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How to fight off the pay freeze

GPs have had their pay frozen for the third year running. Accountant Bob Senior outlines the facts and advises on how practices can minimise the effects

GPs have had their pay frozen for the third year running. Accountant Bob Senior outlines the facts and advises on how practices can minimise the effects

The recent report of the Review Body on Doctors' and Dentists' Remuneration has left many GMS practices wondering what the future has in store for them.

The report implements a clause in the 2006/07 GMS Contract which sets off any increases in the Global Sum against a practices Correction Factor.

As a result of this, perhaps up to 90% of GMS practices will not see any increase in core funding for 2008/09.

For them this is effectively the third year of a pay freeze. Many practices saw profits in 2006/07, the first year of the freeze, drop by 1½ %. Current indicators suggest that the second year, 2007/08, will see profits drop by a further 3%. The likelihood is that they may then drop by a further 3½% in 2008/09.

Overall therefore many GMS practices will see profits falling by 8% over the three year period of the freeze.

The key question facing many GMS practices is therefore "how long do we have to wait until we see an increase in funding?". Do we simply have to hold out for another year or so, or could we be facing many years without any increases?

The answer is that the government appears determined to get rid of, or at least make changes to, the Minimum Practice Income Guarantee.

Last year it put forward changes to the Allocation Formula which were rejected by the GPC so now the government appears to have put Plan B into operation – no further uplifts until doctors ask the government to revise the Allocation Formula, or the MPIG has run out, whichever comes first.

Two things are now needed.

First practices need to do what they can at a practice level to minimise the drop in profits over the next year, or perhaps two.

Second the profession needs to get the question of the Allocation Formula and the Minimum Practice Income Guarantee properly revisited.

As this is the third year of the pay freeze, practices have already taken many of the most obvious steps to improve income and reduce costs. They now need to turn their attention to the less straightforward, and less welcome, areas.

In an average non dispensing practice approximately 50% of overheads are spent on traditional Ancillary Staff, 7% on salaried GPs and 3½% on locums – a combined total of just over 60% of their total costs and an obvious area for attempting to make savings.

Making cuts

Obviously, any savings made in these areas, particularly in relation to reducing the use of locums and salaried doctor sessions, could have a direct impact on the working life of a partner.

However if profits are to be maintained in the short term they might be a necessary evil. If we look beyond the short term we might well see practices moving to a situation where a full time GP is working nine clinical sessions per week!

Trying to establish whether or not savings can be made in ancillary staff costs is very difficult because of the diseconomies of scale experienced by small practices and regional pay variations.

However comparing your own practices ancillary staff cost per patient with regional benchmarks should help you see if you have any scope for savings. For example, in the south of England, outside London, spend per patient, by quartile is as follows:

1st quartile < £28.32

2nd quartile £28.32 - £31.65

3rd quartile £31.65 - £37.75

4th quartile > £37.75

These figures for ancillary staff include National Insurance, superannuation etc.

The Association of Independent Specialist Medical Accountants (aisma) have members throughout the country who should be able to compare your salary costs per patient against local benchmarks. They can be contacted via the aisma website www.aisma.org.uk.

Again, make sure you have made all the right moves with other expenses.

General administration amounts to about a quarter of most practices' expenses, and maybe further savings can be made here. And look once more at the cost of utilities, of drugs and of insurance and office materials.

Can you generate more income by taking on more private work? If significantly less than 10 per cent of your income comes from private work and outside posts, you probably have scope for improvement. Consider things like occupational health (see article on following page).

The broader picture

Looking to the broader picture, it is vital that the background to the MPIG is not overlooked since it appears that, as time passes, the perception is developing within the government that it is "affluent" practices that are benefiting.

This is evident from the following extracts from the DDRB report:

"We understand that there are significant, unwarranted variations in GMP (General Medical Practitioner) income caused solely by the operation of the minimum practice income guarantee (MPIG) regardless of the workload and patient care provided by individual GMPs and their practices".

"This was because a practice's MPIG related directly to its income from the old contract under which funding was inequitable.

Moreover, it was typically practices in more deprived areas that received less income per patient, although their patients had greater needs."

The MPIG reflected, among other things, the historic recognition by Health Authorities of the higher level of staff costs per patient incurred by very small practices and practices operating on split sites.

The historic level of funding, which was protected by the MPIG in such cases, had generally been carefully established on a local basis. To simply write that off as being an "unwarranted variation" or "inequitable" is totally unjustified.

Like it or not there is invariably a political aspect to the governments relationship with GPs, the thought in many politicians minds being "which will get me more votes - being nasty or nice to GPs?"

With a General Election probably being no more than two years away and with the government under pressure, there is no reason to believe that they will be thinking anything different now.

As a result we should hope that the governments current hard line approach will be for the relatively short term and that the Allocation Formula can be revisited without vested interests distorting it again.

In the meantime GPs need make the best of a bad job by trimming costs and maximising income where they can.

Bob Senior is vice-chair of the Association of Independent Specialist Medical Accountants and director of medical services at Tenon, the UK's third largest medical accountant

Frozen money

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