Preserving practice income in tough times

Dr Julian Neal describes how his practice has maintained its income by diversifying and providing new services

Five years ago, before the dark clouds of recession gathered, my partners and I decided to take a leap into the unknown.

As a relatively efficient and successful practice, we nonetheless recognised that the good times could not last forever and that tough times lay ahead with GP income from the NHS becoming increasingly hard to come by.

My partners and I decided that, for a practice like ours to continue to succeed, we needed to grow larger to realise the financial, negotiating, contracting and providing power that comes with greater size. We agreed to embrace – rather than oppose – the consumerist agenda in the NHS, and give our partners the chance to learn valuable new skills.

Five years later, we have four surgery sites with approximately 30,000 registered patients, we have benefited from the economies of scale that come with size, and in addition, we have developed a number of new services that have helped to insulate ourselves from the squeeze on NHS income from which we and most of our GP colleagues have suffered.

The overall effect on our finances is that we have been able to maintain and increase our revenue during each of the past five years, at a time when profits for many GP practices have remained static or fallen. Here is how we did it.

Recognising the importance of professional managers

Fourteen years ago we were one of the first practices to appoint a business manager as opposed to a practice manager, in order to use their expertise to expand our practice.

Three years ago, when our original business manager was coming up to retirement, we made a crucial – and potentially risky – decision to recruit a much younger professional from the private sector with no previous experience of healthcare.

This was because we realised that we needed to explore new business opportunities.

Our plan was to reinvest a significant proportion of increased income from our diversification into our core NHS general practice, in order to increase the numbers of GPs, nurses and other healthcare professionals we employed and to purchase more diagnostic and therapeutic equipment.

We wanted to achieve that holy grail of giving each patient a better quality of care and longer consultation.

Rewriting our business plan

With this strategy in mind, our new business manager facilitated an all-day meeting at a conference centre at which each of our 12 partners was required to give a presentation on one income-generating idea.

No prior discussion was permitted and the result was 10 distinct ideas, ranging from small and conservative to massive.

Many of the ideas related to directly improving NHS patient care and reducing unscheduled care – a particular area of focus for NHS managers.

We ran with three of the suggestions and gave ourselves 12 months to implement them.

The criteria for choosing the ideas included the degree of risk, speed of implementation, the amount of financial investment required, clinical appeal and need as well as the expected rate of return on investment.

Our business manager and I were charged with researching them and making them happen, which included seeking accountancy and legal advice as to the most tax-efficient way of delivering additional services.

Implementing our big ideas

Supporting the elderly

Our first big idea was originally to develop a nursing home to provide geriatric services to the mentally frail.

However, it soon became clear that this was a business firmly in the ‘wally box' (to use our business manager's terminology) – that is, an idea which required developing a high-risk business that needed significant capital investment in an area about which we knew very little. It was soon dropped.

But as a direct result of this development, we made contact with a skilled group of neurophysiotherapists working predominantly in the private sector, looking after the rehabilitation of people who had suffered from an acquired brain injury – an area sorely lacking within the NHS.

They were looking to expand their services geographically and, after some negotiation, we agreed a joint venture with them to open a new outpatient facility based in East Hampshire.

By doing so, we have developed a commercial venture that not only provides an excellent and much-needed service but also a good and sustained potential return on our investment.

Our service will initially be aimed at private patients, and we are developing plans to allow us to offer this service to NHS patients within 18 months.

Developing tele-health services

Our second big idea was to develop a range of tele-health products that would allow patients with chronic diseases to manage their conditions from the comfort of their own home.

Research has proven that this approach leads to a significant reduction in unplanned hospital admissions and, most importantly, provides an improved level of care for patients at a time when we are all being stretched as we try our best to do the day job.

Our tele-medicine business is in its infancy at the moment, but we have great hopes for its success as the pressure on primary care across the country increases with the bitter winds of economic and financial uncertainty looming on the horizon.

A matter of aesthetics

Our third big idea was to develop a medical aesthetics service.

We were seeing an increasing number of patients in our surgeries who had had less than successful botox treatments, and felt that, if we could provide a service that was run solely by properly trained and qualified doctors, we would achieve our joint aims of improving what was currently on offer while at the same time developing a commercially viable business.

Our research led us to a company called ORIS Ltd, which had been established to license GP practices to enable them to provide basic and advanced aesthetic treatments, such as botox and dermal fillers.

It is run for GPs, by GPs, and only GPs deliver the services. The company provides training, marketing, consumables and a national web-based booking centre to support practices, which allows it to rapidly to develop its own businesses.

None of our 12 clinical partners had previously had any training in medical aesthetics, but within three months of expressing an interest, four were suitably trained and qualified to allow us to open our own clinic.

We were so impressed that, to quote Victor Kiam, ‘we bought the company' – or at least a small part of it, so that we could help the founding shareholders to develop the business further.

We have been delighted with the success of our own clinic, four of our GP partners have discovered a new interest and, once more, we aim to provide a better service for our clients while at the same time developing a new, potentially profitable income stream.

The way ahead for GPs is uncertain. The abolition of PCTs and SHAs, the introduction of GP commissioning and the generally parlous state of the health economy have the potential to combine to create a ‘perfect storm'.

We certainly don't have all the answers, but we do believe that we have created a sustainable business model from which to shelter from the storm. I would urge you all to do the same.

Dr Julian Neal is a GP in Portsmouth and a director of Oris Medical – a company providing medical aesthetic treatments (www.orismedical.co.uk)

1. Appoint a dynamic business manager and give them the freedom to manage and implement new ventures
2. Take time to develop a coherent business plan
3. Ensure all partners have equal ownership of this plan
4. Spend time on market research – it is crucial
5. Conduct thorough due diligence before embarking on joint ventures with third parties
6. Proceed at all times with an open mind and be prepared to amend initial plans
7. Manage financial risk but also be prepared to speculate wisely to accumulate
8. Have inordinate amounts of patience as Rome was never built in a day
9. Communicate clearly to practice staff the reasons for diversification and update them regularly
10. Be prepared for criticism from peers