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GPs 'won't cash in on goodwill profits'

Medical accountants believe GPs will be cautious about taking advantage of new rules that could allow them to raise the price of a share in their practice.

The regulations passed last week end a 56-year ban on the sale of goodwill.

The change means practices and private firms can trade in GP services and add on a price for goodwill ­ an estimate of current and expected profit from the service, on top of tangible assets such as premises.

The GPC reacted with outrage to the last-minute move by the Department of Health and predicted it would hit recruitment by pricing young GPs out of joining practices because partners who are leaving will inflate the cost of their share.

But accountants cast doubt on the effect of the changes. They said uncertainty about the profitability of GPs' work and the fact goodwill may rely on the reputation of the doctor providing a service could undermine its value. It will also be difficult and expensive for practices to reorganise in order to trade their services.

Under the new rules goodwill can only be traded on additional, enhanced and out-of-hours services ­ not essential services. Practices would need to clearly distinguish these services from essential services on a separate balancesheet in order to sell them.

Frances Wilson, an accountant with Dodd & Co in Penrith, Cumbria, said practices would have to wait until the end of the year to see how profitable additional or enhanced services were.

She added: 'If a service is being provided by a practice any overhead costs are already being met, but commercial organisations would need to employ staff, so the income may not be as great.'

Mike Gilbert, a committee member of the Association of Independent Specialist Medical Accountants and an accountant with RMT, said: 'I don't think there are fortunes to be made. Goodwill tends to rest with the individual ­ if you haven't got that individual the value just collapses.'

GPC deputy chair Dr Hamish Meldrum said reconfiguring services 'might carry some risks' and put practices off.

By Ian Cameron

Sale of goodwill: opportunities and threats

What is goodwill?

The value of a business over and above its tangible assets.

How have the rules changed?

Up to now trading in goodwill in general practice has been banned. From April 1 enhanced, additional and out-of-hours services ­ but not essential services ­ can be traded with goodwill attached to them.

How might GP principals benefit?

Practices could set up a company or separate partnership within the practice to separate essential and other services. GPs selling their share of the partnership could then add a goodwill factor to the price.

Are retiring GPs guaranteed a goodwill windfall?

No. Goodwill is only worth what buyers are willing to pay. Many accountants believe goodwill rests on the reputation of the individual GP. Any windfall will also be offset by the likely rise in accountancy costs associated with reconfiguring services.

Why is the GPC so angry?

It fears pay prospects could suffer, with GPs being forced to compete against commercial providers to win enhanced services contracts.

Are there any other threats?

The GPC claims the recruitment crisis will get much worse because young doctors and non-principals won't be able to afford to buy in. Negotiators also believe patients will suffer as primary care becomes 'fragmented' and continuity of care suffers.

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