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What to do during the confusing run-up to the new contract

With GPs confused about their pay rise, pensions and much else, Dr Bob Button gives advice on what to do

Ultimately the new contract will increase profitability for most GPs. The big problem is – when? And what should you be doing while things sort themselves out?

Remember that your costs during the next financial year will increase immediately but your income will be in monthly amounts as an advance against your ultimate earnings. You need to budget carefully and do everything you can to maximise your income in a cost-effective way. You also need to keep a careful eye on your expenses.

First, a practice needs to know how profitable it is. Profit is the money made after you have taken off all expenses. A useful way of working out your profit is the concept of the net profit percentage.

Take the gross income of the practice and deduct all the expenses you have incurred. Divide this result by the gross income, then multiply by 100. This will give a figure that amounts to your net profit percentage. It is an index of how efficiently your practice is running.

I would say a figure of 55-60 per cent is very efficient. If your net profit is less than 50 per cent then you are carrying too many expenses and need to recalculate how your practice works.

Carry out this check on your current profitability. Use a couple of the last completed account years for comparison. Then do a calculation of what your anticipated expenses are for next year against the expected profits from Q&O as well as enhanced services.

Don't forget that you will eventually have to allow for a deduction from your global sum for the contributions you are to make in respect of both your own and your staff superannuation.

In the case of GPs this will not be clear until you get your final April global sum figures, by which time a notional amount will have been deducted by the PCT in respect of these contributions. This should be clearly shown on the documentation accompanying the payment.

Second, you need to work at increasing profitability, even – especially – at an uncertain time like this and even if you are already doing well.

You must be cautious without being too conservative. You have to speculate to accumulate. Practices will need to develop their services and their staff in order to be able to provide the increased service levels that are going to be measured by the PCT. Only by doing this and making this investment is the practice really going to become profitable.

I would certainly urge maximising your earnings from the quality and outcomes framework and from enhanced services. I would also recommend keeping a very strict eye on expenses.

You might decide to restructure your practice instead of taking on a planned extra member of staff. You might find more efficient ways of using equipment or providing services. You should certainly look at keeping premises costs to a sensible minimum.

Getting rid of staff is more of a problem. Before contemplating this take very good employment law advice from a specialist. This is often available from the IRO at your BMA local office.

Third, you should recalculate the profit shares of the individual partners. It is likely some partners who in the past have not participated in out-of-hours arrangements (and have earned less as a result) will wish their profit share to be reassessed since it will now no longer be a requirement for any of the partners to be providing out-of-hours services.

You should also reassess how profit is divided up from the point of view of the workload and contribution made by each partner. There are many good reasons why it is best not to be too picky about this since a partnership is working together with a common view to profit.

The efforts of an individual in one field are often matched by other work by someone in another part of the practice and the overall profit is the result of good working by everybody.

In the future the number of GPs who are partners will not directly affect the income the practice receives since your income now will result from the capitation levels rather than the number of doctors.

I suggest the practice manager draws up a clear spreadsheet indicating current income and expected expense as well as calculating the net profit percentage and this should be considered by the partners before the financial year begins.

It might be necessary to make modifications of the partner drawings to guarantee remaining solvent during the various uncertainties of the new contract.

What you should be

doing while things

sort themselves out

lEstablish how profitable your practice is

lMaximise earnings from quality and outcomes framework

lMaximise earnings from enhanced services

lKeep a tight rein on expenses, especially relating to staff and premises

lMake sure profit shares of the partners are fair and appropriate

Bob Button is chief executive of Wessex LMCs

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