Five tips for controlling practice expenses
Specialist medical accountant Deborah Wood advises on controlling practice costs in the first of two articles
In the difficult business environment faced by today’s GPs it is vital to keep a firm grip on costs. These five tips will help you do so.
1 Analyse your staff requirements
A practice’s single biggest resource is its staff. Having great staff means a successful, quality practice but staff costs represent the largest single expense of any medical practice and need to be carefully controlled.
There are statistics available that can help practices monitor this cost but the way a practice chooses to structure its staffing can cause significant variances from the average. For example, the averages set out in the table below assume that 23.7% of all full-time equivalent GPs are salaried. If you have more salaried GPs than this you will expect a higher than average staff cost, and if you have fewer then the converse will be true.
The other danger of using averages is that they do not recognise fully the staff mix. It may be appropriate in some practices to have a higher number of clinical staff rather than deborah
Nevertheless, start the process by comparing your practice with the statistics below from the Health and Social Care Information Centre.1
Number of staff – national averages 30 September 2012 (calculated on a full time equivalent basis)
|Staff type||Per FTE GP provider (partner)||Per FTE GP (salaried)||Per patient|
|FTE practice nurse||0.61||0.47||0.0264|
|FTE direct patient care||0.35||0.26||0.0149|
|FTE admin and clerical||2.50||1.91||0.1082|
This calculation should enable you to determine whether your staff numbers are appropriate.
To gauge your staff costs, but bearing in mind that 23.7% of FTEs are deemed to be salaried, the following statistics will prove to be a useful benchmark:
|Annual staff costs divided by the average number of patients|
|Staff costs as a percentage of total income - non-dispenser||39.9%|
|Staff costs as a percentage of total income - dispenser||30.9%|
|Staff costs per patient (after reimbursement) - non-dispenser||£45.28|
|Staff costs per patient (after reimbursement) - dispenser||£52.82|
The bottom line should now become clear. If your costs are more than the above, then there may be scope to take on new services without additional staff costs to bring the figures into line.
This is of course dependent upon the GP partners creating the time to undertake the new work.
2 Aim to keep a low staff turnover
Recruiting is an expensive exercise so always aim for team stability. To help in the process make sure that you have a clear organisation chart showing lines of responsibility. Ensure that your job specifications are up to date and appropriate and that you address all training needs. Maintain a procedures manual that clearly sets out the processes and procedures that are in place within the organisation that all staff should be aware of and adhere to and ensure that the entire staff team buy into it. Hold regular team meetings. These can often be just a short catch up over coffee, but never underestimate the value of ‘all hands’ meetings, say six monthly, at which partners can communicate to the entire team the strategy of the practice and the progress made to deliver the agreed plan. Consider using coaching and mentoring methods to train and develop staff with regular appraisals.
Those responsible for staff also need to understand the implications of forthcoming changes to the NHS pension scheme from April 2015 and the link to normal state retirement age.
Through general employment law around age discrimination which means individual members of staff do not automatically leave at age 60 or 65, staff structure plans and reward systems could well be affected.
The proposed 2015 scheme will bring a number of other changes in addition to that of retirement age. These will include moving all employees into a career-averaged revalued earnings scheme rather than a final salary scheme and no automatic right to a tax-free lump sum as part of the retirement benefits. There will, however, be the option to commute pension into a tax-free lump sum.
Also on the horizon is auto-enrolment, which may bring additional costs into the staff expense category and will certainly bring additional administrative burdens. Even where the NHS pension scheme is available to practice staff the employer (the GPs) will still have to comply with all the general requirements of auto-enrolment. Not all employees will be eligible to be auto-enrolled into the NHS scheme and an alternative may be needed. Why not explore the option to outsource payroll compliance to a specialist bureau that can deal with RTI compliance, NHS pension scheme compliance and auto-enrolment compliance? It may be more cost-effective than training or taking on additional staff. Also ensure you are well prepared before the due staging date by talking to a specialist auto-enrolment IFA.
3 Ensure GP staffing is as cost-effective as possible
One of the biggest decisions relating to costs centres on that of whether to use locums, salaried GPs or partners. In a recent survey it emerged that an average locum fee is £475 per day. The Health & Social Care Information Centre states that a salaried GP earns £49,300 on average working 5.4 sessions. Using eight sessions as a norm this equates to £73,037 per FTE per year which, with the on-cost of employers NIC and pension, could amount to over £90,000 a year. If, on this basis, a salaried GP works 230 days in a given year, this equates to a daily rate of £391, which is, of course, less than a locum. A GP partner working 230 days in a given year earning, say, £115,000 a year in profit share equates to a daily rate of £500.
The advantage of a partner over a locum or salaried GP relates to commitment to work ‘on’ as well as ‘in’ the practice. In this way, GP succession is dealt with and it may solve the problem of surgery ownership looking into the future.
It therefore follows that practices should review rotas and look to internal rather than external locums. The figures above suggest that salaried GPs are a better option to long-term locums, but practices also have to consider succession issues when reaching their final decision.
4 Get more control over your outgoings
Control of expenses is crucial to the maximisation of profit. Here are some ideas to help you along the way:
- Consider forming a buying consortium with other practices to create buying power.
- Shop about for the best deals in utilities and stationery.
- Beware of contractual tie-ups for computer paper and accessories.
- Review rotas. Internal locums are cheaper than external locums.
- Benchmark your expenses using figures that show expenses as a percentage of total income. Moore and Smalley’s annual survey of the income and expenses of 100 GP practices reveals the following figures:
|Expense||% of total income|
|Medical expenses (drugs, defence subs etc)||6.9%|
If your ratios are different do you know why? Split-site, high-demand patients, dispensing, high rent or service charge, few partners and lots of salaried GPs?
Ask a specialist medical accountant to benchmark your accounts and provide an explanatory review of the figures so you can see which areas can be addressed for improvement.
5 Reduce the risk of fraud
The trick is to have a clear plan and procedures to deal with risks such as error and fraud.
GP partners can delegate financial tasks to practice managers but must never abdicate responsibility. As a bare minimum the finance partner should review the monthly payroll and compare the gross pay with the preceding month. He or she should also carefully review the monthly PMS or GMS schedule for completeness, and look over the monthly bank receipts and payments. The bank mandate should be clear – there should be two cheque signatories to the account and two people (at least one partner) should be authorised to undertake transfers or other on-line activities.
Deborah Wood is healthcare services partner, Moore and Smalley, and vice-chairman of the Association of Independent Specialist Medical Accountants (AISMA).
HSCIC. NHS Workforce: Summary of staff in the NHS: Results from September 2012 Census. http://www.hscic.gov.uk/catalogue/PUB10392/nhs-staf-2002-2012-over-rep.pdf