseline funding, including growth money, has always been higher than the GMS practices' global sum and MPIG.

Before PCTs started reviewing PMS contracts, my firm's average PMS baseline was £86 per patient and for GMS, £69 per patient.

The reviews have resulted in PCTs setting a uniform price per patient for all their practices - from £67 to £80 per patient depending on PCT.

Practices need to know exactly what services the new PMS price per patient covers as their existing baseline may include some PMS services under GMS as enhanced services.

If the new PMS contract price covers the provision of essential and additional services similarly to GMS contracts, the new price can be compared to the global sum. If the new PMS contract price covers additional services over and above what is expected under the GMS contract, practices need to consider the additional expense of providing these services against the loss of payment for them if returning to GMS.

Raw and registered lists
New PMS contracts will calculate baseline funding for the weighted population and not, as previously, the registered population. PMS GPs need to calculate the impact of this.

Quality and outcomes
PMS practices have 105 points deducted from their QOF income that would not be deducted if they returned to GMS. The aim of PMS reviews is to get the PMS contract price per patient closer to GMS, and some PCTs are compensating practices for the loss of these points.

Enhanced services
Some PMS baselines include funding to provide certain services, such as minor surgery. Under GMS, these would be funded as enhanced services. If the new PMS price per patient excludes these services, and instead funds them at enhanced service rates, the income under PMS and GMS would be the same.

You also need to consider the impact of these services being paid on an actual basis under GMS. For example, your baseline may have included funding for the higher targets for childhood vaccinations regardless of whether the practice reaches them. Under GMS you will lose funding if you fail to reach the higher targets.

Seniority pay
This was previously included in the PMS baseline based on historical data. If returning to GMS or having a new PMS contract, seniority payments are calculated on each GP principal's actual years of NHS service and pensionable earnings.

If a PMS practice has opted out of providing out-of-hours cover, there will have been a deduction from the baseline. Practices should confirm how much their PCT deducted as this needs to be compared with the 6 per cent global sum deduction under GMS for opting out.

Premium service targets
The new PMS contract may include an offer of additional funding for providing new 'premium services'. So you need to consider whether the practice can meet premium services' targets to earn this extra income along with the expense of providing the services.

Jenny Stone is a partner at specialist medical accountants Ramsay Brown & Partners, www.ramsaybrown.co.uk

Lynne Abbess considers the legal issues and process involved in changing the practice's contract.

PMS practices are aware that going back to GMS is a right and not an obligation. However, with PCTs facing severe financial pressures, the issue of the rights and obligations of PMS practices over their ability to transfer to a GMS contract has become high profile.

The DoH's recent clarification, enshrined in the NHS (Primary Medical Services) (Miscellaneous Amendments) Regularities 2010, that a PMS contract may be terminated by a PCT on six months' notice has only served to heighten PMS GPs' concerns.

Prior to this, the principle of whether a PCT had the power to exercise its right of termination (with just three months' notice) under the relevant, pre-2004 directions for pilot PMS schemes, was unclear.

Also, while it has always been recognised that a PCT has a right to review PMS contracting arrangements, this was subject to a fundamental safeguard: any variation to a PMS contract must be in writing and agreed by both the PCT and practice.

Dispute resolution
If a PMS practice received notice of termination, and did not agree with it, the GPs could apply for dispute resolution to the NHS Litigation Authority.

However, given the clarification in the 2010 regulations, any such challenge is now unlikely to succeed.

In the light of this, PMS practices would be better advised to concentrate their efforts on negotiating with their PCT - and doing so on a united basis across a PCT patch. They could enlist the support of the LMC, and a unified front often carries more weight at the negotiating table than a single voice.

Of course, any review also provides an opportunity for both parties to reassess previously agreed provisions and services, and there may well be benefits to practices in engaging in a PMS review process.

Simply refusing to participate is unlikely to be seen as constructive in developing a long-term relationship with the PCT for delivery of primary medical care. The chance to influence what may be inevitable change will also be lost.

One of the more common concerns expressed about these reviews is that the PCT is 'making' the practice revert to GMS. That is not an option open to a PCT, and the practice is entitled to rebut any attempt to do this.

However, if a PCT serves notice to terminate a PMS agreement, the options realistically open to the GPs are:

  • Negotiate a new PMS agreement on revised terms.
  • Exercise their right to revert to GMS, or
  • Walk away.

If a practice decides that it would prefer to enter into a GMS contract, the procedure is relatively straightforward and can be found in Regulation 19 of the NHS (PMS Agreement) Regulations 2004.

The procedure should also be set out in the practice's PMS contract. However, only practices providing at least essential services can apply to revert to GMS. Practices not providing essential services cannot revert.

Serve notice on PCT
What is involved in converting to GMS? The first step is to serve notice on the PCT that you want a GMS contract. The practice needs to set out in the notice the date the GMS contract is to start.

This needs to tie in with the end of your PMS contract, but unless the PCT agrees a shorter period, at least three months' notice must be given.

You must include the names of the contractor. As PMS agreements are with named individuals and GMS contracts are with partnerships (or single-handed practices), you need to ensure that the partnership holds the GMS contract.

For this reason, it is vital that the partners draw up and sign a formal partnership deed at the same time if they do not already have an up to date deed.

You must also confirm that the proposed partners are all eligible to hold a GMS contract. Having a PMS contract does not amount to an automatic entitlement to a GMS one.

Only the current PMS contractor can give notice. If there is more than one named person, all parties will need to sign as one partner signing on behalf of the others will not be adequate.

Reverting to GMS
  • PMS practices have the legal right to revert.
  • Partnerships must have an up to date partnershlp deed.
  • Give the PCT a minimum three months' notice to coincide with the date your PMS contract ends.
  • All partners with whom the PMS contract is with must sign the notice.
  • The PCT must acknowledge the notice within seven days and must give the practice a GMS contract if all conditions are met.
  • Your patient list will be transferred to the GMS contract.
  • The services the practice provides must be the same unless both parties agree otherwise.
  • The practice's funding will not be the same under GMS and you are not entitled to an MPIG as a right.

Patient list
The PCT must acknowledge your notice within seven days and must give you a GMS contract if the practice has met all the conditions.

Your patient list will be transferred to the GMS contract. The services provided to patients must be the same unless the practice and the PCT agree otherwise. This includes the out-of-hours opt-out unless agreed otherwise.

Under the GMS contract, you will not retain the same level of funding. Unless you can persuade your PCT otherwise, your practice's funding will be reduced to the standard national GMS funding.

You will not be entitled to an MPIG: any additional funding is at the PCT's discretion.

However, under current NHS legislation, a GMS contract is a 'contract for life' as it cannot be terminated on notice.

While you might have a lower income from the PCT and have to shift some staff and services around to make efficiency savings, the practice is only likely to lose its contract if it is in serious breach of it.

On this basis, the long-term benefits of security may outweigh short-term higher profits.

In the portfolio career world, which is developing within the NHS, there is nothing to prevent you from topping up your income by undertaking other healthcare activities both in and outside the NHS, safe in the knowledge that the practice's core income stream is better protected.

Lynne Abbess is a partner at medical specialist solicitors Hempsons, www.hempsons.co.uk

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