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Facing up to income loss in the future

If global sum revisions go through, you could face large cuts in income in the not-too-distant future. Start your plan of campaign now, advises Dr John Couch

Within two years many practices could face substantial cuts in income.

Following the review of the global sum formula, the criteria for redistribution of earnings seem unclear. For instance, practices with large numbers of children will be winners. But practices with equally large numbers of elderly will be losers.

I see children relatively frequently up until school age and then they mostly disappear off the radar until they get acne, want the pill, or both.

Elderly patients, on the other hand, consult increasingly often, require longer consultations, require more home visits, have multiple medications – and numbers are steadily increasing. Two weeks ago I wrote about the importance of a financial disaster plan. The recent global sum news should reinforce the points I was making.

We must be ready in advance for a significant drop in income. Waiting until it happens is not an option. It is not yet clear whether the figures of up to 19 per cent fall in income represents core income only or QOF and enhanced service income too. This is important because MPIG, or core PMS income, makes up about 55 per cent of practice NHS income.

The balance is from items such as QOF, enhanced services, rent and drugs reimbursement.So what would your options be if your income fell by, say, 15 per cent overnight?Well, you'd have to face the fact that partner drawings would fall. If expenses did not reduce at all, the fall in profits would be magnified.

For instance, a three-partner practice with NHS income of £700,000 and a profit ratio of 50 per cent (that is, £350,000 profit) would lose £105,000 of income but the profit ratio would fall to 41 per cent (£245,000 profit).Put another way, each partner would lose 30 per cent (£35,000) in NHS profit.

The drop in drawings could be lessened by either an increase in income from other areas, a fall in expenses, or a combination of both. Most practices are always on the lookout for extra income, and new opportunities often appear.

There is little doubt there are more provider opportunities within the NHS at the moment, especially around the secondary to primary care work shift as well as Choose and Book and (gruesome thought) extended opening.

PCTs are also putting 'for sale' signs up on vacant or managed practices, and even now there is much competition in this area. Private services such as occupational health, drug trials and insurance work are other options.Reducing expenses must also be considered. While there may be some cost savings in most areas, staff costs account for the largest proportion and must have primary focus.

More efficient skill mixing will be vital and will include greater shift of QOF and minor illness work to nurses and health care assistants. It has therefore never been more important to review every staff and partner vacancy before advertising.

Sadly it would also be wise to brush up on redundancy rules just in case. I also suspect some partners' half-days will be abandoned!

Practice amalgamations will also increase as efficiency savings in all areas are likely to be considerable. I

f you have been considering this you should look much more closely now.It is likely that practices facing income falls will employ a combination of all the above. With care a reduction in drawings will be something most of us can avoid. However a smaller drop is inevitable for many.

John Couch is a GP in Ashford, Middlesex

Take home pointsTake home points Take home points

• To combat a possible fall in earnings, try to increase income – for example by providing private services
• Try to reduce practice expenses
• Maximise cost-effective use of staff – for example by more efficient skill mixing
• Consider amalgamating with another practice – efficiency savings are likely as a result

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