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Investment in general practice over the past five years – what’s the outlook for practice profits?

13 July 2022

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Specialist medical accountant Andrew Burwood gives his analysis of the latest figures on investment in general practice over the last five years

In May, NHS England and NHS Improvement (NHSE/I) published a report detailing the investment in general practice in England in the five years from 2016/17 to 2020/21. The report was based on NHSE/I financial reporting systems and other published data on reimbursement and remuneration for dispensing activity.

The headline figures indicated there have been real terms funding increases every year for the five-year period. But what is the real story behind the numbers and what is the impact on practice profitability?  

Below, is analysis of some of the most interesting trends and issues.

The first part of the report looks at the total investment in cash and real terms over the five-year period.  Figure A summarises the percentage change in investment, compared with the Consumer Price Index (CPI) rates in April (at the start of each financial year).

There was a sizeable uplift in total investment in 2019/20. What was behind this?

There were two main contributory factors to the notable 7.58% increase in 2019/20.

The first was the launch of the Clinical Negligence Scheme for General Practice in 2019/20, which allows GPs to significantly reduce the cost of their medical defence insurance.  Then there was also the introduction of primary care networks (PCNs).  According to the NHSE/I report, PCN funding amounted to £347m in 2019/20 and increased to £673m in 2020/21.

While the employer superannuation rate increased from 14.38% to 20.68% in 2019/20, the additional 6.3% is paid centrally by NHSE/I. It is likely that this additional cost was factored into the overall investment noted in Figure A. This was positive for two reasons: first, an additional 6.3% payable for every member of staff within the NHS Pension Scheme would have a marked impact on practice profitability. Second, the same increase would be faced by GP members of the NHS Pension Scheme on their own pensionable pay.

However, we know that responsibility for covering the extra 6.3% will be passed back to practices and practitioners at some point.  The arrangement from April 2019 was ‘transitional’. NHS Pensions has said the transitional arrangement remains in place for 2022/23 to ‘maximise stability for employers in the sector, particularly in light of the pressure resulting from the coronavirus (COVID-19) pandemic.’

Investment in general practice can only be described as modest at best

Initial impressions are positive, given that investment exceeded CPI in all but one year.  However, what the report fails to acknowledge is the increase in the number of registered patients over the five-year period. 

The data in Table B and Figure B is taken from the number of registered patients in England on the first day of each month published by NHS Digital.

Table B – Patients registered at a GP practice

 YearPatient numbersIncrease% change
April 201657,631,776621,3031.09%
April 201758,328,549696,7731.21%
April 201859,039,595711,0461.22%
April 201959,759,638720,0431.22%
April 202060,458,907699,2691.17%

The additional workload, and corresponding costs stemming from the increase in registered patients makes the increase in investment over the five-year period seem modest at best.

Increases in global sum funding were partly the result of recycled money

The NHSE/I report includes a breakdown of how the annual investment increases are calculated. Although there were percentage increases in global sum payments and actual global sum payments per weighted patient over the five-year period (see Table C), some of the increases came from recycled money, through the phasing out of seniority and Minimum Practice Income Guarantee (MPIG) income over a seven-year period from April 2014.  This led to GP practice winners and losers across the country.

Table C – Global sum changes

 Year% changePer weighted patient% change per weighted patient
2017/18+8.45%£85.35+5.91%
2018/19+5.19%£88.96+4.23%
2019/20+2.04%£89.88+1.14%
2020/21+6.49%£93.46+3.98%

There have been DES funding transfers

There were significant decreases in Directed Enhanced Services (DES) funding in 2017/18 and 2019/20 (see Figure D). In 2017/18 this can be attributed to the Avoiding Unplanned Admissions DES ceasing and the money being recycled into the global sum. In 2019/20 the Extended Hours DES was transferred to the Network Contract DES (network funding presented separately in the NHSE/I report). Funding for extended hours reduced by 45p per patient following the transfer, and this was also recycled into global sum funding.  The overall impact at practice level is therefore neutral, despite the increases in the global sum in both years presented in Table C.

There has only been a moderate increase in premises funding

Premises funding includes rent reimbursements: cost or notional rent for premises provided by the GPs, or actual rent where premises are leased from a third party. It also includes rates reimbursements since practices are able to claim these costs back.

According to the NHSE/I report, ‘significant additional funding has been invested in GP premises costs.’ However, the data suggests otherwise (see Figure E).  Bearing in mind that premises funding is crudely a reimbursement of costs, it is difficult to see how this has benefitted general practice.

Medical defence cover costs are behind the increases in primary care organisation (PCO) administered funds

PCO funding (see Figure F) includes contributions towards recruitment and retention, such as the GP retention scheme.  The figures for 2017/18 and 2018/19 included contributions towards the increasing costs of medical defence cover, prior to the state-backed indemnity scheme being launched in 2019/20. 

In 2017/18, the contribution was 51.6p per patient, increasing to £1.017 per patient in 2018/19. 

In addition, in 2017/18 the payments for sickness leave cover were increased to allow for cover to be provided by external locums or existing GPs already working in the practice but who did not work full-time. Also, the qualifying criteria was changed to absence for two or more weeks, rather than on a basis of patient numbers and periods of absence. 

Covid support funding provided a short-term boost to profitability

In 2020/21 and 2021/22, Covid support funding received by practices will have created spikes in practice profitability, with £270m paid out across the country, allowing practices to reduce locum costs through different ways of working.

It is fair to assume that profits will return to pre-pandemic levels moving forward, and possibly decrease further given current inflation rates. 

Increases in core funding may not be sufficient to keep general practice sustainable as patient numbers grow

According to the NHSE/I report, PCN funding amounted to £347m in 2019/20 and increased to £673m in 2020/21. The five-year forward view states that £1.799 billion will flow nationally through the Network Contract DES by 2023/24

It has always been clear that networks and working at scale are seen as the future direction of general practice. However, while the latest core GP contract uplift for 2022/23 represented a 3% increase in the amount paid per weighted patient, this compares with the current CPI of 9% (in the 12 months to April 2022).

What is more, the number of registered patients has continued to increase, with the data at April 2022 showing a total of 61,625,745, up 1,166,838 (1.93%) compared to the numbers registered in April 2020.

Practice sustainability is a key consideration across the country, and it is clear is that the modest increases in core funding will not be helping to build resilience in general practice.

Engagement with PCNs is key to unlocking additional funding

Employees are of vital importance to practices, and the GP partners who are the business owners will want to ensure that valuable staff are retained and rewarded appropriately. 

Ultimately, difficult decisions will have to be made over practice profitability and fair reward for the workforce. It is unlikely that core funding will be increased significantly in future years, meaning that individual practices need to engage with and work to develop their PCNs, if they are to benefit from the additional funding they need to cope with the increasing costs of running their businesses.

Practices should be reviewing their financial performance on a regular basis, not least because retaining GPs in general practice is harder than ever, and profit reductions will not make it any easier.

Practices should also review every income-generating opportunity and consider whether the reward is worth the time and effort.  With resource being a real commodity, there is no sense in taking on additional work where there is little or no return on investment.

Andrew Burwood is a partner at Larking Gowen LLP, which is a member of the Association of Independent Specialist Medical Accountants (AISMA)

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