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How merging or federating affects practice premises

If you are joining together via merger or federation, consider the premises issues that can arise from collaboration, writes Sam Hopkins

Sharing space may enable practices to use buildings more efficiently and sell surplus premises (image: iStock)
Sharing space may enable practices to use buildings more efficiently and sell surplus premises (image: iStock)

There are a number of possible legal models for closer collaboration between GP practices. These range from simple alliances or contractual joint ventures to full mergers and the creation of new limited liability companies.

The purpose of this article is to consider the practice premises issues that can arise from collaboration between practices. These issues will depend on the legal model that is used, but they may also be an important factor in deciding which model to use in the first place. 

At the less formal end of the scale

For the less formal, ‘loose’ federations or contractual alliances, there may not be any fundamental changes to the premises arrangements, and each practice may continue to use and occupy its own premises as it did before.  

For the more complex arrangement

 At the more formal end of the scale – where there is a new provider company, a social enterprise or a practice merger - there will almost certainly need to be legal changes to the practice premises arrangements. For example, where partners retain ownership of a building, the entity holding the contract will need to be granted a proper lease, in order to obtain continuing reimbursement.  

What are the benefits of collaborating on premises issues?

Depending on the circumstances, the financial benefits of collaborating on premises issues may be significant, even where the model used is at the less formal end of the scale. For example:

  • Sharing space may enable practices to use space more efficiently; this may even lead to the sale of surplus premises, generating additional revenue.
  • There may be opportunities to share certain staff and consolidate individuals into a smaller number of buildings.
  • It will enable the introduction of consistent policies across all buildings (e.g. in relation to energy efficiency) that can also be geared towards costs savings.
  • There may be increased scope to generate income from third parties, such as pharmacies.
  • Premises-related services such as facilities management or grounds maintenance may be jointly procured – and greater buying power usually means lower costs.
  • Practices will be able share in the risks and rewards associated with new developments (rather than those being borne by a small practice only).
  • There may be better potential to fund premises improvements.
  • It may be possible to use premises more effectively to contribute to an integrated care strategy (i.e. with other primary care or community service providers and adult social care).

Key practical issues to bear in mind

It would be worth practices keeping the following practical issues in mind when assessing how best to approach the premises arrangements, in order to avoid potential pitfalls:

  • From the earliest stage, it will important to understand how the legal structure will impact on the premises arrangements. A less formal structure may not mean that there will be changes to ownership arrangements, whereas a more formal, complex arrangement is very likely to mean that there will need to be changes.
  • Each practice will need to understand what it is bringing to the table, in terms of premises. This should be achieved by carrying out a complete and open appraisal of each of the collaborating practices’ property interests and identifying the risks associated with it, and the opportunities it gives rise to. This would include checking whether the premises are owned freehold or leasehold, whether or not they are subject to mortgages, whether they are shared with any third parties and their state of repair. Particular caution should be exercised where practices are using properties that may not be fit-for-purpose. Bearing in mind the CQC’s proposed new ‘failure regime’ for GP practices, how will those be dealt with?
  • Once this analysis has been carried out, it should be possible to develop a premises strategy that aims to make best use of all of the available estate and also to identify any workstreams (whether legal or practical) that need to be completed before the collaboration arrangement takes effect.
  • In certain rural localities, it will be important to bear in mind that a rationalisation of the estate may have a negative impact on some patients who have to travel further.
  • It will be important to check and obtain written confirmation that the proposed new arrangements will not have an adverse impact on premises cost reimbursement.
  • Sam Hopkins is a partner in the Real Estates department at Capsticks LLP

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