In these difficult times of income reductions and budget renegotiations, practices are looking at whatever ways they can of preserving profits.
The usual approach is to maximise income wherever possible and to look at reducing expenses, but there are some other more interesting approaches to consider.
Sharing costs between practices and pooling resources to create efficiencies is one such example.
Sharing a building
In north London, there is an example of this having been used for many years. There are four practices sharing a health centre. The four practices are all independent, each with their own contract with the NHS, some PMS and some GMS.
The four partnerships in turn are members of an ‘umbrella’ partnership which is responsible for the day-to-day running of the centre. The ‘umbrella’ partnership employs the nursing, reception and administration staff, including the practice manager. If they wish to, each practice employs their own salaried GPs. The umbrella partnership pays for all the running costs of the centre
Of course there has to be a formula to recharge costs to the individual practices, and in this case the charges are allocated according to the list sizes of the practices.
The savings include at least two receptionists on duty and two practice managers instead of four. Overall savings are in the region of £100,000.
This works because all the practices are located in the same building. Can the same savings be made with practices close to each other? The picture is less clear.
In recent years there have been a number of practices taking over or merging with others. Where the practices are maintained in their separate premises, the savings are likely to be in administration. Replacing two practice managers with a manager and an assistant will save around £20,000.
However, experience shows that these mergers/takeovers can be costly. Unless the acquiring practice gets involved in the day-to-day operations of the other practice, inefficiencies can quickly develop, largely around the use of locums to fill surgeries.
The key to success is for the partners of the practice taking over responsibility for the smaller practice to spend time at the new surgery.
Resources are finite, and one of the difficulties in making savings from two or more surgeries under common control is avoiding internal arguments over the need or entitlement for resources.
Patient demand is now higher than ever, and resources are tighter than ever. If limits are placed on costs across more than one surgery, each will bid for their own needs and it is easy to become involved in a form of internal competition which will be counter-productive to the group as a whole.
Working more closely with other practices can also bring economies of scale.
Size matters in purchasing. The bigger you are, the better the terms, the discounts and the credit period that can be extracted from suppliers.
You do not have to have a formal ‘umbrella’ partnership to achieve savings like this – a group of practices getting together to purchase would achieve a similar result.
Joining together, either through a merger or perhaps a federation of some kind with neighbouring practices, could also help you compete for new contracts and ensure you have a louder ‘voice’ and greater influence within your CCG area.
However, there is much to consider before becoming part of a federation, which has been dealt with elsewhere:
Outsourcing is something that has not really taken hold in general practice, probably because the size of most practices do not justify the time and transfer of resources.
However, some practice do outsource their payroll and bookkeeping, not to another continent (although they could) but to specialist firms that provide this service for them.
If you are considering this, weigh up whether the specialist unit can do the work faster, cheaper and more efficiently than the practice can manage in house. As with purchasing, there may be greater advantages to be had if you are doing this as a group of practices, or a federation.
What does the future hold?
There is a widely-held view that the future of general practice will include large organisations such as Virgin Care. What is clear is that the traditional model still has its place, but the world is changing.
How GPs and practices need to change to meet these challenges will unfold in the next few years – but it does seem likely that practices working more closely with each other, either to save money or to expand their services, will become increasingly commonplace.
- Laurence Slavin is a partner at Ramsay Brown and Partners Chartered Accountants who specialise in the finances of GPs. www.ramsaybrown.co.uk