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Legal issues with APMS contracts

Justin Cumberlege reviews the key areas of concern for GP practices opting for alternative provider medical services.

A breach is a problem only if there is no amicable solution (Image: iStock)
A breach is a problem only if there is no amicable solution (Image: iStock)

Taking on a contract for alternative provider medical services (APMS) is a major step for practices as the consequences of failing to deliver the promised patient services for the agreed tender price or walking away from the contract can be costly.

So it is crucial to fully understand what will happen if you encounter problems or want to end the contract.

Four questions you need to answer
  1. What happens if we breach the contract?
  2. How do we exit the contract?
  3. What if we do not get paid on time?
  4. Can we renew the contract?

Breaching the contract

A breach only becomes a major problem if an amicable solution to the breach cannot be found.

In normal circumstances when contract terms are breached, the commissioning body wants to resolve the breach as quickly as possible rather than terminate the contract.

Most APMS contracts 'foresee' this, and have provisions requiring a breach notice to be served on you stating the steps to be taken in order to remedy the breach and the period in which it is to be done. Except in extreme circumstances, the commissioner should always follow these provisions.    

If there are repeated breaches or a breach has not been remedied within the agreed time, the contract may be terminated. The consequences of this may include having to pay damages to cover any increased costs that arise if someone else completes the contract.

Exiting the contract

Transferring the contract to another provider, or subcontracting all or part of the services is often the way out.

However, APMS contracts normally prohibit this without the prior consent of the commissioners who may allow this only if certain conditions are met and these may prove impossible.

What can go wrong was shown in the furore caused when United Health transferred an APMS contract to The Practice to run the Camden Road Surgery in London, only for The Practice to shut down the operation a year later in April 2012.  

An alternative to transferring an APMS contract is to change the owner of the contractor. So if, for example, a GP practice has set up a company to hold the contract, the GPs could sell their shares in the company.

A change of control like this can result in the commissioner having the right to terminate the contract.

Late payment or no payment

APMS contracts have no provisions for interest to be added to late payments. Most NHS bodies are signed up to the Better Payment Practice Code, which requires payments to be made within the contracted time, or if this is not specified, then within 30 days.   

But what if you are not paid, or not paid on time? Unlike most contracts, there is often a provision in APMS contracts allowing you to terminate the contract if the commissioner fails to pay the amount due within 28 days of receipt of a late payment notice.

This is a drastic action, and the notice period to terminate the service may be too long – for example, six months – for this to be a practical solution.

Non-payment and dispute

Normally when a payment is not made this is because of an underlying dispute, so you will get paid only when it has been resolved.   

If you are sure of your ground, you can make a claim for the unpaid debt in the courts. However, if you opted for an NHS contract, you will have to go through the NHS dispute resolution procedure.

Getting a default judgment for non-payment can be quick (a few weeks), but if any part of the unpaid sum is disputed the process will take significantly longer and costs will rise.  However you can charge interest at the court rate, currently 8% a year, from the date of your claim.

Renewing your contract

We are now entering a period when many APMS contracts that started five years ago and coming up for renewal. APMS contracts of this length do not usually include an option to extend. Therefore, you cannot avoid going through the tendering process again if you want to retain the contract.

At the same time you need to prepare for losing the contract, which will include, potentially, disposing of premises and transferring staff from your employment to the new contractor’s employment.

However, if the new contractor does not require all or some of the  staff and you are unable to redeploy them elsewhere within your business, you will be faced with making redundancy payments.

Key points
  • If in breach of a contract term provision, look at the remedial notice provisions and ask the commissioner to follow them so that you can avert a dispute or termination scenario.
  • Exiting a contract usually requires the commissioner’s consent to transfer or sub-contract to another contractor.
  • If contract payments are late, refer the commissioner to the Better Payment Practice Code. Otherwise your only options are to resort to the courts or termination.
  • Unless you negotiate a contract extension, be prepared to re-tender for the contract when it ends and plan how to dispose of the premises from which the APMS services are provided if you are unsuccessful.
  • You will also need to make the staff concerned redundant if they cannot be redeployed in your business or transferred to the successful bidder.

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