For the first time in a number of years, the income practices earn from private fees or non-core sources has fallen.
Core income is classed as PMS/global sum, MPIG, QOF and all enhanced services income, anything else would be non-core.
The table below, based on figures from our clients, shows that in 2017 the income per full time equivalent partner fell – albeit by only 4p, but what does this tell us?
|Year||£ per patient
|Source: Ramsay Brown and Partners|
These days, the average principal looks after 3,100 patients, so that principal is earning around £30,000 from non-core sources, which has to be taken seriously. This would include income from teaching and training, nursing homes, CCG appointments, insurance reports, medical reports, cremations etc
So, why has this income fallen? The most likely answer is that GP principals are busier than ever looking after their patients. In 2011, that same GP with 3,100 patients now, had 2,407 patients and had more time to spend on non-core work
One of the problems associated with being busy is that there is no time to look at what is being done and whether it should be done. Running parallel with the increase in list sizes is the rise in technology to help GPs run their practices.
Make use of technology
Accounting programs will allow a practice not just to see what income is received from an activity, but also what profits are made from that activity. We recently worked with a practice with a significant travel clinic that had a healthy turnover but were able to show that they were making a loss once you took into account the cost of vaccines, nurses time and the other associated costs
Technology certainly has its place in helping with the non-core income. It is not unusual to find practices which are doubtful they are receiving all the income they should from private fees. The GPs may be unwilling to ask the patient to pay money, the receptionists may be too busy and having a system to collect unpaid debts may not maximise the income the practices should be earning.
Products like iZettle, or similar card-readers offered by practices’ banks can help maximise this income – some patients may not have cash or their cheque book, but they are much more likely to carry a credit or debit card. Meanwhile, modern accounting programs also enable the practice to produce a report instantly of who has not paid without the need to trawl through files.
How much should you charge?
A core question is how much a practice should charge for their private fees. The BMA offer some guidance but mostly by suggesting a range of fees. The BMA refers refer to the ‘opportunity cost’, an important term in financial planning. The principle is how much could be earned in the same time doing something else.
These days, with general practice under so much pressure of work the opportunity of doing private work is probably the cost of the locum to cover their session, so the price of the non-core work has to cover that session. If it doesn’t, then you have to ask why you would do it? It may be that the service is helping patients, and that might be important, but the opportunity costs is something that has to be considered.
- The Medeconomics GP Fees Database provides detail of the average fee charged by practices for a range of commonly-requested private services.
Is there a limit on private earnings?
Many clients ask us whether there is a limit on how much can be earned from non-core activity. The limit is usually the point at which NHS England would feel that their premises is being used for non-NHS work and accordingly they would seek an abatement of the rent and rates reimbursed to the practice.
How much practices were allowed to earn before this happened used to be quite clear - the 2004 NHS Premises Directions suggested that up to 10% of a practice’s income could be earned from non-NHS sources. A sliding scale reduced the reimbursements so that when 90% of the income was being received from non-NHS income, the abatement of rent and rates was 90% too.
The 2004 directions were replaced in 2013 by virtually identical directions, but this paragraph with the non-NHS abatements is missing. This has been interpreted by some commentators as suggesting there is no limit on the non-NHS income, while others are suggesting that the removal of the actual figures gives NHS England the opportunity to tackle a practice with what they may consider significant non-NHS income. In practice, most advisers use the 2004 figures as a rule of thumb.
So to help ensure practices maximise their non-NHS and private income:
- Look at what you are doing and take some time to consider the actual profits made from a service or activity.
- Use modern accounting software to help understand the profitability of your work and to chase unpaid debts.
- In determining the rate of charges consider the opportunity cost of the service.
- Review the amount of income being generated from non-NHS work to ensure it remains under the 10% limit.
Laurence Slavin is, a partner with Ramsay Brown and Partners which specialises in the finances of GPs and a director of Ramsay Brown Cloud Accounting Ltd which helps practices with the transition to cloud accounting solutions.