How your practice can cope with this year’s funding swings
Accountant Melanie Thomas gives her advice on how seven different types of GP practice can navigate major changes in practice funding this year
With a 40% reduction in QOF points, an 11% rise in the value of the global sum and the MPIG being phased out over the next seven years and distributed among all practices, GPs will find major changes to their cash-flow throughout the year.
Add to this, the abolition of seniority payments, the introduction of the massive new unplanned admissions DES – worth around £20,400 per year for the average practice – and a renewed push to review PMS contracts, and you have a recipe for mass confusion.
For some, this will mean forestalling on taking drawings early on in the year and, for others, looking for new sources of income e.g. from taking on out-of-area patients. In this article, I list seven practice profiles that will face significant changes this year.
Practice in a deprived area
Profile: Centrally-located, high level of deprivation and many alcohol- or drug-dependent patients and asylum seekers registered. Earns £38,000 a year through the MPIG, and £10 above average in the QOF.
List size: 11,500
Effects: This practice will lose a significant proportion – around £95,000 - of their QOF income this year, and £5,500 per annum as the MPIG is phased out. The global sum increase will offset £81,000 of this loss and cashflow during the year may be improved (as the global sum is paid monthly). But the practice will still be £19,000 worse off in 2014/15, year on year.
Advice: The danger is that the practice will not prepare sufficiently for the drop in income. The partners must not rely on income from the QOF, as the end of year lump sum will be much lower than usual. Partners must plan cashflow carefully.
That said, from 2015/16 onwards this practice should feel income start to creep up again. The global sum payable on its high weighted list will be worth more to the practice than the erosion of the MPIG within three to four years. By 2017/18, this practice will be back at its 2013/14 levels of income, not allowing for changes to inflation.
Urban practice with a young professional population
Profile: Weighted list is close to the actual number of patients. Earns £56,000 a year from MPIG, to be phased out by £8,000 per annum. QOF income stands at roughly £12-3 per patient due to low disease prevalence.
List size: 6,000
Effects: Due to the retirement of the organisational indicators (the area the practice performed best in) the practice stands to make £20,000 less compared with last year.
But global sum funding is due to go up by £40,000 in 2014/15. As the global sum is paid monthly, this practice may feel better off initially, as they are not waiting until the end of the financial year to receive a lump sum of QOF income. The changes to MPIG, QOF and the global sum taken together would make the practice better off in 2014/15 by around £12,000, but the increase in global sum payments will not keep pace with dwindling MPIG. Partners will see pressure on their earnings from 2015 onwards.
Advice: Partners should not increase their drawings during 2014/15 and retain profits for leaner years. They should also prepare for smaller end-of-year payments from the QOF. The practice could increase its income by agreeing to register commuters from October onwards.
Suburban practice with high MPIG income
Profile: A mixed patient profile in a slightly deprived area. Weighting is slightly below average, and MPIG payments are more than £70,000 a year.
List size: 7,000
Effects: Although the global sum is going up, this extra resource will not be enough to mitigate the erosion of QOF income and the phase-out of MPIG payments. By 2020/21, this practice’s income could be up to £30,000 lower than in 2013/14 – equivalent to the cost of employing a practice manager, or two administrative staff, for a year.
Advice: The practice needs to consider how it can protect long-term profits to mitigate this loss of income – for example, saving staff costs by sharing administrative costs with another local practice, or replacing retiring partners with a salaried GP or nurse practitioner. There may be scope to increase income by bidding for additional local services without incurring significant additional expenses.
Rural practice that serves an elderly population
Profile: Slightly smaller than the average but has a weighted list of 5,500 and earns approximately £10 more per patient from the QOF. No MPIG.
List size: 4,500
Effects: Although this practice will lose income from the QOF, it will overall experience a small uplift as a result of the re-investment in the global sum (approximately £2,000 this year) because of its high weighted list size. If the global sum keeps going up, this practice’s income should increase by approximately £5,000 per annum from 2015/16 onwards. Unfortunately, this year’s increase is likely to be wiped out with inflationary pressure on costs and increases in NHS pension contributions. GP workload may also increase as the practice appoints named GPs for the over 75s on its list.
Advice: The practice may need to look at ceasing some services (starting with the ones with smallest profits) to cope with the change in the balance of workload. Stopping activity - such as running a clinic - may allow partners to refocus what they are doing and free up an existing GP or nurse to focus on new tasks.
Large rural practice with a high MPIG
Profile: A large practice in a market town with four partners approaching retirement. It has a mixed population, age-wise. Its MPIG payment is £82,000 a year.
List size: 10,000
Effects: This practice has a large MPIG, but the size of the practice ensures that it will only see a small drop of income (under 1%) over the seven-year phase-out of the payment. The biggest concern at this practice will be the removal of seniority payment as the partners receive a combined pot of close to £40,000 in seniority.
Changes to the QOF won’t affect the practice significantly as its list is mixed.
Advice: Loss of seniority may lead to GPs pursuing more private or portfolio work, which can lead to fragmentation in the practice. See if the practice has any way to make up the difference in income – e.g. by running new services or cutting back on any unprofitable work.
Small rural practice with a high MPIG
Profile: This is a small, isolated, rural practice run by two part-time GPs sharing a full-time ‘single-hander’ role. It currently receives MPIG payments worth £25,000 per year, and is one of the 229 practices that will lose over £2 per patient per year during the phase-out.
List size: 1,000
Effects: The income drop over the whole period of the MPIG phase-out will be close to 20% of core income for this practice, as it is so small. Cutting costs in a practice of this size is difficult, and making changes therefore risks its future viability.
Advice: It is hard to make any financial predictions beyond the next 12 months for this small practice, since there are too many unknowns, but it is risking closure. For the moment, the partners should carefully project how much money practices will be able to earn from the money re-directed into enhanced services from the QOF, any additional services locally it could bid for, and then make a decision if it can continue to be viable.
A PMS practice
Profile: In a deprived area with high levels of unemployment, surrounded by social housing in the suburbs of a small city. High turnover of patients, who are mainly young (many single-parent families). Higher than average prevalence of mental health, drug and alcohol dependence. High per-patient budget of £150, funded by growth money, but also high staff costs (required to meet their KPIs).
List size: 4,000
Effects: PMS practices are facing even more uncertainty than GMS practices with all subject to contract reviews. Many of our PMS clients are confident that they can prove that they are delivering services over and above what is expected by the core GMS contract.
Advice: PMS practices must prepare now for funding reviews. Develop a business case and gather data and evidence of your performance. Meet the accountant to develop a range of scenarios that might result from your review: thresholds for continuing to run the practice as was, scaling back costs, switching to a GMS contract or closing.
If a sledgehammer is taken to the budgets of those practices with a high cost-to-patient ratio, then we see no alternative than large-scale redundancies of salaried GPs, nurses and administrative staff.
Melanie Thomas is a director at Hall Liddy Chartered Accountants, a member of the Association of Independent Specialist Medical Accountants.
Department of Health. GP contracts: phasing out of the Minimum Practice Income Guarantee (MPIG) from April 2014. 18 Dec 2013. http://www.england.nhs.uk/wp-content/uploads/2014/02/annex-a-let-at.pdf