Accountants advise GPs to reduce drawings by up to 10% to prepare for contract imposition
Exclusive: GPs should start reducing their drawings by up to 10% in order to prepare immediately for a sharp dip in income from April, medical accountants have warned.
Accountants are advising practices to prepare early for the sweeping changes to the GP contract which are set to be imposed from April, with some predicting take-home pay could fall by as much as a fifth.
The GPC estimates that practices in England are set for a £31,000 gap in QOF funding next year unless they work much harder under the Government’s proposed contract deal for 2013/14. Practices in Scotland and Wales have been offered some concessions, but the GPC has warned they still face a ‘very significant increase in workload’ from April. The Northern Ireland Executive is still to announce its final deal for 2013/14.
Rosemary Smith, senior partner at RS Medical Accountancy, said the changes could result in a worst-case scenario of practice income being reduced by about 14% in England, if practices do not take on additional work.
She is advising her clients to cut their overheads, and suggesting GP partners reduce their drawings by 5% to 10% immediately.
She says: ‘It is advisable for doctors to reduce their drawings after estimating their income for the next year and making the decision before the start of the year.’
‘If they over estimate they can pay themselves out at the year end, but it is easier to cut drawings monthly than find themselves having to put larger sums back into the practice.’
But she added that cutting income may not be enough, and said practices would also have to trim back the extra services they offer patients. She added that GPs were reluctant to take on new staffing costs to deal with the rise in workload as they were not convinced the additional income would remain in place in future years.
She said: ‘Unless they cut overheads as well as cutting income, they will lose money. GPs will have to keep one step in front of the changes and spread their income streams so that they can cushion new proposals.’
Bob Senior, chair of the Association of Independent Specialist Medical Accountants and head of medical services at RSM Tenon, said reducing drawings by 5% to 10% was ‘reasonable’ advice.
He said: ‘GPs should expect to see profits come under pressure, particularly with the changes to services coming and the QOF reductions, which won’t help.’
‘If profits are being removed from the system and workload added, then somethings got to give.’
Michael Ogilvie, client service director at OBC The Accountants, said he estimated that GP partners’ take-home pay would be reduced by around 10% to 20% in 2013/14, when factoring in the onset of punitive pension changes in March.
He said: ‘Many GPs may find themselves having to pay a larger tax bill on well invested pensions, as the Government reduces the tax free annual allowance from £50,000 to £40,000 or £30,000.’
‘They won’t be taking any new money in to the practice, but they’ll have to pay out into this tax increase.’
Dr Charles Zuckerman, medical secretary for Birmingham LMC, said based on his projections, if the average three partner practice with 6,000 patients did nottake up any of the new DESs, they would lose roughly £10,000 per partner, which would equate generally to a 10% to 15% reduction in profit for the practice.
Dr Zuckerman said: ‘The first thing to go will be any additional, unpaid work, for example the work that went in to setting up the CCGs. The last thing to go will be services that impact on patient care, so enhanced services that practices provide for minimal profit such as minor surgery or smoking cessation.’