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Impact of funding cuts on PMS practices

Accountant Laurence Slavin looks at what the future holds for PMS practices.

If funding falls there will be a restriction what the practice can provide (Picture: iStock)
If funding falls there will be a restriction what the practice can provide (Picture: iStock)

One of the difficulties of working as a GP within the NHS is the uncertainty that makes long term planning difficult. You can plan three years ahead or so, and yes, you need to have a vision of where your practice is going, but politics plays havoc with planning.

History tells us that those practices that adapt early are those that fare best (first wave PMS, first wave fundholders etc)

The future for PMS

There is a crystal clear picture of what is going to be happening to PMS over the next 3–7 years, and again this will only be altered if there is a political change of heart, and that seems unlikely at the moment.

A few months ago, we were told that PMS practices would be joining GMS practices in having their income brought to a common level over seven years, to match GMS funding. For GMS practices this is being effected by the phasing out of the MPIG correction factor, for PMS it will be a simple linear reduction of the PMS baseline to the final GMS level.

PMS reviews

Last month, NHS England revealed plans for a national review of PMS contracts. The review will consider ‘how far it is paying for "enhanced" primary care services’.

If the review determines that a large proportion of extra cash paid to PMS practices is effectively enhanced services funding, it could be cut or opened up to other providers rather than redistributed among GP practices.

GP leaders have warned that up to £200m could be lost to general practice if extra money paid to PMS practices is diverted elsewhere in the NHS or out of the health service.

Regional PMS reviews have been running for several years, and the results are hugely differing. In Surrey, the final agreed baseline that PMS GPs were pushed down to was in the £60s, while in Newham it was in the £90s and in North London it was £92, but £16 of this is conditional on hitting a number of key performance indicators, which could in time become harder to achieve.

Higher than average profits?

Not all PMS GPs earn higher than average profits. It is true that PMS GPs have an average baseline that is higher than the average GMS global sum equivalent, but not always. There are plenty of cases of average-earning PMS practices losing funding through a review, which potentially makes them unviable.

The issue when funding is cut is the same whether the GP is PMS or GMS, the difference is the expenses profile of the two types of practice.

It is more likely that the PMS practice will have a greater expenditure on clinical costs, (locums, salaried GPs or nurses) since the justification for the PMS contract in the first place involved provision of more services.

Matching resources to patient need

The key challenge for GPs at the moment is matching their resources to patient need – and one has a direct link on the other.

If funding is cut, either in the short or medium term, there will be a restriction on the amount of services or access the practice can provide. We know practices will be judged on access, we know most practices want to provide an excellent service. Most practices have also pruned expenses as far as they can in recent years as a consequence of the pay freeze (or reductions).

Accordingly, in the majority of cases, the reduction in PMS funding will likely result in redundancy for the salaried GP(s). Redundancy is, in fact, less costly than many practices think. Of course, a possible consequence of this could mean the profession as a whole could see cheaper locum costs.

More than that, a point must come where GPs have to decide what level of resources they are going to provide to their patients. They will have to limit resources, and the consequences will be felt by patients.

Each year, the Doctors’ and Dentists’ Review Body reports and advises on GP earnings. It decides, in effect, what a GP should be earning after all expenses. If a practice knows its core infrastructure, overhead and staff costs, the difference between these costs and the income paid through the PMS baseline is how much that can be afforded on clinical cost – face-to-face patient contact.

If there is not enough resources left to meet patient demand, then it is a fault in the funding – and the problem must be taken back to the DH.

There have been numerous articles written on how to generate extra income to meet falling funding, and all have their place, but this ends up with the GPs working harder and doing additional work to support the NHS side of the practice - and that cannot be right.

Practical advice for PMS practices
  • Check how much funding the PMS practice currently receives
  • Identify the likely loss through a review or reduction to GMS level
  • Review staff contracts for redundancy costs – including potential TUPE costs
  • Compare the practice profits per partner to Doctors’ and Dentists’ Review Body recommendations
  • Calculate how much the practice can afford to pay for their clinical costs
  • Laurence Slavin is a partner with Ramsay Brown and Partners Chartered Accountants who specialise in the finances of GPs. www.ramsaybrown.co.uk

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