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How to survive a PMS review

Accountant Laurence Slavin provides advice to PMS practices facing a reduction in funding in the wake of their PMS review.

NHS England area teams are cutting spending on PMS practices (Picture: iStock)
NHS England area teams are cutting spending on PMS practices (Picture: iStock)

It is nearly two years since NHS England area teams were tasked with constraining spending on PMS budgets, and different areas are adopting different techniques in dealing with their PMS practices.

What is almost universally different is that individual dialogues with separate practices is being replaced with a series of choices for practices to make. This makes it more certain that the areas teams will have completed their tasks by the 31 March 2016, but at the expense of a full dialogue and understanding of what practices are achieving with their funding.

GMS practices know that by 2021 they will all be paid the basic global sum irrespective of the quality of the practice, and this has set the framework for the manner of the PMS reviews.

NHS England’s approach to reviews

A common approach by NHSE is to give PMS practices three choices:

  1. Stay in PMS and take your chances in a negotiation with NHS England
  2. Use the right of return to GMS at some time and receive the global sum payment at that time
  3. Within a narrow time frame, usually a few months, return to GMS and receive transitional funding – effectively a correction factor – which represents the loss of funding the practice would see. This transitional funding will be phased out over a period, usually coinciding with the end of the GMS correction factor

Where these offers have been made, the majority of practices have selected option three on the basis that they will fare badly with one, and three will be better than two.

The other factor is that many practices will be seeing a number of partners retiring within the next five years, so getting the funding now is a reasonable option.

The impact of PMS reviews

Some PMS practices will not be badly affected, the global sum is increasing annually up to £80 or so by 2021 (and was just £66 two years ago) and their loss of funding may not be significant.

Others however will be badly affected and services that they had been providing in the past may not be affordable.

Steps PMS practices can take

These are the key steps that PMS practices need to take to protect themselves.

In order for the practice to be sustainable, the partners will need to earn a certain level of income for the responsibility and hassle that goes with partnership. If that is not achievable, it makes the likelihood of partners wishing to remain less certain.

Think about the following:

  1. Consider what level of profits the partnership would accept as a minimum.
  2. Calculate the loss that they expect over the next five years.
  3. Consider the effect of this loss on their profits – does this reach the minimum profits level needed for the practice?
  4. Review the level of services that are currently provided, do these need to be cut to make the practice sustainable? Quantify the saving and consider whether the profits will be adequate
  5. Consider other options…

What do I mean by other options? The generic advice from business advisers (and NHS England) is to see whether costs can be reduced. This is just not helpful, if savings could have been made, GPs would have made them – that is what partnerships do.

Practice mergers

In reality, other options worth considering are merging with another practice, and as the number of GPs falls the opportunity of increasing private practice might be possible.

Mergers come in two shapes, one is the complete merger where NHS England is asked to combine the lists and transfer the two contracts into one. The advantage is that the combined practice ends up with a new single contract, but the disadvantage is that NHS Englanf will have some authority over the terms of the new single contract

Many mergers happen by the partners in both practices joining each other’s contracts and preserving the existing contracts. The partners join into one over-arching partnership in which all income is shared as they agree, and they have two individual income streams which go into the over-arching partnership.

Mergers can be beneficial for practices that become unsustainable as a consequence of the PMS reviews as well as those that can benefit from sharing costs and resources. Merging may also enable a failing practice to mitigate closure costs such as redundancy, continuing rental payments and other obligations.

Private services

I have been advising practices for nearly 30 years and this year I have seen an enormous rise in the number asking about setting up private services. In most cases the reason is to subsidise the unsustainable NHS GP practice.

However, there are important issues to observe if you want to provide more private services. There is the prohibition on charging a patient registered on the NHS GP’s list and there is the 10% earnings restriction on non-NHS sources, after which abatement of NHS reimbursements takes place. However, there are solutions to these issues.

The BMA has produced a booklet for doctors setting up in private practice with a helpful section for GPs explaining how this can be done using a separate organisation. The 10% rule applies to work done at the surgery, so if the writing of reports etc happens off-site, that proportion of the income will not be taken into account

PMS GPs are going to have to face a number of important challenges in the next few years, and it is important that they consider these changes and don’t just ignore them. The assistance of an accountant specialising in GP finance with an understanding of the GP financial environment will be crucial.

  • Laurence Slavin is a partner with Ramsay Brown and Partners Chartered Accountants who specialize in the finances of GPs laurence@ramsaybrown.co.uk

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