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Questions to consider when replacing a partner

Many practices see a partner leaving as a way to increase profits, but there may be downsides, says Rosemary Smith

By Rosemary Smith

Many practices see a partner leaving as a way to increase profits, but there may be downsides, says Rosemary Smith


Every time you open the papers everything seems to be doom and gloom, your practice has seen its income repeatedly frozen and to cap it all one of your partners is due to retire.

Partners each bring their own skills, viewpoints and responsibilities. Remove one partner from a practice and it can change in nature and may be destabilised. It is important to make sure you make the right decision for the right reasons. Many practices see a partner leaving as a way to increase profits and do not look into the possible adverse effects.

First you need to meet as a group to discuss some of the following:

The past

Look critically at an analysis of your current and past performance.

• Are you well organised?

• What is the split between hours spent on professional activities and administration?

• How do you think this compares with other practices?

Practice performance

• What are the main strengths and weaknesses of your partners, staff and premises?

• Do you have the appropriate clinical support staffing?

• Do you deal appropriately with training needs?

• Do you work well as a team and meet regularly to improve the practice?

• Do you provide the right services?

• Are you happy with your practice profile, quality of healthcare and list size?

• Do you have appropriate prescribing and referral patterns?

• Are your finances well organised?

Practice aspirations

•What are the opportunities and threats in your changing local environment?

• Are you participating fully with PBC and maximising other income opportunities like enhanced services?

• What are the personal aspirations of the partners regarding healthcare, earnings and general goals?

• What do you regard as the right balance between money and quality of life?

• How much do you want to earn? How many hours per week do you want to work?

• What roles do the partners want to take?

• What are the views on partnership succession?

Having discussed all the above you will be able to move on and work out how to best fill the position. Do you:

• Recruit another equity partner?

• Take on a salaried GP?

• Take on a nurse practitioner?

If a partner is retiring there will need to be a payout and this can be financed in several ways. If a property-owning partner retires and is not being replaced by another equity partner, then the partners who remain will have to decide if they are prepared to take on increased loans to buy out the cost of the property share.

Recruiting an equity partner

Recruiting a new partner should broadly speaking keep the practice as it is, and should follow discussions to ensure the partners are happy with stability. Given the financial situation, year on year declines in profits are possible. But there are advantages to stability, in that it puts a practice in a good position to increase the enhanced services it can offer to its patients. For the purpose of this exercise, we can assume that recruiting a new partner will have a neutral effect on profits.

With any change within the practice, it is essential to ensure a new practice agreement is drawn up to protect the remaining or new partners. This is often overlooked when a new partner starts.

I will now estimate the effect of replacing a partner with a salaried GP or nurse in two hypothetical practices that may share facets with your own. Practice A (average performance) has three partners earning £125,000 a year and Practice B (better than average performance) hs five partners earning £200,000 a year.

Taking on a salaried GP
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The annual pay for a full-time, eight-session salaried GP lies between £52,462 and £79,167, so we shall assume a mid point of £65,000.

This is only the starting point as the practice will then have to pay the employers' element of the salaried GP's pension contribution, which will amount to £9,100, and the employers' element of the national insurance, which amounts to £7,680.

This leaves a true cost to the practice of £81,780, before professional indemnity insurance is paid.

There is a risk of additional costs if the GP takes maternity or paternity leave. This would leave the practice with the expense of locum provision after reimbursements are received – and some PCTs have dramatically cut back what they offer to practices.

The impact of this is summarised in the first box below. But remember that although it looks good, the increased profit will come at the expense of an increase in administration for you. You may also want to consider paying a bonus for high scores in the QOF to ensure your salaried GP has an incentive to deliver good performance.

Taking on a nurse practitioner
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Taking on a nurse practitioner will mean partners having to take on more surgeries or paying for locums to cover them. But it could enable you to alter some of your existing policies at the practice and use your present staff in different capacities.

If an individual nurse practitioner really grasps the role and fully accepts additional responsibility then the value for money being achieved can be excellent. But the individual must be capable of stepping up from the traditional nurse role.

On average a nurse practitioner at grade 7 will be paid about £40,000, which with employer's pension and national insurance would work out at just over £50,000.

As with employment of a salaried GP, you may want to pay a bonus for high QOF scores.

So how does this affect our two practices? See below.

Once again the increase in profits looks encouraging, but it could be lower than these figures suggest. Practice A especially would find that covering holidays and sickness would be difficult and therefore would need a higher than usual payment for locums.

Overall, locum costs could easily increase by about £30,000, which would reduce the increased profit per partner to about £20,000 per annum.

Rosemary Smith is healthcare manager with Tenon, the UK's third largest medical accountant

Rosemary Smith, healthcare manager with medical accountant Tenon. Rosemary Smith fay_wilson_stamp.gif Taking on a salaried GP Taking on a nurse practitioner

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