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Should I worry about being trapped in a sinking practice?

Three experts advise a GP in the middle of a partnership trial period how to decide whether his future is safe

I am six months into a partnership ‘trial period’. If I decide to stay, the practice deeds say my resignation could be trumped by that of a more senior doctor, so I could effectively be trapped in a sinking practice. What are the financial implications of being the last partner standing? 

Dr Fiona Cornish: Remember you have legal obligations from day one

A new partner signs a partnership agreement before starting the ‘mutual assessment’ period. Even though there may be a termination period of as little as one month, on either side, it is important to remember that this is a legal partnership from day one.

An incoming partner, once in their post, is entitled to see the practice accounts, so don’t be squeamish about asserting this. Ideally, try to have a discussion with all existing partners about their intentions for retirement, so that planning is in place and the likelihood of shocks is minimised.

If a partner retires, leaving one, then the outgoing partner will need to be paid out their share of assets. It is very unlikely that the new partner will buy into the property during the mutual assessment period, so only the share of the partnership capital will have to be paid. This includes fixtures and fittings, drug stock and equipment.

If you do decide to stay in the practice and this happens, you will need to contact NHS England to inform them of the situation.

There is a statutory period of three months’ notice for retirement of an individual, and six months’ notice for a practice dissolution, under the GMS contract, so a sudden retirement may be in breach of contract obligations, and sanctions may be imposed. There are similar provisions for PMS.

The GPC produced a helpful document, Partnership Agreements, Guidance for GPs, in 2014, which offers advice on many thorny issues.1 This is essential reading, however perfect you think your partnership is.

Dr Fiona Cornish is a GP in Cambridge and a former president of the Medical Women’s Federatio

Dr John Allingham: Sign a partnership deed on the first day of practice

To avoid the terrifying financial implications of being the last partner standing, any partner joining on a ‘mutual assessment’ period (usually six or 12 months) should agree and sign a partnership deed on or before the first day in the practice. A reasonable agreement will probably state that there must be a period between resignations, which is often six months, but may be three. Retirements should be dealt with on a first-come, first-served basis.

During the mutual assessment period, the option of walking at the end should ‘trump’ the senior partner’s resignation and in today’s climate a new partnership should be easy to find.

The GMS regulations do not make it easy to become the sole contract holder in a situation like this. The last man standing has to accept the nomination from the leaving doctor and NHS England needs to approve it.

Otherwise, difficulties recruiting will make it necessary to run on locums, leaving all the practice and a lot of the clinical admin with the singlehanded contract holder. Locum costs may prove unaffordable and returning the contract to NHS England may be the only way out. In this scenario the GP is personally liable for redundancy payments. They may be left with the building to dispose of, and will find a lot of the capital account is made up of furniture and goods, the value of which is difficult to work out.

Dr John Allingham is medical secretary at Kent LMC

Phil Harnby: Take legal advice on the wording of the current deed

In the first instance, you should ask to see full details of the practice’s financial records and future expectations, so you can judge whether there are any points that need clarification.

The financial implications of finding yourself in this position are so severe that you should take preventive measures now. Any probationary period is a two-way street – you’re not only there to prove yourself, but also to find out if the practice is the right one for you.

Given the concerns you’re expressing, it might be that you’ve already decided subconsciously that this isn’t the practice for you. But if you do see your future there, and your partners want you to sign up, there are things you can do to give you greater peace of mind.

Take legal advice on the wording of the existing practice deed – now may be an opportune moment to update it with a medical lawyer. There may be other elements of the deed that make you uncomfortable and you must ensure it meets your needs as well as those of the other partners. There’s no reason why you can’t suggest the deed is brought up to date as part of you completing your trial, especially as reviewing it is good practice anyway.

For instance, maternity/paternity leave is an item that is commonly missing from partnership agreements. There should also be a last man standing clause: a good agreement would not allow a number of partners to retire at once. And if a practice owns its premises, provisions for how the property is to be dealt with should also be included in the agreement.

Phil Harnby is manager at RMT Healthcare, a member of the Association of Independent Specialist Medical Accountants

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Readers' comments (14)

  • The moral of the story?

    Don't become a partner.

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  • Short answer - Yes. And even if the practice isn't failing now. The majority of practices (unless super-partnerships or similar) will fall over at three consecutive operational events - a resignation, emigration, retirement or long term sickness of partners or even ANPs. Jump ship.

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  • I hate to say it but @unts mandate is working. Practices are falling like dominos and private companies are having a field day. They do not want GPs in charge of primary care anymore! We had our chance and we failed misurably.

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  • The writing is on the wall for smaller GP practices, unless something drastic changes to government policy and payments.

    If the government can make giving Flu Jabs less profitable with the signing of a contract with Aggressive national pharmacies, think of the consequences when they actively get vindictive.

    I'd have some clause in the partnership agreement to at least ensure some way of sharing redundancy payments in lieu of not being able to recruit a replacement partner.

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  • A little test for the GPs looking to enter the business side of the profession:

    If you have read the article and did not notice that you were promised the advice of three experts and were given only two, - stay out of the money side of things :)

    Apart from that, - entering into a partnership is a business deal just like any other. Manage your risks and proceed with caution.

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  • 8 months down the line .we closed our practice as it would fail in the next year or so.
    We both retired early , paid off the redundancies , sold the building and handed back the contract .
    Best thing we could have done . Walked away from the misery of being a partner , Had very little help from NHSE , 6500 patients assimilated into the surrounding practices .
    They must be finding it tough .
    I now locum 2.5 days a week , and have time to do things I like .motorcycling , keeping fit and currently cycling around Italy
    Had we soldiered on we would both have been bankrupt and probably dead in a year or so .If a practice is sinking get the hell out .I look back and wonder how we coped for the last few years .Got my lust for life back , and it feels good

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  • Don't do it. Don't become a partner as the politics has made it untenable. The partnership model was supposed to keep us safe, but the 2004 contract was the beginning of the end, and now it is the end. The politicians have won. Go abroad before it is too late (for family reasons)
    I merged my practice with another. At the 11th hour the other practice told me I had to leave or they wouldn't merge. While I could have taken them to court, it would not be in anyone's interests really, and not my own.
    I am looking back on it now, and realising that my low mood, mistakes, physical symptoms were largely to do with dreading the merger, but also realising I was trapped in a sinking ship. I am now doing locums, but more importantly, seeing my children, doing some gardening, doing more exercise, and generally feeling a great deal healthier than I have been in years.
    It is still painful to have had to leave so suddenly, and I am so sorry for my patients and staff, but the job was rubbish.
    Howeve, if you have a great team of supportive, like minded doctors who look out for one another, a team who works together and looks after each other helps out the doctors, then go for it. There aren't that many around.

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  • When I requested this article was written, I was more interested in the answers to the following questions:
    1) Can you shelter yourself from risk of closure financially? I don't think limited companies work in a GP partnership model?
    2) Do any GPs that have been unfortunate enough to go through a closure mind letting people know roughly how much they lost through the closure (with a rough breakdown of how that was broken down ie staffing costs etc). I obviously appreciate that this would vary massively depending on staff numbers and contracts, premise ownership and dispensing status.
    Does anyone mind giving any advice on these matters?

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  • Anon 9.18
    It cost us £100000 redundancies , £65000 early repayment fine for paying off mortgage and loans £165000 mortgage repayment .£10000 accountancy fees .£5600 estate agent fees .£5000 solicitor fees plus £3-5000 in odds and ends disposing of equipment , sold some equipment for £3000 .Not the golden investment I had imagined when I bought in in 1989 at a cost of £50000 .We had 13 staff some with us 25 years , 2 partners and an old property that we sold to a developer with cat D use ie medical only so lower value than residential .He will have to wait a year for planning to get residential use , then turn it into 4 units .At least we did not have to pay in to leave .walked away with enough to buy a nice bottle of wine ! If you are tied into a lease you will be liable for your share if you leave .Hence no one wants to buy into a practice these days You would be a mug to do so these days

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  • Thanks Anon 10:43! I am shocked at the £100,000 staff redundancy figures! What were contract terms for the staff? I need to get calculating....

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