Don't fear for your quality pay cash-flow
Some GPs are concerned about cash-flow under quality payments, but they shouldn't be, says accountant Richard Vickery
nder the GMS system GPs have always been owed money by health authorities for things like drug dispensing and reimbursements, health promotion, items of service and target payments.
A typical figure for debtors of a four-partner practice might be £25,000. This debtor (and others) has to be funded by partners' working capital, which also has to cover the partnership's fixed assets, but is reduced by creditors (people the practice owes money to).
Under the proposed contract, the global sum replaces Red Book earnings and staff reimbursements.
A new source of income is the quality payment based on quality points achieved. This is in two parts. The 'aspirational' part is paid monthly along with the global sum and other money from the PCO with the balance or achievement part after the year-end. It is this delay in receiving the balance of the quality money that is giving some GPs a cash-flow worry it shouldn't.
This quality money is new money. It does replace the old quality money, but is largely an additional source of income. It is a bonus for providing quality care to patients and as many GPs will be providing a high-quality service already, this extra money will be the reward for going the extra mile and for the added burden of recording data.
So, under the new contract GPs will get their money by monthly payment and the cash-flow problem associated with the Red Book debtors will largely go. There will be a one-off cash-flow advantage in the first few months of the new contract as GPs will receive their monthly payments and collect arrears from the GMS pre-new contract income. This is similar to practices that have moved from GMS to PMS.
Even assuming the practice has to give up 100 quality points to ensure the MPIG applies, the excess is profit. Therefore in year one the aspirational payment of one-third of aspirational points x £75 (x £120 in later years) is paid monthly along with the MPIG as additional money.
In the first three years there is the additional £9,000 preparation payment to pay for the costs involved in attaining a high level of quality points. Of course in year two the achievement money is paid once actual points are known, and then the full quality money will be flowing into the practice. This income reaches full flow in year three when both the balancing payment and aspirational payment are based on £120 per point.
In summary this quality money is additional, new money, being paid to practices delivering quality care to their patients.
GPs would need to either build into an averaged drawings regime the annual lump sums due in April each year or to take a reasoned distribution when the monies are received. A more cautious approach would be to wait until the practice accounts have been prepared and the surplus profit can be distributed. The example on the right shows the situation in some detail.
Quality payments cash-flow
· Assuming MPIG option taken
· Quality points aspired to and achieved 750 in 2004/5, rising to 850 for later years
· GMS debtors at 31.3.04 £25,000
2004/5 2005/6 2006/7
Monthly aspiration payments
750 x 75 (£1,562 per month) 18,750
850 x 120 (£2,833 per month) 34,000 34,000
Achievment payments (paid mid April) 37,500 68,000
18,750 71,500 102,000
For cash-flow add GMS debtors
(paid say June 2004) 25,000
43,750 71,500 102,000