Do we stand a hope in hell against the GPFC?
In his second feature on practice property, Dr Peter Stott examines the different ways that practices can consider funding new surgeries
Eighty-six per cent of all GP premises are either owned by the GPs themselves or by the private sector and paid for through the cost-rent and notional rent systems.
The system has worked well to contain costs but it is cumbersome and the downside has been lack of investment. Most GPs still practise from inadequate premises. Only 40 per cent of our surgeries are purpose-built. Most are run from converted houses and shops and 80 per cent are below the current recommended size (see table on page 42).
Until 1989 when it was privatised and sold to Norwich Union for £145 million, the General Practice Finance Corporation (GPFC) provided almost all the finance for surgery buildings. GPFC arrangements were long-term, linked to the yield on Government bonds (gilts) and the total amount available was strictly in line with Treasury limits.
There were high penalties when GPs tried to get out of the arrangements early and this limited change. Since privatisation in 1989, the GPFC has raised capital privately from the Norwich Union annuities (pensions) fund. This took the brakes off Government limits, allowed escalation in the loans available but it also encouraged for-profit corporations to enter the scene.
The cost of PFI
For a variety of reasons, GP self-build is becoming less common. More than 60 per cent of GPFC funds are now accessed by commercial property developers who are building, owning and buying out GPs' premises. In the process, they are tying many of us into long-term leaseback arrangements that may constrain further development. Because both Norwich Union and the property companies need to create profit for their shareholders, this also increases costs for the public purse.
In 1998/9, £290 million (around 9 per cent) of the GMS budget was used to reimburse GPs for practice premises expenses and rental schemes. All rental funding comes finally from the NHS and if more than 9 per cent of GMS funds has to be diverted from clinical services to meet extra costs it will inevitably be at the expense of clinical care.
Experience of PFI in the acute hospitals sector shows it has undoubtedly increased costs. The resulting budget deficit has typically resulted in a 30 per cent contraction in capacity and a 20 per cent cut in service budgets which has had to be met by further efficiencies from centralisation of resources.
New cost limits
In 1997, recognising the risks that for-profit companies posed, the Government introduced new cost limits this time not for the capital available, but for the cost-rent and notional rents. So while in theory we can borrow unlimited amounts, there are still tight cost limits on rent reimbursement and therefore on GPs building and owning their own premises.
There is new capital funding. It's called LIFT (NHS Local Improvement Finance Trust) and this is where a lot of the new investment into primary health care has gone. In 2001, the Government claimed that as a result of LIFT, by 2004, £1 billion would be invested in primary care facilities and up to 3,000 family doctors' premises would be substantially refurbished. This is a massive capital investment equal to half the current real estate worth of all practices in England.
LIFT concentrates capital investment in areas of greatest need and in projects which promised greater integration of primary care services. The proposals echo those for public-private finance in hospital development.
The source of finance is both national and local. The national LIFT joint venture company is a public private partnership, 51 per cent owned by the private sector (Norwich Union is again heavily involved) and 49 per cent by the Treasury and the Scottish Executive. At local level, LIFTs are intended to bring together 60 per cent private sector funding with 20 per cent from local health bodies and 20 per cent from the national joint venture company.
LIFT development brings many other primary care professionals into GP surgeries pharmacists, community services, social workers, physiotherapy, opticians. The first tranche were built in the original health action zones, the inner-city areas of higher deprivation where primary care facilities were historically poor.
In 2001, £200 million was initially promised to six of them: £24 million for example went to Manchester, Salford and Trafford; £36 million to Southern Derbyshire; £23 million to Barnet, Enfield and Haringey. Similar sums went in 2002 to 12 second-wave projects and in 2003 to 24 projects in a third wave. The sums are staggering and well outside the investment limits of most GPs. Between £1 million and £5 million are now being spent on individual health centre projects.
Each year, the Government has devoted greater levels of funding to LIFT. We are now in the fourth wave of creating what John Reid calls 'super-surgeries'. This year £177 milion went to nine areas and 51 new LIFT projects.
These new super surgeries provide some of the most modern integrated primary care facilities in the UK and, because they are situated in areas of high deprivation, will enable NHS primary care to begin to tackle some of the inequalities and to provide greater resource to needy communities. The GPs who work in these premises may retain some financial involvement, however, usually from selling the freehold on their existing premises.
In 1944, before the NHS began, a poll of GPs in the armed services showed 83 per cent were in favour of practising in a health centre-lead salaried service and did not wish to own their own premises. By focusing investment on LIFT, the Government is moving us inexorably towards that model.
Peter Stott is a GP in Tadworth, Surrey