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Winners and losers under global sum rejig proposals

Many GPs are confused about the proposals for reshaping the global sum formula. Rosemary Smith of accountancy firm Sandison Easson discusses the implications and indicates the possible winners and losers

Life in general practice never seems to be ripple free. Now there is yet another worry – about the profitability of your surgeries if the new review of the GMS global sum formula is followed up.What does it mean to you?

The proposed new formula will introduce weightings for the following.

•Workload. This would develop an updated workload measure based on the age-sex profile of the patient list, proportion of patients registered in the previous 12 months and the deprivation measures linked to those patients' postcode of residence. This measure would no longer include the weighting for patients in care or residential homes

.•Consultation length and home visits. This works out the consultation length and home visits data from a national research database and combines it with the practice level age-sex profile of patients.

•Staff market forces. The global sum funding would be adjusted according to the data on geographical variations in staff costs.

•Cost of recruitment and retention. This allows for the extra cost of recruiting and retaining GPs in deprived areas of the country. Funding adjustments based on premiums paid to private sector staff in certain geographical areas and the chronic health needs associated with each practice.

•Cost of unavoidable smallness. Global sums would be weighted to take into account the lost economies of scale faced by practices that are 'unavoidably' small. Payments would be graded according to how isolated the practice is, therefore inner-city small practices are unlikely to benefit at all.

•Rurality (possibly). The formula review team was unable to recommend whether this should be included. The current formula weights for rurality. This is because research links rurality with increased practice expenses per capita. But the team said the data may be unreliable, and pointed out that the 'unavoidable smallness' payment would also help some of the rural practices.

Most of the above points are obvious. The only one causing problems is the rurality adjustment. The feeling is that with patients gaining more flexibility about where they register, the distance from patients' homes to the surgery would no longer be a good measure of rurality.Overall, the payments are meant to compensate practices for any extra work that is associated with their specific practice make-up. But it has been proved in previous surveys that working hours do not correlate with additional needs. However, the age and sex of your patients does directly correlate with working hours.Also the following will be removed:

• QOF prevalence

• Patients living in nursing homes and residential homes

• Ethnicity• Patients who speak a different language from their GP

• GP market forces factor

The winners

The above indicates that the winners will be: urban practices; practices with high additional needs; practices with high proportions of new registrations; practices with low proportions of patients in nursing and residential homes; practices with low proportions of elderly patients; London practices and practices in spearhead PCTs.

If the rurality factor changes, this would mean that practices with high additional needs and practices in spearhead PCTs would fall out of the winners' enclosure.At the moment these practices would not have their MPIG and correction factor payments adjusted for any gains but the London adjustment would be discontinued. This is because the new adjustments would eliminate the need for it.

However, I must point out that the percentage gains and losses are only relative to the actual global sum and this usually is between 30 - 50 per cent of your total income. They are obviously a less dramatic proportion of your overall gains or losses.

Take, for example, a GP with remuneration from the practice of £110,000. A 20 per cent loss on the global sum would result in that GP's overall earnings falling to £83,500.A 20 per cent gain would result in the overall earnings rising to £122,500.

There has been a lot about the proposition that 'it is not the case of some practices losing money, it is a case that some practices have been overpaid and that the changes will rectify it'.

But the fact remains that both the global sum and PMS were set up to give practices the ability to run their surgeries as they saw fit.

This often means spending more than others on staffing which is a long-term commitment that cannot easily be changed when income suddenly falls. There is a risk that under the new proposals the partners will be left with falling profits and problems with cash flow.

Can the losing practices do anything to improve their situation?

The most important thing is to ensure that good budgets for expenditure are set and (more importantly) monitored throughout the year. This will enable the practice to prepare a cash flow and then work out what level drawings can be set at.

It is a wise precaution to keep monthly drawings at a realistically low figure and then at the end of the year a balancing-up payment can be made if the profits and the funds are available.

The worst of the high January tax bills and superannuation balancing-up payments have now been reached and this should ease the cash flow problems that a lot of practices are experiencing.

But always remember it is easier to get an extra payment at the end of the year than to run the risk of having to pay money back into the surgery that you have already spent or to which you have committed yourself.

Additionally you need to be sure that all your income that can be claimed has been claimed. This is especially the case for enhanced services. Also you need to ensure that all efforts to generate fresh income are looked at.

But do ensure that the extra income you are chasing will not bring high costs. Your efforts need to be cost-effective.Get together with similar practices and start buying in a consortium.

This will give you more purchasing power and reduce your costs.But remember that the proposals for reshaping the global sum are only proposals (the changes proposed will be out to consultation until May). Nothing may actually happen, though the Government does seem to be in a belligerent frame of mind at the moment.

  • Rosemary Smith is the GP liaison manager at chartered accountant Sandison Easson and Co, Wilmslow, Cheshire

formula

The proposed formula will introduce a new set of weightings

drawings

Keep monthly drawings realistically low so you don't have to claw back later

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