Bob Senior: What to think about when considering merging
As GP practices increasingly seek advice on merging, accountant Bob Senior pinpoints what to look out for
There are a range of things GP practices considering a merger need to look at quite carefully.
Some are financial, others more human and cultural. You have to feel that you can get on with the practice you are merging with, that they are not a million miles different from you, because if they are then frankly it won’t work.
Next you need to look at the staff structures and make sure that there are not very different staff rates of pay, because if you are going to start bringing the two teams together the likelihood is you are going to be harmonising people upwards. All of a sudden what looked like quite a profitable surgery, when you have to harmonise pay for all their staff to bring them in line with yours, is not so profitable.
You then need look at the cultural elements, such as working sessions, holidays for partners. I had one recently where in one practice full time is nine sessions and in the other full time is eight. One takes seven weeks holiday, one takes eight. How do they handle practice expenses? Is it paid for by partners or being covered via practice accounts? You need to ensure you are comparing apples with apples.
You need to effectively translate these differences into comparable equivalent figures so that you can say that for the work you are doing, this is what you’re earning, this is what we’re earning. If there a big gap then you must work out how to bridge that because you cannot in perpetuity have a situation where one part of the practice is earning more profits than the others because then it is not a true partnership.
Premises is then generally the next thing that you’ve got to be looking at quite carefully, to ensure no nasties are lurking. Say for example you have a practice in a health centre, which has been owned by the PCT and with comparatively low service charges. You need to understand if these will remain at this level or if the practice behind the scenes is actually having a row with PropCo wanting to impose a massive increase in charges. If either of the practice premises are owned by the GPs, are there any nasties there regarding loan interest rates and redemption penalties?
The last thing to consider is whether to keep all branches after merging and that depends on the circumstances. In a situation where small surgeries merge with large units it is questionable how much that merger will improve the result if they don’t, in time, do something about their premises because having a set of small buildings open is a challenge.
I am aware of one practice which has merged with a number of smaller ones in a particular city and their aim, I believe, is to actually put a development request in for a central location where they will all move in and let all the small non-CQC-compliant buildings go out for alternative use. That is normally like saying “I wanna lose three stone, I’m not gonna do it over night”, it is that sort of strategic plan they have in place. These practices have issues with CQC compliance, issues with disability access. So, we can’t change it overnight, but strategically we do want to bring them into bigger units over time.
The savings are often about making more efficient use of doctors’ time. Because if you have small surgeries you have a minimum number of doctors you need there. Whereas if you’re working as part of a bigger unit you can get greater efficiency because you are able to spread the load more easily, make better use of doctors and more readily control the use of locums.
Obviously there are economies of scale around management staff, you could have one practice manager instead of several. Similarly with nurse management and IT. So it’s that sort of thing where you see the biggest efficiency savings - around people. Obviously the cost of bricks and mortar can be made more efficient but that’s slower to get to really. You can also have savings on accountancy fees as well, because you’re only doing one set of accounts, not two.
Bob Senior is head of medical services at Baker Tilly and chairs the Association of Independent Specialist Medical Accountants.