Should I join a partnership that relies on MPIG funding?
Should a GP avoid joining a partnership if he or she suspects it relies heavily on MPIG payments? Three experts advise
Puja Patel: Ask to see the practice’s financial forecasts
Joining a medical practice as a partner is no different to joining any other business as a partner and you should request sufficient financial information to enable you to make an informed decision. A partner is jointly and severally liable for the losses of his business – and it is standard practice for a new partner to expect to take accountancy advice on the last three years’ accounts before making a commitment.
However, NHS GPs have traditionally been less concerned about the financial wellbeing of the business, on the assumption the underpinning of the NHS funding would ensure its viability.
That is no longer the case given the MPIG correction factor payments are to be phased out over seven years from 1 April 2014.
If your partnership offer is from a practice with potential significant losses to income, you should seek evidence of its calculated losses alongside its contingency financial planning to forecast how savings can be made e.g. through merging, reviewing staffing structures etc.
Ask to see the forecasted financial plan and, if possible, to be included in discussions with the Local Area team/LMC about how NHS England plan to assist the practice during this time.
If it is the case the practice could potentially become non-viable and be closed down, this would no doubt affect your decision to join particularly given you are likely to have to make a capital contribution to the business as an equity partner.
Puja Patel is a senior solicitor for health and social care law firm Hempsons, with a specialty in partnership issues.
Daphne Robertson: Get answers in writing
Anyone joining a partnership should do their homework first. Regardless of whether you are making a capital commitment, you are buying into a business, so ‘buyer beware’. There is nothing new in this, and many GPs, accountants and solicitors have joined professional partnerships believing this represented the pinnacle of their career, only to discover that the business had problems. GP partners are normally ‘jointly and severally’ liable for the practice, which means that your entire wealth could be called on to settle the partnership debts, even if these were incurred before you joined.
The end of MPIG will leave some practices with financial difficulties, but there are many other problems that a practice might face such as onerous leases, problems with staff and more. Other practices are more fortunate and have lucrative contracts, or are able to earn additional money from their surgery. This is why every new partner should perform ‘due diligence’ before joining a partnership: ask as many questions as you can and get the answers in writing. If problems emerge later you will want to rely on these ‘warranties’, so get them checked by a solicitor. If the other partners are not prepared to answer your reasonable questions, ask yourself why and consider walking away.
Remember to sign a partnership agreement documenting your business relationship before you join.
Daphne Robertson is the principal of DR Solicitors.
Oliver Pool: Don’t be embarrassed to discuss practice funding
Whether the practice is heavily reliant on MPIG is just one of a number of issues that a new partner should consider before taking on a share of the business. A new partner takes on joint and several liability with his or her new partners from day one - not just (as is sometimes thought) from the end of the probation. Becoming a partner is therefore much more than simply an increase of status. One becomes a business owner with all the risk and responsibility that goes with that. Any new partner ought therefore to give careful consideration to the viability of the practice as a whole. Its long-term financial viability is just one part of the picture - albeit an extremely important part.
The question suggests an implied awkwardness about being seen to be ‘difficult’ by asking questions. The existing partners may roll their eyes about an intending partner making investigations, but it would be unfair of them to mark the new partner down for doing so. It is not at all unreasonable for a new partner to ask to see, say, the last three years’ accounts, and either to ask to be allowed to speak to the practice’s accountant about them, or to get those accounts vetted by an independent accountant (although new partners should be discouraged from going to accountants who are not specialists in primary care). If the existing partners are confident that the practice is in good shape they should have no problem with this.
Oliver Pool is a senior associate in Veale Wasbrough Vizards’ healthcare team.