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Financial assessment - Coping with a drop in MPIG

Specialist accountant Sean McLernon examines a three-partner inner city practice's annual accounts.

There is always scope to increase support staff and GPs could consider recruiting healthcare assistants
There is always scope to increase support staff and GPs could consider recruiting healthcare assistants

This south east England practice is experiencing significant ongoing growth in its registered population and managing this is its number one concern.

The raw list size rose from 5,400 in 2007 to nearly 6,000 patients by 2009. However, given the predominantly young profile of the list these GMS GPs located in a deprived urban area, lose approximately 6.5 per cent of their patients in arriving at the weighted list

The removal of the square root factor is likely to result in reduced quality framework (QOF) income for 2009/10.

Previously, locums were used quite a lot. But when a full-time partner retired in 2008, to deal with the rising workload, he was replaced by 1.5 full-time equivalent partners.

Staffing costs in the accounts for the 2008/9 year show a below average spend compared with the in-house local averages of the practice's specialist accountants. This suggests some scope to increase support staff, including nurses, and the GPs could consider recruiting healthcare assistants.

The accounts contain an enormous amount of data, including QOF achievements by domain with comparatives, together with an appendix of financial statistics, and the practice manager says a comprehensive annual meeting with the accountant takes place that includes tax and pensions advice.

Cash flow
Cash flow was reported to be good (in November 2009) although, as the practice pays the partners' personal tax bills, there is a sizeable liability to be paid in January 2010 as tax payments on account for 2008/9 were not necessary for the two new partners. Also there is provisionally £26,000 of balancing NHS superannuation contributions to pay when the GPs' pensionable pay certificates 2008/9 have been completed and processed.

One concern is that the retired partner left behind an overdrawn 'current' account (not a bank account but working capital in the practice). As this doctor has so far retained a share in the surgery premises the assumption is that the practice's cost rent surplus (in excess of interest and loan capital repayments) will gradually refund the deficit.

In the past the practice has relied on a high minimum practice income guarantee (MPIG) correction factor. This represented over 27 per cent of its global sum income in its 2008 accounts.

However, following the 2009/10 GMS contract changes, the GPs' MPIG has virtually halved from £73,000 to £36,000. The drop has been replaced by a global sum increase (before the out-of-hours opt out deduction).

The anticipated reduction in QOF income for both 2009 and 2010 is of greater concern. This results from the removal of the square root factor this year followed by the 5 per cent damping safety net going in 2010. The GPs could lose more than 20 per cent (over £20,000) of their QOF income by 2010. The practice manager recently replaced manual bookkeeping with standard GP accounting software.

In time this should yield benefits in the production of much needed management information, including comparative figures and forecasts.

Action list
  • Ensure a cash flow forecast through to at least July 2011 is drawn up and regular meetings are held to discuss variances from it.
  • Take on board the full impact on future QOF revenue of the 2009 GMS contract changes and, possibly, meet with the PCT to discuss.
  • Continue to take on profitable and strategically sensitive local enhanced services.
  • Maximise QOF points.
  • Get advice on tax planning ideas and opportunities.
  • Review individual partners' 2009/10 NHS superannuation payments on account levels.

GMS income
GMS income per patient has been below national averages due to the practice's weighted list size, failure to maximise quality points and the impact of low disease prevalence factors.

The number of quality points did however increase in 2009. Also, including extended hours income, the practice earned significantly more from enhanced services.

The accounts reveal a reasonably good rise in profits per full-time equivalent partner during the accounting year, up from £141,000 to £152,000.

However this is based on two whole-time equivalent GPs for all of both years when in fact the number of sessions worked increased from August 2008. These average earnings are before deducting NHS superannuation (both the employer's 14 per cent and the employee's contribution) from drawings.

Also, there is one quite large outside appointment listed which is allocated to only one partner and possibly undertaken in the GP's own time. If so, it should be omitted in arriving at the underlying practice profits.

The past year has been one of significant change for the practice given a partner retirement, two new partners, and the continuing rise in the registered population. It is therefore more critical then ever to have reliable and timely management information available, so that the key performance indicators of the practice can be monitored and so that, well in advance, the cash flows situation can be predicted.

  • Accounts analysis by Sean McLernon, medical services director at accountants RSM Tenon, www.tenongroup.com
  • If you would like your practice's accounts analysed free of charge, please email carole.slingsby@haymarket.com
Practice summary


Inner city, southern England

Contract typeGMS
Whole-time equivalent GP
partners/salaried GPs
2.5 partners
Whole-time equivalent other staff6
List sizeApprox. 6,000; 50 per cent of patients are under age 20
PremisesOwned by an existing partner and a retired partner; cost rent reimbursement
Practice's specific concernsLoss of MPIG
Overall profits

2009 £343,425

2008 £318,637

Profit per whole-time equivalent

2009 £151,633*

2008 £141,296

* see text


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