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Financial planning for GP practices

What should GP practices consider as they plan their finances for the coming five years? Accountant Katie Singer provides some advice.

Practices must stay on top of their finances (Picture: iStock)
Practices must stay on top of their finances (Picture: iStock)

The funding practices are seeing trickling into their accounts appears to be depleting. There are changes to both GMS and PMS funding streams as well as the phased closure of the seniority pool.

There appears to be less and less opportunities being made available to GP practices and by 2020, all practices are likely to have unified sources of income. So how can practices ensure they keep ahead of the game by keeping their finances at a maintainable level.

How can you ensure you aren’t overspending?

There is little that can be done to increase core funding other than ensuring you maximise your enhanced services income where possible.

One area that is key to review on a regular basis, especially for those GMS practices with falling correction factors or PMS practices subject to large cuts post review, are the costs of the practice.

The two areas where overspending are most common are administrative staff and clinical staff. Of course, all practices need to ensure the reception desk is adequately manned but ensuring only the number of staff needed are working and that these staff are maximising their duties is key. In recent years we have seen a significant cut back in overtime pay for administrative staff which has helped with overspending.

Clinical staff, including salaried GPs and locums, are the second area practices should be mindful of. Practices need to ensure they are offering the right level of clinical sessions to their patients (our rule of thumb is a session for every 250 patients; a session being approximately three hours of 10-minute appointments followed by 1/2 – 1 hour of telephone triage).

All practices will have noticed the cost of locum staff has increased in recent months and ensuring locums are only used where needed will keep costs under control.

General administrative costs such as telephone bills, computer equipment, stationery and cleaning all need to be monitored as these are costs which can creep up without being noticed.

Should we all be on GMS contracts?

It hasn’t gone unnoticed that the NHS appears to be pushing most PMS practices in the direction of GMS. PMS practices will have received a letter that the funding streams are to be reviewed imminently if they haven’t done so already.

Historically, PMS practices have been generally higher paid than GMS practices but with correction factors for GMS being wound up, there is a drive towards all practices being paid the same.

We anticipate that by 2020 the global sum or equivalent per patient will be in the region of £82. For GMS practices it is currently around £77 per patient and for PMS practices this varies hugely but is around £90 per patient.

Although there is very likely to be a drop in overall income and profits for all PMS practices who chose to convert or transition back to GMS, there will be the additional security of the GMS contract as well as the relief of not having reviews of income every three years.

Those practices who are PMS and currently have a highly weighted list size may want to seriously consider their conversion back to GMS as there may not be a significant fall in income overall for these practices.

What about merging?

In recent years, the term merger has become well-known in general practice, especially for those single-handed or small practices. A merger, simply put, is when two practices come together.

This doesn’t necessarily mean they will move into the same premises or even share the same contract but they will be seen as one body instead of two. In the eyes of the NHS these practices are not two small practices but one larger practice with more than one contract, an increased list size and potentially greater number services available to combined patient numbers.

A merger is also a way of practices being able to share skills and staff as well as creating cost efficiencies, such as sharing practice management staff or specialist nurses.

There are complications surrounding mergers and practices should ensure they consider mergers carefully. Not just to ensure the environment is adequate and that all partners are moving towards the same goal, but to ensure that financially the new merged practice will be stable.

Practices looking to merge should consult their accountants and speak to a lawyer. If you have agreed to merge, a new partnership agreement is key to ensure any issues arising on merging, such as how the profits are shared, can be brought to the table and discussed early on.

How can a federation help?

Federations and networks are two further buzzwords in general practice. They are essentially a large body of a number of practices who come together to host contracts, usually for enhanced services.

In areas with successful federations, practices have benefitted from sharing services with other local practices and setting up new GP led services. Practices have been able to benefit by taking on services, or even being part of a service, that previously wouldn’t have had the facility to host on its own.

As mentioned earlier, the core income of a practice is pretty static so it is the enhanced services that need to be maximised where possible.

As with a merger, setting up a network or federation isn’t easy and a team of accountants and lawyers will be needed, especially where the body is being set up as a limited liability partnership (LLP), a limited company (Ltd) or a community interest company (CIC).

Practices need to ensure they know the cost of subscribing into a federation, and whether there will be ongoing fees needed from each practice, as this varies from area to area.

Don't forget your finances

GP practices just do not have the same level of control over their income than they used to. The key for practices is to ensure that, although their primary focus is to care for the patients, the financial side of the business is not put aside. Practices need to keep on top of their income and expenditure, carry out constant reviews of expenditure and be mindful of any opportunities to expand their income.

  • Katie Singer is client principal at Ramsay Brown and Partners, which specialises in the finances of GPs and their related busines

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