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Understanding your practice's vital statistics

The key to good analysis is understanding what your key metrics mean, and what the main factors are that affect them. Here Bob Senior of accountant Tenon offers a quick guide.

The key to good analysis is understanding what your key metrics mean, and what the main factors are that affect them. Here Bob Senior of accountant Tenon offers a quick guide.

Although you might think one NHS GP practice operates very much like another as they all have the same fundamental objective, it's surprising how much financial results differ.

There is a range of reasons for the differences, some of which you cannot easily do anything about, but others are a result of things that can be changed. And if, as we expect, Government funding is reduced over the next few years, practices will either need to accept a drop in partners' incomes – and conceivably staff salaries – or do something to improve their financial performance.

This article sets out the vital statistics that you need to have available in order to make comparisons and improve performance. Next week we will go one to look at how the statistics compare with the average and consider what might be done to improve them.

Patient population profile

The first thing to look at is the profile of the practice's patients since that is one of the major factors in the analysis of a practice's performance. First you need to establish the number of patients in each of the age bands 0-4, 5-14, 15-44, 45-64, 65-74, 75-84 and 85 and over. From that you then establish what percentage of the practice population is in the three broader groupings of 0-64, 65-74 and 75 and over. Those percentages can then be compared with what one might typically expect to see for an average practice – namely 81.5% aged 0-64, 9.5% in the 65-74 band and 9% for patients 75 and over.

Establishing how ‘old' your list is compared to the average is essential as it has a massive impact on your workload and the size of patient list that can be managed by a single clinician. As a GP will often see more of their older patients, it is very easy to believe that a practice's overall list is ‘older' than it actually is, unless you assess it properly.

Sessions per partner

Having looked at the patients, you then need to consider the clinical structure of the practice. How many sessions are partners working a week and how many weeks' holiday, study leave and sabbaticals do they take? What are the equivalent figures for salaried doctors and nurse practitioners?

Of the sessions they work in the practice, how many are clinical and how many administrative? Although some practices may regard seven clinical sessions and one admin session as full-time it is not surprising that the resulting level of profits per partner will be different when compared with a practice where a partner puts in nine clinical sessions a week.

Patients per partner and doctor

The reason for looking at sessions is that one of the key factors in financial performance is the number of patients looked after per partner and per doctor. You therefore need to calculate the list size per full-time partner (dividing the patient list size by the number of full-time partners) and per full-time doctor (dividing the list size by the number of full-time doctors, including salaried doctors). As an rule of thumb, one might expect a full-time partner to be looking after an average of 2,100 patients. That number is however affected by the age and social profile of the patients. For a young, affluent list it could be as high as 2,400 patients per partner, a middle-aged list with a lot of social issues could be down to 2,000 patients per partner and a very elderly population could be more like 1,800 patients per partner.

Staff costs per patient

The next area for consideration is the staff costs (excluding salaried doctors and nurse practitioners), since in a typical practice the traditional ancillary staff costs account for about 45% of total practice costs. You will need to ensure that you separate out in your accounts the total employment costs, including employers' National Insurance and employers' superannuation contributions, for all staff excluding salaried doctors and nurse practitioners. Dividing the total ancillary staff by the number of patients looked after by the practice will produce the staff cost per patient. Assessing how that cost compares with other similar practices is the other fundamental strand of practice profitability.

Profitability per partner

Overall profitability per partner is of course what practices are generally most focused on. However simply looking at a single figure in a set of accounts may be misleading as there are several things that may not be treated consistently by all accountants. First and foremost is the treatment of employers' superannuation contributions for partners, which should be charged as an expense in the accounts. Some accountants simply charge this to partner's drawings, which has the result that their profits are artificially inflated when compared with other practices. Why do some accountants charge employers' superannuation to drawings rather than charge it as an expense in the accounts? Perhaps because it is easier and avoids having to try to explain it to clients. But just because it is the easy option does not make it right!

Inconsistencies can also occur with the treatment of bank loan interest, which can either be shown as a practice expense if the loan is in the practice's name or claimed directly on a partner's tax return if each partner has a separate loan. If the interest does not appear in the accounts you need to take it into account when establishing the true profit of a partner.

By way of example, consider a GP who looks at his accounts and sees that his share of profit for a year was £130,000. He is aware that Government statistics suggest that an average GP may be earning £108,000, so he generally feels pretty pleased with the result. That is until he realises that the £10,000 of loan interest he is paying on his property loan does not appear in the accounts, and that £15,000 of employers' superannuation contributions have been charged to his drawings rather than being treated as an expense. Once the £10,000 loan interest and £15,000 employer's superannuation have been taken into account he will see that he is actually earning £105,000, some £3,000 less than the Government's published average – not quite so satisfactory!

If you want to find out how to improve your practice statistics then click here.

Bob Senior is director of medical services at accountant Tenon

Bob Senior is director of medical services at accountant Tenon To improve your practice's financial performance you first need to assess how you measure up Key vital statistics in a nutshell

• Profile of patient population
• Sessions worked per partner
• Patients per partner and per full-time doctor
• Staff costs per patient
• Profitability per partner

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