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Financial opportunities arising from clinical commissioning

14 October 2011

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Deborah Wood
Healthcare Services Partner, Moore and Smalley LLP

Vice-Chairman, AISMA

Deborah is currently head of Moore and Smalley’s Healthcare Services Department, providing financial advisory services to a wide range of owner-managed businesses operating within that sector. She is also Vice Chairman of the Association of Independent Specialist Medical Accountants (AISMA), with responsibility for the technical update training and peer reviews of the member firms

With Personal Medical Services (PMS) contracts under attack, phasing out of the correction factor on the General Medical Services (GMS) contract and enhanced services income reducing, many practices are fighting to prevent a serious drop in profits. So now, more than ever, is the time for practice managers to explore new income streams and review overheads to enable profitability to be improved or at least maintained, while not compromising quality of care.

Opportunities arising from clinical commissioning
The draft Health and Social Care Bill proposed the introduction of clinical commissioning groups (CCGs), which by 2013 would hold the majority of the NHS budget. Clinical commissioning will create opportunities and advantages for practices as GP-led consortia will commission the majority of health services not already delivered via the core contract.

To ensure commissioning can work there is a need for clinical leadership, greater partnership working and efficient workload planning. Patients will have a greater choice of care, services and providers. Central control will be significantly reduced. All practices will have to be party to a CCG.

Getting involved early should mean you have the chance to influence change directly. Where commissioners identify changes to service delivery to improve quality, generate patient choice or save money those services will be recommisioned. It is at this point that practices need to consider whether they are in a position to provide those services through Any Qualified Provider (AQP) contracts.

Such contracts are starting to emerge across a range of services including: community health services, maternity services, cardiology, palliative medicine, ear, nose and throat (ENT), dermatology, older people’s health services, diabetes rehabilitation services, healthcare service for mental health conditions and continuing healthcare.

Opportunities arising under the AQP model
AQP contracts provide an approach to service provision under which any provider who is able to provide a specific service and meets the required minimum standards can be listed as a possible provider. Patients choose which provider on the AQP list they wish to see. No provider is guaranteed any volume or exclusivity. AQP reflects the change in emphasis on providers meeting the required quality standards.

What should you do now?
Get involved with your CCG and find out what its priorities are and where your practice could fit in and offer services. Look at entering service contracts such as the AQP model. Take time to think about patient power and how they can help achieve the efficiency changes needed. Money follows patients and patients have a widening choice available to them. Practices need patients to choose them to ensure the income generated by those patients flows into the practice.

Communication is key: staff, partners, CCGs, external organisations and patients need to communicate their views, plans and objectives. All parties need to be aware of each other’s views in order for each party to achieve what they are setting out to do.

If you decide to offer services via the AQP model it may be beneficial to consider offering those services through a separate ‘limited company’ rather than as an additional general practice service. This can be beneficial for a number of reasons, including risk management, tax mitigation and pension planning. It is essential to seek specialist advice early to get the right structure in place.

Improve operating efficiency
Audit everything. Implement budgets. Monitor performance. Take time to prepare an accurate budget and utilise it.

Benchmarking is a key aid to monitoring performance against external averages. Monitoring your practice’s results against averages and what is expected should be part of the annual information you receive from your accountant. This information will normally be given on a ‘per patient’ or ‘per FTE’ (fulltime equivalent) partner basis and will enable you to assess where the practice is missing out on income and where it
is overspending.

Tips for improving profitability through cost savings

  • Change how you view the practice – it is not just a GP surgery, it’s a business providing the product of primary care services.
  • Look closely at the staff mix of the practice as this is the main cost to a practice – practice managers are at the forefront of staffing and are best placed to evaluate efficiencies. Ensure that the right person is seeing the patient/performing the service. As GP time is the most expensive, ensure other staff, for example practice nurses and healthcare assistants, are being utilised effectively. Assess staff capabilities, identify team players, implement coaching and address training needs. Utilise annual appraisals.
  • Other staff cost savings can be made, for example by offering perks such as childcare vouchers rather than remuneration or additional holidays rather than pay awards. Minimise as far as possible the overtime hours as this is additional expensive time. Remember the 80:20 rule (that 80% of the cost is incurred by 20% of patients) – look at whether high-intensity patients are taking up the majority of appointments and whether staff are dealing with patients in the most effective way.
  • Ensure you are getting the best use of IT systems. Look to improve and ensure information is up to date.
  • Outsourcing time-consuming exercises can be cheaper and free up valuable practice time. Look at costs for outsourcing shredding, cleaning, payroll, weight loss/healthy living groups and use buying groups.

Tips for improving profitability through increased income streams

  • Look at how big the list size should be for an average nine-sessions GP and then determine the right mix of GP partners, salaried GPs or nurse practitioners needed to meet that demand. Consider the age and deprivation factors that influence weighting (see Box 1).
  • Funding from additional patients brings in £65 GMS (weighted list). Significant increases in list size will provide additional income but will also require the practice to provide services more efficiently in order to make profit on income for additional patients.
  • Enhanced services may still be profitable if considered in the right way. The practice should look at, evaluate and keep under review all the services their primary care trust (PCT) is prepared to fund. Ensure services are taken on with a view to profit. Services should therefore be evaluated to ensure they are profitable and that all the costs that will be incurred have been taken into account.
  • Personally administered drugs income can also be a profitable area and therefore needs to be monitored closely. Three common areas leading to missed income are:
    •    Failure to understand what can be claimed for.
    •    Failure to produce FP10 correctly.
    •    Administering items where the Prescription Pricing Authority (PPA) claw back exceeds the discount obtained.
    The key is to know what can be claimed for, that everything that can be claimed for is being claimed for and that controls are in place to ensure this.
  • Negotiate medical report fees. BMA guidelines are not a set scale. Limited reports requested from insurance companies do not mean a limit in the fee. Set your own scale of fees. Most importantly, ensure prompt payment.
  • Explore new sources of income – clinical trials, occupational health, AQP, teaching, directorships, Macmillan service or medical audits. But always take into account the cost of providing any new service to check it will generate a profit before taking it on.


There is no magic wand to improve practice profitability or to find new income streams to replace lost ones. However, ignoring the problem and not taking action is definitely not the answer. Instead review where you are now, what you want to achieve and make some small steps along the lines outlined above to help keep you moving in the right direction.