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Economy drive

27 June 2011

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Chartered Accountant and Partner
Moore and Smalley

A member of the Association of Independent Specialist Medical Accountants (AISMA), Nick specialises in offering advice to healthcare sector clients, including GPs, medical practices and hospital consultants

Recent headline-grabbing events at Westminster have forced the government to ‘press pause’ on the passage of the Health and Social Care Bill through Parliament. There will be further consultation over the next few months, and the timetable has been shifted back by at least three months. However, while politicians listen to concerns about the reforms, David Cameron has already stated that key elements of the changes, including handing GPs control of budgets, 
will remain.

Measures in the bill will give the new GP-led consortia responsibility for commissioning the majority of health services and create an independent NHS Commissioning Board. The reforms will result in the abolition of primary care trusts (PCTs) and strategic health authorities (SHAs) and transfer local health improvement functions from PCTs to local authorities.

At a practice level, the abolition of SHAs and PCTs will mean that practices will no longer be dealing, negotiating or contracting with these bodies. In their place will be the newly created independent NHS Commissioning Board that will hold and award a core contract to individual practices. The commissioning consortia will be responsible for the majority of health services not delivered via the core contract.

Any willing provider
One of the key phrases coming out of the Health Bill is in relation to the idea of ‘any willing provider’ and the promotion of competition between providers of NHS-funded services and private providers. Patients will have a greater choice of provider and so the need to stand out from your local colleagues (who are also likely to be your competitors) will be increased. Opportunities will exist for practices to expand services but consideration must always be given to the issue of potential conflicts of interest. Practices should consider setting up a provider company and obtaining service contracts under ‘any willing provider’.

Workload planning will be essential with greater partnership working needed. Your practice will need to get involved, and as practice manager you can play a role in finding out the priorities of your local commissioning consortium – or indeed registering interest to be on the consortia board.

Contract changes
Practices are already dealing with the implications of the 2011/12 contract award, which gave GPs a net pay freeze, in line with government policy to freeze public sector pay. While a 0.5% increase in contract value allows practices to increase pay for lower paid staff, the government is expecting all NHS organisations, including general practices, to achieve efficiency savings of 4% each year through its Quality, Innovation, Productivity and Prevention (QIPP) programme.

Looking ahead, there will be a single unified core contract from 2013 held by the NHS Commissioning Board. No details have as yet been released but it is worth noting that across the country personal medical services (PMS) contracts are already under threat. In England, 40% of GP practices have locally negotiated PMS contracts and PCTs are making inroads into aligning these with GMS figures. Caps have been set in some areas so that the core price per patient cannot exceed this level irrespective of historical reasons for practices having a higher baseline.

This reduction in funding has a direct impact on a practice’s profitability and in some cases it is causing instability and raising serious concerns over the ‘going concern’ status of certain practices. As it is likely that any new contract will be based around the current national general medical services (GMS) framework of pence per patient on a weighted list size, it is essential that practices prepare now for the consequences.

Increase income, save costs
Practices will need to look at other income streams and cost-saving ideas to maintain profit levels. Find out which enhanced services your PCT is prepared to fund and keep them under constant review. Consider taking on new services but ensure that these are costed out accurately so they are adding profit, rather than utilising valuable and possibly scarce resources. Also consider collaborative working with other local practices.

Consider where savings can be made. Can you or your practice provide services more cost-effectively? The biggest single cost to practices is staff costs (usually between 35% to 40% of income) but staff are also your biggest asset, so it is vital to review the staff mix and ensure the right person is doing the right work. Can work be moved from doctor to nurse practitioner, or from nurse to healthcare assistant? Can your administrative team do more income generating work?

To achieve the right economic balance of skills, practice managers should assess staff processes and identify staff capabilities. Streamline patient forms and remove unnecessary processes. Identify team players and training needs by using annual appraisals and try to improve effectiveness through coaching.

Consider other staff cost-saving ideas. Always plan for holidays and sickness to minimise overtime, agency workers or duplicate staffing. Part-time workers may be more flexible over the hours they work and can represent a saving in tax or National Insurance terms. Offer perks, such as childcare vouchers or additional holiday, rather than pay increases or remuneration. Plan for staff changes. Do staff need to be replaced or can a lower grade be employed to do the same job?

Take time to think about patient power and how they can help achieve the changes needed. Audit your patients: are high-intensity users taking up the majority of appointments? Are staff dealing with patients in the most effective ways?
Improve your practice’s operating efficiency. Audit your IT systems and ensure you are making best use of the systems and that the information is up-to-date. Embrace technology and look at new ways of doing things by use of mobile phones, text messages, emails and your practice website.

Premises are a fixed cost, so the more your premises are used, the less they will cost per hour. Try and stagger surgery times to ease pressure on car parking, waiting room and reception areas. To some extent, the introduction of extended hours appointments has done this by default. If, however, funding for extended hours is removed you will need to consider whether or not it is still financially viable to continue offering the service.

Use your consulting rooms for consulting and not for administration or storage! Look at the potential for subletting rooms outside your core surgery hours, but be aware of the potential loss of notional rent if this income exceeds 10% of your total. Also consider whether your practice has the space or capacity to add services such as a pharmacy.

There is the potential threat of the physical limitation of premises on increasing your practice list size. Also make sure you consider how your premises will stand up to scrutiny under the new strengthened powers of the Care Quality Commission. Will they be fit for purpose?

Other expenses
Audit other expenses to reduce them where possible. Are you regularly comparing the costs charged by your energy suppliers? Do you make use of buying groups that can
 negotiate discounts on your behalf? 
Consider outsourcing services like shredding, cleaning and payroll. Review your maintenance contracts and try to plan and budget for repair costs.

Plan now to improve drug reimbursements and referral budget spending. Ensure your practice is not missing any claims with a quick health check. Typically, the three things that go wrong here are:

Failure to understand what can be claimed.
  • Failure to produce the FP10 correctly.
Administering items where the Prescription Pricing Authority (PPA) claw back exceeds the discount obtained.

So ensure your whole team knows what can be claimed – for example, sutures and certain diagnostics – and check that your FP10s reflect the precise items claimed (check the generic switch is working correctly). Instigate manual controls on expensive drugs such as Zoladex and Prostap, and ensure the formulary and templates are completely up-to-date.

Benchmark practice performance
You should be benchmarking your practice against other similar practices to find out how your practice is performing financially and to identify any obvious areas of weakness. Practices with accountants who are members of the Association of Independent Specialist Medical Accountants (AISMA) will automatically receive benchmarking information as part of the service they receive.

It may well be the case that economies of scale will force single-handed and smaller practices to merge to become much larger partnerships in newer purpose-built premises.

To survive in a time of momentous change, communication will be key across the board: listen and talk to partners, staff, consortium and external organisations including hospital colleagues. Importantly, listen to your patients. In difficult times, they may well become your closest allies. Keep your ear to the ground by staying in close contact with your practice manager colleagues locally.

Doing nothing is no longer an option. Practices are businesses with primary care as their end product. Reduced core income needs to be addressed and the sooner this is done the better placed the practice will be to cope, move forward and take advantage of the opportunities that will undoubtedly arise in the 
years ahead.