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Sunday 19 November 2017
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Is it time to close your practice?

In what circumstances should you take the difficult decision to close your practice?

Many practices are left with no option but to shut up shop. However, it is worth considering your options carefully before you take this drastic step, says Andrew McHugh  

 

No one can be unaware of the depth of the crisis we are in. It was predicted in summer 2014;I produced a report based on 2,769 responses to a survey with the title ‘Do you despair of your future in general practice?’ 

 

The results of that survey boiled down to one word: yes. My findings were later supported by a British Medical Association (BMA) survey where a significant number of respondents said they believed their GP practices were no longer financially viable.

 

Domino effect

 

No GP practice is an island. The closure of one will impose significant strains on neighbouring practices. 

 

In his speech to the Special Local Medical Committee (LMC) Conference, Dr Chaand Nagpaul, chair of BMA Council, told delegates that 200,000 patients had already been left without a doctor following practice closures.

 

He further stated that the Government cannot afford for a single practice to close unnecessarily, as the costs far outweigh the cost of rescuing practices at risk of closure.

 

Handing the contract back to NHS England is not a decision to be taken lightly, but practices at this stage will already be at the end of their tether. It is highly likely that GP partners and practice managers will be burnt out and not in the best frame of mind to make strategic decisions. It is therefore vital that they take advice, in confidence, from a number of agencies. 

 

 

Who to call

 

In the first instance, you should speak to NHS England, your clinical commissioning group (CCG) and your LMC. The LMC will act as an honest broker in the negotiations to come. In all likelihood the practice will already have spoken to NHS England, requesting permission to close the list. 

 

List closure is one way that vulnerable practices can protect themselves. But as more practices become vulnerable, NHS England is under pressure to keep as many lists open as possible. If you seriously believe that without list closure your practice cannot continue, you need to ensure NHS England understands your situation. Details of the process can be found in the NHS England document Managing Closed Lists.[1]

 

You should not be put off if NHS England rejects or queries your application. It has a statutory duty to ensure the provision of primary care across the country and list closures severely restrict this. Also, be aware that NHS England and CCGs can support practices at risk of closure under Section 96 of the NHS Act 2006.

 

This states that primary care trusts (now CCGs) may provide support to any person (or organisation) providing or proposing to provide primary medical services. The Act makes it clear this includes financial assistance, but the legislation also contains another significant word – ‘may’. NHS England is under no obligation to provide financial support. 

 

 

Support for vulnerable practices

 

In December 2015, NHS England announced a pilot programme for the support of vulnerable practices. A sum of £10m was allocated, though this is probably insufficient. In order to stand a chance of gaining support from NHS England from this funding, practices will have to show that they are of strategic importance to the local health economy. NHS teams may also set local criteria for practices to gain access to the funding. 

 

These criteria may include:

  • No doctor in the practice to have declared pensionable earnings in excess of £96,100 pa (pro rata for part-time GPs).
  • Practice expenses to be greater than 63%.
  • The practice must have had no contract breaches issued since 1 April 2013.
  • The practice should not have any ongoing cases with NHS England performer machinery or the GMC.  

When a practice asks to close

 

When NHS England receives a request to hand back a contract, it has three options: 

1 List dispersal – sharing the practice’s patients among neighbouring practices.

2 Finding a ‘step-in provider’ to take over the contract.

3 Putting the contract out to tender. 

 

If NHS England feels list dispersal is possible without destabilising the local health economy, significant financial support is unlikely. But if a practice is identified as strategically important it is likely to get support to keep operating until an alternative provider can be found. The practice would need to provide projections of costs – normally a projection of locum costs, less the cost of employing salaried GPs.

 

Property issues

 

Any practice considering handing back the contract will need to look carefully at the practice premises

 

Some of the issues to consider include:

  • Whether the surgery building is owned or mortgaged by partners – are all the current partners named on the mortgage? If not, take legal advice.
  • Are the building and other assets listed in your partnership agreement? Is it clear who is a property-owning partner and who isn’t? Is it clear what share of the property each property-owning partner has? If not, take legal advice. 
  • What is the planning designation of the surgery? Can it only be used for health and social care purposes? Could you apply for change of use to increase the property’s value?
  • What is the value of the property?
     
  • Be aware that commercial valuations are based largely on rental income.

If your surgery was valued recently the value would be based on rental reimbursement and the expectation that this would continue. Handing back the contract with no guarantee of rent reimbursement can significantly alter the property value. If you think you will be affected by this, take professional advice.

 

Do you have any tenants in your building? Will handing back the contract affect them? How long is their lease for? Is there a break point?

 

Is your surgery building owned by a third party and leased to the partners? In this case, the practice manager and the partners must study their lease for:

  • The date the lease was taken out.
  • The term of the lease – normally 25 years.
  • Any break point – this can be 10 or 15 years after the lease date.
  • Dilapidations – what state the landlord expects the building to be handed back in.
  • Rent reviews – if the landlord can allow for assumed future rent raises when assessing the cost to the partners of terminating the lease.

 

In most commercial leases, the tenant is responsible for meeting the cost of the rent up to either the full term of the lease or until a break point. So if NHS England is considering list dispersal, the partners will remain jointly and severally liable for the lease until full term or the break point and will not have the GMS or PMS rent reimbursement to cover it. This could result in partners facing financial ruin.

 

Employment issues

 

Handing back the contract will obviously affect surgery staff. If the list is dispersed, there are likely to be redundancies. Any employee who has worked in the surgery for more than two years is eligible for redundancy pay as set out below: 

  • Half a week’s pay for each full year under the age of 22.
  • One week’s pay for each full year aged 22 or older, but under 41.
  • One and half week’s pay for each full year if aged 41 or older.

 

The length of service is capped at 20 years. Weekly pay is now capped at £479. The maximum statutory redundancy pay is £14,370. 

 

If NHS England, in consultation with the practice partners, decides to look for an alternative provider, practice staff will usually move to the alternative provider under transfer of undertakings (protection of employment) regulations (TUPE) . When TUPE applies:

 

  • The employees’ jobs usually transfer to the new company – exceptions could be if they are made redundant or in some cases where the practice is insolvent.
  • Their employment terms and conditions transfer.
  • Continuity of employment is maintained. 

 

Financial issues

 

If you decide to hand back the contract, you should contact the practice bank and any other body where you have financial liability.  You should be aware that banks and other financial institutions may choose to foreclose on loans and mortgages if there is no guarantee of future income. Talks with the bank and other institutions should only be undertaken after discussion with the practice’s accountants.

 

Political issues

 

Having spoken with NHS England, the CCG, the LMC and the bank, you should also speak to your MP. It is important that the depth of this crisis in general practice is recognised in Parliament. Parliament must be able to give area teams the ability and flexibility to transfer funds from unproductive areas, such as challenge fund contracts and Sunday afternoon clinics and use them to help to stabilise general practice.

 

Conclusion

 

Clearly, the decision to hand back the contract to NHS England is not to be taken lightly. It could be financially ruinous to partners. I am also aware that many partners feel so ground down that the prospect of financial ruin seems preferable to the uncertain future in primary care. It is important to take professional advice at every step of the way. If you decide to continue to operate, I would advise retrenchment. Look at the contract and decide what doesn’t have to be done. 

 

Andrew McHugh is medical practice director at a practice in Banbury, Oxfordshire 

 

References

 

1 NHS England. Managing closed lists tinyurl.com/z87r2xd

2 Business transfers, takeovers and TUPE gov.uk/transfers-takeovers