Practice managers will not need reminding of the economic downturn. Between the previous issue of this publication and now, a series of extraordinary economic events has conspired to confound the prime minister’s rose-tinted declaration, as chancellor, that yesteryear’s boom would not turn to bust. The economy may yet be revived, but right now it appears decidedly busted.
But how will this affect general practice? The latest online Management in Practice survey, sponsored by the Royal Bank of Scotland (RBS), sought practice managers’ views on financial issues affecting GP surgeries.
While managers are not proclaiming doom, many are forecasting gloom. Of the 220 practice managers who responded to the survey, more than a quarter (28%) believe the economic downturn will have a “quite serious effect” on general practice. Half had seen a drop in profit since last year. Seven in 10 expect a drop in profit next year.
The fall in income had been exacerbated by rises in expenditure – particularly energy costs and staff salaries. Added to this was a concern over increased demand for GP services with more unemployed, stressed and depressed patients seeking treatment.
At the same time, new policies and contract revisions are set to shake up practice finances, and your opinions were also sought here. Nearly a third of respondents said new pharmacy white paper proposals pose a “severe” threat to practices’ income, and 78% believe the introduction of polyclinics, or GP-led health centres, could lead to the closure of existing GP surgeries.
The job title of the vast majority (77.5%) of respondents’ titles was “practice manager”. Six percent were practice directors or partners; 8% were business managers; a few were assistant practice managers, administrators or GPs or nurse managers. The majority (88%) worked in practices in England; 5% were from Scotland, 5% from Northern Ireland and 2% from Wales.
Respondents were in unanimous agreement that the current economic climate would impact upon general practice – not a single one believed this would have “no impact whatsoever”.
The largest group (49%) believed the credit crunch would have “a moderate impact causing problems for some”; 28% said it would have a “quite serious effect”. However, clearly many managers believe the end of the world is far from nigh. One in five think the current climate will have only a limited impact on GP surgeries, and just under half (49%) said it will have a “moderate impact, causing problems for some”.
Cathryn Bateman, a fulltime practice manager and consultant editor of Management in Practice, was surprised by this latter view – her own experience warns against complacency.
“Just this week, we have told our staff that we are having to rationalise expenditure, and as such our salary increases will not follow the national guidance this year,” she said. “This has been a huge blow to some and, as you can imagine, morale is quite low within our practice. So I do think the credit crunch has serious implications for the business of general practice”.
The survey responses suggest fears of a “knock-on” effect caused by the downturn. “The government is likely to put a moratorium on increases in public sector spending, which will put pressure on practices with increased costs for purchases and use of utilities,” predicted a practice manager from the West Midlands.
Others cited concerns that the healthcare industry could face increased demand. As a practice manager from Inverclyde said: “Being in an already deprived area, I feel this will add to people’s health problems, with increased anxiety and depression. General practice is already an extremely busy place to be without increasing attendances and demands from unhappy patients”.
A manager from West Glamorgan echoed the above comment, adding: “This increase in demand will have to be dealt with by existing GPs, since employing salaried GPs and locums will not be an option financially.”
Experts would seem to agree with much of this. In a recent online British Medical Journal article, King’s Fund chief economist John Appleby argued that lower or capped NHS spending, together with the health impacts of unemployment and deprivation caused by the credit crisis and looming recession “could rock the health service in the future”.(1) Mr Appleby warned that preparations needed to be made “for the inevitable difficult financial and health future.”
If the King’s Fund’s forecast seems bleak, the MiP survey suggests the pessimism is shared by most practice managers when considering their future profit – 70% of respondents said they expected to see a drop in profit over the next year. Of these, 62% thought their income would drop by a moderate amount and 29% by a minimal amount – yet a handful (8%) believed the drop would be severe.
Perhaps such views are not suprising, considering that 17% of managers said their practice had seen a “significant” decrease in profit since last year; a third said they had seen a “slight decrease”. However, one in five said profit had remained steady, and more than a quarter reported an increase in profit – so why do so many think their profit margin will shrink next year?
To quote a succinct answer from a practice director from Buckinghamshire: “Expenses have risen while income has dropped”. This was the story from many respondents – that while they have faced increased running costs, the level of income has either remained the same, or has fallen.
A practice director from West London said: “We continue to take on enhanced services to keep competitive and offer a good local service, but these are not funded so that they always even cover the cost. The credit crunch has meant rising electricity, gas and refreshment costs”.
Indeed, when asked in what area they had seen the biggest rise in expenses in the last year, most cited energy costs (39%) and staff salaries (35%). More than half (51%) said that their staff costs, as a percentage of the practice’s overall expenditure, had increased when compared with the previous year.
Extended surgery hours are likely to be a significant factor here – while 41% of respondents said their working hours had not changed, the same proportion said that, compared to last year, they were working longer hours for the same pay. Only 11% said they were working longer for more pay, and 6% even said that they were now working longer hours for less money.
One in five managers said that while they had managed to increase staff salaries this year, this was at a reduced rate. Just over 5% said they had been unable to increase salaries as resources would not allow. In some cases salary increases could only be afforded by the GP partners taking a cut in their own incomes (one respondent said this was the fourth year in a row the practice had resorted to this).
A practice manager in Yorkshire said a pay freeze was not an option: “You have to [increase staff salaries] or you will lose staff to primary care trusts (PCTs) and hospitals who already pay Agenda for Change, with better conditions than we can offer.”
Responding to the MiP survey results, a British Medical Association (BMA) spokeswoman acknowledged the issue of increased demand on a limited workforce: “We agree that the downturn will have an impact on general practice, though it is difficult to speculate how much,” she said. “There is likely to be an increase in consultation rates and pressure from government to avoid inflationary rises in public-sector pay could limit practices’ ability to expand their workforce sufficiently to meet demand.”
No money back, no guarantee?
When it comes to practice finances, will government policy prove a help or a hindrance? Proposals first announced in Lord Darzi’s NHS review, published this summer, to phase out the historic minimum practice income guarantee (MPIG) alarmed many whose surgeries are reliant on this funding mechanism.
The MiP/RBS survey therefore asked practice managers’ views on the withdrawal of the MPIG. The results reflected unease over the change – 30% said this could be “seriously damaging” for their practice, while a further 29% said it would have a negative impact.
However, on 14 October, after the launch of the survey, the BMA’s GPs Committee (GPC) and NHS Employers agreed a new package of changes to the GMS contract for 2009–10. While the changes will reduce general practice reliance on correction factor payments under the MPIG, a BMA spokeswoman assured Management in Practice that the new agreement means practices will not lose out: “The gross percentage uplift figure recommended by the Doctors’ and Dentists’ Review Body (DDRB), which sets pay for GPs, for 2009–10, if accepted by government, will be applied differentially to the global sum, correction factor payments, Quality and Outcomes Framework payments and enhanced services payments. Under this arrangement, no practice will lose money and some stand to gain significant amounts.2 The number of GP practices that can move away from the MPIG depends on DDRB recommendations.”
For a breakdown of how the changes might work under these arrangements, see Box 1:
For many dispensing practices, the current climate is even more uncertain. Proposed changes to the control of entry rules for pharmacies have caused serious alarm for surgeries that rely on dispensing income to fund other services (see Ailsa Colquhoun’s report on page 40 for a detailed examination of this issue).(3)
Nearly a third (31%) of respondents believed the proposed changes posed a “severe” threat to practices, with a further 44% believing this threat was “moderate”. A practice manager from Somserset said: “Loss of our dispensary would mean making staff redundant – not just dispensers but possibly a salaried GP and nurse. The human cost of this is awful, with the staff ‘left behind’ also needing support. The financial impact of having to provide redundancy payments will have another major impact as many of our team have been with us for a long while”.
The Dispensing Doctors’ Association (DDA) has recently estimated that more than 5,400 practice staff – including 109 practice managers – could lose their jobs if the control of entry changes go ahead.4 Dr David Baker, DDA Chief Executive, said the redundancy fears voiced in the MiP survey “are, without doubt, realistic.”
“If dispensing ceases, a whole section of people will have to go. There’s no question. Moving across to pharmacy is not currently possible at the moment, because the qualifications are not yet portable,” said Dr Baker.
One survey respondent, a practice manager from Oxon, voiced another concern: “Changing this rule will mean commercial pharmacies will be able to enter the market. Practices seen to be winners – ie, those that would become 100% dispensing – will also be under threat because commercial pharmacies will be in a position to open on their doorstep and take on their attractive dispensing. That can only mean a decline in the services on offer, if not a complete closure of the practice”.
Private providers and polyclinics
This was certainly not the only concern voiced over independent providers. An interesting finding from the survey was the apparent increased scepticism over the private sector. The vast majority (80%) said they believed private companies pose a “major threat” to general practice and patient care. When we asked the same question a year ago in the first online MiP survey, 68% of managers felt this way.(5)
The increase is particularly surprising considering that the credit crisis has to a degree restricted the emergence of private sector health providers. For instance, in September the chief executive of Virgin Group UK announced Virgin Healthcare would not yet enter the market: “Given the current economic conditions and the challenges within the sector, we have decided to measure our pace and to evaluate a broader range of entry options,” he said.
So how to explain the increased wariness among managers that the survey suggests? “I think this is all linked with polyclinics – and the whole issue is very confused,” said practice manager Jayne Tabor. “I am not so sure private providers as such are a threat – we are private providers ourselves! It is more the issue of PLCs coming into the marketplace, as their decisions will be based on satisfying their shareholders far more than their customers – the patients.”
Indeed, 78% of respondents said polyclinics or GP-led health centres were also a “serious threat” to traditional general practice. The response of a practice manager from Oxon highlighted this association of private providers and polyclinics: “Movement of funds to support the GP-led centres is inevitable as no government wants to pay twice for the same work. GP practices will not be able to compete on the same footing as they are not allowed the same commercial freedom as limited companies”.
In response to these results, a BMA spokeswoman said: “GPs and their practice managers clearly feel the same about polyclinics and GP-led health centres. We are not opposed to polyclinics if there has been a proper consultation and there is a proven clinical need. However, if a polyclinic opens in an area already well-served by GP practices and takes registered patients from them, many of these practices could become uneconomic.”
So far, this article may not fill readers with Christmas cheer. Yet it would be a mistake to overemphasise the pessimism. While most managers are agreed that the current climate and future policy changes will affect practice finance to some degree, the majority believe the effects will not be dramatic. Significantly, morale seems to be positive: a quarter said their morale was “quite high”, 6% even said it was “very high”, and the largest group (44%) said it was “moderate”.
As Jayne Tabor says: “I think most practices will ride the storm – they usually do! Most practices are fairly resourceful and find ways to cope with whatever is thrown at them – that is part of the beauty of general practices being ‘private’ businesses”.
1. Appleby J. The credit crisis and health care. BMJ 2008;337:a2259.
2. Joint press release from the British Medical Association and NHS Employers. NHS Employers and the GPC announce agreement on changes to the GMS contract for 2009/10. 14 October 2008. Available from: http://www.bma.org.uk/pressrel.nsf/wlu/SGOY-7KDHGW?OpenDocument&vw=wfmms
3. Department of Health. Pharmacy in England: building on strengths – delivering the future. London: DH; 2008. Available from: http://www.dh.gov.uk/en/publicationsandstatistics/publications/publicati…
4. See http://www.managementinpractice.com/article_12357
5. Gidden S. Practice managers speak: the MiP survey results. Management in Practice 2008;12:10-15.