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Creating a survival plan for your practice

Accountant Jenny Stone explains how practices can put in place a robust financial plan to help them survive in these challenging times.

Practices have been operating in a tough environment for some time now. Funding is falling, PMS premiums are being phased out and the MPIG correction factor is reducing annually until 2019/20. The intention is that all practices will be paid the same by 2020.

However, for many practices this funding is invested in services and employing staff, so cuts in income means further reduction in profits. In addition, costs are increasing which is putting pressure on practices' ability to maintain profits and the workforce crisis is making it harder for practices to recruit GPs.

So how does a practice survive these threats?

Building a robust financial plan

If your practice is facing cuts you need to plan so you can make decisions about the services you can afford to provide. You need to calculate your income over the next five years, taking into account the reduction in your MPIG correction factor or PMS baseline. You should also include an estimate of income from QOF and enhanced services to calculate your total income.

Reviewing costs

When you have calculated your expected income over the next five years, you can look at the services your practice can afford. Those practices with high a MPIG correction factor or PMS premium who have invested this funding into services will suffer a reduction in profits if no action is taken. So it is important to look at your level of costs.

An average practice will spend about 35% of their core GMS or PMS income (global sum, PMS baseline, QOF and enhanced services) on administration, management and nursing staff. You can review the level of your staff costs in light of your reducing income.

You may have spent a lower percentage when your PMS income included the PMS premium, but with cuts in funding the staff costs will need to reduce as well.

Practices generally spent about 9% of their GMS or PMS income on the general running of the practice (excluding staff).

Funding has not followed the increase in workload and patient demand. Typically an average practice will have one full time GP per 2,000 patients. You can review the level of your clinical staff and nurse appointments offered.  

Reviewing the skill mix of your staff

As funding reduces and workload increases, consider whether your practice has the right skill mix and your staff are working efficiently.

If a salaried GP leaves and you are struggling to recruit, this may give you an opportunity to review you staffing. A nurse practitioner will be able to deal with a lot of patient appointments and will be a cheaper alternative. Also consider health care assistants.

There may be benefits with having a pharmacist in general practice as they can deal with medicine reviews and help take some of the admin work from GPs. You may not necessarily be able to afford a full time pharmacist for your practice, but sharing a pharmacist with local practices may be an alternative.

Considering becoming a training practice, having a GP registrar will help to meet patient demand for appointments.   

Setting a budget each year

Practices should set a budget at the start of their financial year for their predicted income and expenditure. Each month the budget can be reviewed to check they have received the expected income and also to review expenditure.

Many practices have problems with enhanced service payments and do not realise until the accounts are prepared to the end of year. You should make sure you are being paid for everything you are doing on a monthly basis.

Having a budget and reviewing it each month facilitates regular review of expenses. Practices are often surprised how much they have spent on locums. If you have a budget for locums and have overspent in one month, you can think about locum use for the next month to try and keep the cost to budget.

Maximising income

Practices need to make sure they are not losing income due to targets not being met or services not correctly coded. Ensuring staff are aware of their responsibilities is a key factor.

For example, there is three-fold difference in the payment for the childhood vaccinations if you reach the high target. Check your staff know the procedures and are doing everything they can to ensure the high target is met.

Practices have also suffered a reduction in income from flu vaccines as pharmacies have started giving these. The income for flu in 2016/17 year has increased by 28% so starting your flu campaign earlier may help to ensure you maximise this income.

If your practice has rooms not in use (for example during extended hours' surgery) you can offer the room to another healthcare professional who can contribute a service charge for the use of the room.  

Not all practices maximise their private income, some feel guilty for charging, but if the work is being done it should be paid for. Review the fees you are charging to make sure these are in line with recommendations.

Are there any opportunities for increasing private work? With any new sources of income, consider if a partner is away from the practice, the cost of replacing that time, and how does this compare to the income that can be earned.


With practices facing cuts, there may be opportunities by merging or taking over a retiring single handed practice list. With merging, there may be cuts in costs with streamlined processes and reduced staff levels. Having a combined larger list will hopefully create some efficiency in overheads too. Merging with another practice allows skills to be shared, for example one practice may offer minor surgery and the other may not have the skills to do this.

What happens if you decide to close the practice

If after reviewing your financial plan, the practice is not viable and the intention is to return your GMS/PMS contract, consider the cost of closing your practice if your list is dispersed.

The biggest cost may be staff redundancy, but also calculate the cost of terminating contracts early e.g. photocopier lease, telephone contract etc. If in leased premises rent needs to be paid until the term of the lease, so see if there is a break clause.

In most cases it would be better for the practice to merge (and then the partners can resign or retire if they so wish) rather than close, consider approaching your federation as they might take over your contract.

The key to survival is to know your finances and what you can afford to provide and constantly review processes and costs to see where you can be more efficient.

  • Jenny Stone is a partner at specialist medical accountants Ramsay Brown & Partners. She is also Medeconmics' finance expert - ask Jenny your questions here.

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