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4 August 2023

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What are the main financial issues our practice needs to think about for 2023/24?

A GP financial expert outlines how practices can navigate the difficult months ahead to save on costs and maximise funding

Question from Management in Practice reader:

As practices are now well into the 2023/24 fiscal year, what are the main issues we need to consider financially? Are there any changes coming up that we need to keep in mind and prepare for?

Answer from Nicholas Nesbitt, Partner at Mazars:

2023/2024 has already been a challenging year for GP practices. Inflation remains high at 7.9% (Consumer Prices Index as at June 2023) and industrial disputes within the sector have highlighted how wage growth has fallen significantly behind this level. The Government in England has tried to address this with its pay deal but we are yet to hear how the NHS would fund any pay increments. Pay rises for health staff has been announced in Scotland but negotiation is still ongoing in Wales and Northern Ireland.

In relation to general practice, the government has proposed to uplift GP contract funding by 6% for 2023/24 for its salaried GPs and staff, however, this does not include GP partners, choosing to stick to the five-year deal agreed in 2019/20. There is no detail as yet, on how this will flow through to GP practices.

GP practices are not necessarily obliged to pass on the pay increases set out by the Government, but they will find it difficult to ignore and practices with staff on Agenda for Pay contracts may have to pass on the agreed uplifts.

The priority financial issues practices need to take action on this year are:

1. Ensure funding given to PCNs reaches your practice

On 31 March 2023, NHS England published the 2023/24 statement of financial entitlement, setting out the funding for the year ahead. This is the last year of a five-year deal agreed back in 2019/20. The uplift to funding at practice level was minimal with only the global sum being uplifted by 2.59%. All remaining other practice funding was frozen with no increment at all.

    There were changes in PCN funding, particularly around the investment and impact fund linked to patient capacity and access. It is therefore essential that practices work closely with their PCN to ensure that funding is passed on to practices to meet the rising cost of providing the service, which will largely be delivered at practice level. Too often, we see PCNs retaining funding to the end of the year before releasing it to practices for 2023/24. This will need to change.

    2. Review staff costs and look to get the most out of ARRS funding

    Changes to the national living wage rate were introduced in April 2023 with increases above 9%. As such practices will need to review staff salaries to ensure no member of staff falls below the new levels.

    At a time of increasing demand from patients, this can be difficult to manage. Practices will therefore need to review costs and whenever there is a change in staff, managers will need to assess whether replacing them is affordable. In addition, practices need to work with the PCN to maximise the benefit of ARRS funding to ensure there is no duplication of employee roles at practice and PCN level.

    3. Review energy price deals

    Many practices have been protected from the increase in energy prices as they had agreed longer term fix rate deals. Some of these will be coming to an end and practices need to be careful about entering new deals as it is anticipated energy costs will come down over the next year. Current rates remain above levels that existed two years prior. This will result in some practices paying higher energy costs over the next short-term period, which will need to be factored into budgets.

    4. Check when your telephone contracts come to an end

    The Government has indicated its intention to make practices update telephone systems to cloud based technology. Practices that have leased their telephone contracts, need to be mindful of the dates when those contracts come to an end so that they do not automatically renew, leaving them tied in. Practices also need to be aware of any advice published by NHS England to cover costs and plan ahead for telephone changes.

    5. Seek out options for property loans

    Property owning GP’s will also be impacted by higher interest rates where they have variable rate borrowing in place. This has pushed up the cost of loan repayments significantly. Practices may wish to consider discussing options with banks.

    6. Consider reducing monthly drawings to maintain profit levels

    Squeezed income and the rising cost of living has impacted profits and what partners can draw out of the business. Practices therefore need to monitor cash flow carefully, and if necessary, reduce monthly drawings where profits are not being maintained.

    7. Look at viability of offering services outside of core contract

    Practices will now need to review services offered to ensure that the funding received covers costs, but if that is not the case then practices will need to be more decisive about what services they can offer that are not part of the core contract. It is no longer sustainable for practices to provide services that are not funded adequately.

    8. Have your say on local enhanced services

    A further area of concern is Local Enhanced Services as these were previously commissioned at CCG level with significant variances between CCGs. ICSs will have to start looking at local funding as they move into the second year of running the local NHS budget, which may impact on the funding available. Practices therefore need to work closely with both their PCNs and their LMCs to ensure that their voice is represented at ICS level, particularly where the ICS is seeking to change how funding is allocated.