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Cut and dried? The new economy catches up with general practice

4 October 2010

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AISMA (Association of Independent Specialist Medical Accountants)

Bob is a chartered accountant and Director of Medical Services at RSM Tenon. He is also the chairman of AISMA. Bob first got involved with GPs back in 1990 through helping a friend who was involved in the preparatory year for GP fundholding. Twenty years later, Bob now devotes all his time to the healthcare sector

Although the general economy has had a torrid few years, many GPs have, in reality, been sheltered from the worst of the downturn. While the last government was, in the main, supportive of healthcare, it tried to reduce the cost of GP contracts by providing minimal increases in General Medical Services (GMS) and Personal Medical Services (PMS) funding. Those modest increases in funding have generally been outweighed for most practices by increased costs, resulting in a fairly modest reduction in profits.

Indeed, for many the most noticeable aspect of the economic climate has probably been the drop in interest rates. Since many GPs have quite sizeable mortgages or loans, this means they have actually seen their monthly outgoings reducing sufficiently to compensate for the drop in profits.

This happy state of affairs – ie, GPs coming through the problems of the economy fairly unscathed – may not continue. The new government’s Emergency Budget started the ball rolling by revisiting the tax system with a view to extracting more tax from the economy. Some changes had already been introduced by the previous government, such as the reduction in the personal tax allowance for those with taxable income of more than £100,000. This allowance was then completely removed for those earning more than £113,000; giving an effective tax rate on that £13,000 of 61%.

That change has been left in place and may well result in GPs who fall into that £13,000 income band aiming to reduce their income to £100,000 by perhaps dropping sessions or cutting back on less profitable, non-core work. Overall, up to 50% of fulltime GPs could find themselves losing some or all of the personal allowance, with their tax bills increasing by up to £2,590 a year.

The 50% tax band for those earning more than £150,000 has also remained intact. For some GPs, this is particularly unwelcome. Again, its introduction could well lead to GPs cutting back, particularly on out-of-hours and other 
non-core work.

Other significant tax changes are that the rate of employers’ national insurance contributions will be increased by 1%, which could easily mean that a fulltime salaried doctor would cost the practice an extra £640 a year to employ. The tax relief available on the purchase of capital equipment is also being cut back.

At the moment a practice can claim an Annual Investment Allowance (AIA) on expenditure on capital equipment of up to £100,000 in a year, meaning that full tax relief can be gained on that amount of expenditure in one year. From 6 April 2012, the AIA is being reduced to £25,000, which will mean that while tax relief on expenditure will still be given, it will be spread over a number of years. For practices, this means that if you are going to be making significant investments in capital equipment then you ought to plan to do it before 6 April 2012 if possible.

Federated models
The government’s drive to improve efficiency and reduce costs will have a major impact on GPs following the publication of the white paper Equity and Excellence and the planned changes to commissioning, including the closure of primary care trusts (PCTs) and strategic health authorities.

As a starter, PCTs are urging practices to look seriously at working in a federated model, since this is perceived to be a way to reduce costs and improve efficiency. While federated working may have some benefits, immediate financial savings cannot be guaranteed.

In order to generate direct cost savings of any significance, it will be necessary to see rationalisation of premises and staff. If practices in shared buildings are committed to achieving cost savings, they may need to face up to the financial inefficiencies of each of them having their own separate reception and administration teams.

The federated model, in many respects, could be considered an early stage of the development of commissioning. It has been suggested by some commentators, perhaps rather cynically, that some PCT staff’s enthusiasm for pushing the development of the federated model in their area is that they see it simply as a structure into which they can play musical chairs, either when PCTs reduce their staff numbers or when they cease to exist.

Skill mix
Although it is dangerous to try to identify character traits in a particular profession, there are perhaps some things common to many GPs: they are typically very caring individuals who are keen to do the best they can for their patients, and who will do what they can to make the most of the system. When all is said and done, however, they are highly skilled professionals who expect their skills and efforts to be properly valued and rewarded.

The introduction of GP-led commissioning could sit well with both these objectives – if both conditions are adequately catered for. However, if the actual result of commissioning in the new world is only to pass the buck to doctors to act as gatekeeper in an inadequately funded world, with an opportunity to be personally financially penalised if the commissioning group overspends but without the opportunity to benefit personally if efficiencies are gained, then one might speculate that the process is not going to get wholehearted buy-in from GPs.

Instead GPs will focus on improving efficiency within their own practices, particularly when it becomes harder simply to generate income from the provision of new services. Practices will need to focus on how they work with patients and actually look at implementing the skill-mix changes that many have been talking about for years. While many practices have made strides to get simple activities taken over by nurses and healthcare assistants, in some a GP’s day-to-day job has not changed fundamentally for 
many years.

True, the introduction of the Quality and Outcomes Framework (QOF) and performance management has meant that much more time and effort is put into data recording, and the use of telephone appointments has provided an alternative to physically sitting in front of all patients. Nevertheless, for many GPs the core approach to dealing with patients has not changed.

Patient demand management
Many practices have seen the profile of their patients change dramatically in recent years. Some innercity practices now have a significant proportion of their list made up of a transient immigrant population. In such cases English is not the patient’s first language. Not surprisingly, such practices are finding their appointments are very much under pressure.

Other practices, in less obviously demanding environments, still find that their doctors are always very busy with constant pressure on their appointments. In many cases, this pressure is brought about by high levels of frequently attending patients continuing to present and doctors being reluctant to actively manage those patients. In simple terms, this goes through the doctor’s mind as: “Life is too short to have a row with Mr or Mrs X about why I don’t need to see them so often. I am already running late, let’s simply see what they want this time and get them out of the door as soon as possible.”

While that approach is quite understandable, doctors must realise that if they don’t try actively to manage the patients and do something to minimise their attendance then the problem of pressure on appointments will never improve. The end result of this will be to continue to offer more doctor sessions for the same patient list – so more work is done for the same income.

Practices should aim to ease the pressure on their appointments system – either to enable them to cope with larger lists with the same number of doctors, or handle the existing list size with fewer doctor sessions.

One way to work towards this is to set up a regular clinical review procedure for frequently attending patients. Do this by producing a list of the top 100 frequently attending patients, then divide the list into six batches. Each month, get all the doctors into a clinical meeting and take the next batch of cases. Start with the first name in the batch and ask the GP dealing with the patient to give details of the case to the other doctors, explaining what actions they have taken to manage the case so far. From the discussion, the GP can develop a specific plan of action for the patient. Only by discussing individual cases in detail in this way can any changes to patient, and sometimes doctor, behaviour be brought about.

Having looked at the doctors’ appointments, attention then needs to be directed at the practice nurses. How many patients are the nurses seeing in a week? How long are their appointments? Are there regular gaps between one patient leaving and the next being seen? Could appointment times be shortened? Are nurses still doing things that don’t actually need their expertise and which could be done by healthcare assistants?

The whole concept of patient demand management causes concern to many clinicians, who do not wish to appear uncaring. The key to making it acceptable is that the patient should feel valued, cared for and actively managed. If they understand that the clinician has thought about their case and made a careful judgement about them then hopefully they will be happy to go along with the advice in a positive manner.

Utilise available space
Improving efficiency needs to extend to the use of the practice premises. The historic approach of simply seeking PCT approval for funding for an extension when the premises become too small rarely works nowadays. The current limitations on NHS funding will do nothing to improve that situation, and practices therefore need to face up to the fact that many will need to bear an increasing proportion of their premises’ funding costs if seeking to extend their building.

The logical point arising from this is that practices need to avoid increasing their available space until they have exhausted all other opportunities to fully utilise their existing space. Using consulting rooms simply for two patient-facing sessions per day, when for the remainder of the day the room is used for admin, is not a great option going forward.

There is no doubt that practices are now facing their most challenging times for many years. In the light of that, GPs’ traditional option of simply keeping their heads down and getting on with treating patients until the system changes again might not be the best plan!

Practices now need to focus on improving their efficiency in all aspects of the way they work and look after patients if they are to survive in the new economy.