Five steps to merging GMS practices
Dr Robert Morley uses his experience of merging seven practices into one business to explain GMS mergers in a stage-by-stage guide
1. Make the case for a merger
Our project came about when a number of like-minded partners with a shared vision began talking to each other about a response to the threat of private providers using APMS to win local contracts. We wanted to ensure that traditional general practice – local surgeries, with local partners and a long-term commitment to their patients – could survive, compete and prosper in the new commercial environment. The idea was to create ‘corporate independent contractor general practice’ within the NHS.
This was even before the ‘Equitable Access’ policy was introduced, with Darzi centres in every PCT as well as other newly procured practices arriving on our doorsteps, proving our predictions to be spot on and nothing that has happened since then has made us change our views.
We considered various options for models of practice that would help us achieve our aims and protect the long-term doctor-patient relationship that is the bedrock of successful general practice in the NHS. Rather than complex consortia or federations it became clear to us that the only way forward was merger of practices and the formation of a large partnership – sticking with the national GMS contract for security, unlike commercial time-limited APMS contracts and PMS contracts subject to local PCT whim and the threat of termination without reason.
In the end, we merged to form one single GP partnership of 24, but running separate GMS contracts with different PCTs. Initially, we had three contracts covering our original seven surgeries. Following subsequent additional mergers we now have four contracts covering 10 surgeries across Birmingham and Sutton Coldfield, with 33 partners and 60,000 patients.
Clearly obtaining the support of the PCTs was essential as our plans included practice as well as partnership mergers and this support was achieved through diligent lobbying and the production of a well thought-out business plan. One PCT did try to tempt us to switch to APMS in return for allowing us to proceed as a unified cross-city contract. Needless to say we declined their kind offer.
2. Recruit third-party support
From conception to initial merger, our vision took two-and-a-half years to come to fruition We started by canvassing as many local practices as we could and holding various meetings in different parts of the city. From the start it was clear that we needed appropriate professional advice and engaged high-calibre specialist lawyers and accountants who helped us with much of the initial work on a contingency basis so that if no merger took place there would be no fees.
While many practices participated initially, eventually this was whittled down to just seven who had the courage, vision, ambition and leadership to continue when it finally came to committing money to the project. As well as the obvious costs of the merger process, in both time and money, the enormous risk that participating partners are prepared to undergo, in giving up the businesses they have devoted their working lives to building up, cannot be underestimated.
In order for the complex merger process to progress we set up a formal project board with our accountants’ commercial merger team managing the process and elected a project board of five partners including a chairman. We had deliberately selected a firm with expertise in both GP accounting and commercial mergers and never regretted this. Meetings became more frequent as the project developed, eventually meeting weekly in the six months prior to merger.
Clearly the complex financial issues involved in the merger required a great deal of work and attention. We appointed one partner on the board as finance partner, leading on liaison with the accountants, and developed a business plan for the merged partnership. It was clear the new business would need to set up a single unified finance department to deal with all accounting and finance processes, and of course we would need to close pre-existing partnership accounts and set up accounts for the new business as well as new banking arrangements.
The idea was to base our new GP partnership on the models established in professions such as law and accounting, rather than the old small GP partnership model, while at the same time ensuring that the traditional model of GP care continued and flourished.
3. Profit sharing and developing a new partnership agreement
The new partnership deed took six months to agree. One of the issues was that with over 20 people having a say, it proved difficult to reach an agreement on many clauses. The running joke was that we knew we had got something right when everyone was equally unhappy about it. We inevitably went through many iterations, but we were committed to the idea of producing a deed that was fair to all and that everyone felt they could sign up to.
Eventually we managed to get consensus on most things but, needless to say, determining profit-sharing arrangements was the biggest headache.
Prior to embarking on the formal merger project we had had to go through a due diligence process on every practice, dealing with both legal and financial issues. In particular, we needed to ensure that while there would inevitably be differing profitability between us, there were no discrepancies so large as to make merger too difficult to achieve. Fortunately the due diligence process did not identify any bar to merger and we could go ahead.
We eventually agreed that a sensible and fair way forward was for the partners of the pre-existing practices to come into the new partnership on a profit share that reflected the historical profitability that their old practice was bringing in to the new business. However we would then enter into a three-year period of moving to parity on a sliding scale so that after this time all partners would share the profits of the new business going forward on an equitable basis. Clearly there would be winners and losers but everyone bought into the idea that this was fair to all and in the best interests of the new partnership as a whole.
We therefore agreed that profit allocations would be awarded in a series of ‘tranches’.
A prior share tranche would consist of seniority plus notional rent re-imbursement to property-owning partners. A ‘sessional’ tranche would pay a basic amount of profit to every partner according to the number of sessions worked. An ‘equity tranche’ would operate by awarding points to distribute whatever profit was left over to share; the original number of points awarded would be based on historical profits; over three years these would alter to reflect changes towards parity so that after three years points would be awarded purely on the basis of sessions worked.
Another issue was how to deal with outside income and we agreed on the principle that all work done by partners during our sessional commitments to the partnership would be pooled and all treated as of equal value, whether it be clinical or otherwise.
An arrangement for premises was also complex. We had a mixed economy with some surgeries owned and some rented. As this had the potential to be incredibly complicated we agreed to keep partner-owned premises out of the new business and to keep surgery ownership as it was prior to merger and inserted clauses in the partnership deed to maintain any protection afforded to property-owning partners by their previous partnership agreements.
4. Adapt staffing and HR management
While most job roles would remain more or less the same post-merger, all staff nevertheless would have to transfer to employment by the new partnership. This meant that we had to deal with all relevant employment law, including the provisions of transfer of undertakings (TUPE). Staff had to be formally consulted, and this was an area in which we received invaluable advice and support from the employment law team of our legal advisers. Even though jobs were protected and roles maintained, the enormous change process inevitably caused anxieties for staff, which was one of the main issues we had to deal with. We repeatedly stressed the message that no job was at risk and that the reason for the change was actually to protect them in the longer term from the threats of the commercialisation of general practice as well as giving them greater opportunities to develop their careers in a larger organisation.
All staff were given the choice of transferring to the new business on their existing terms and conditions or of transferring to our new unified contract, and their choices reflected their own personal views on which suited them best.
All newly recruited staff post-merger however, are employed on the new contractual arrangements.
5. Manage ongoing restructuring
While most job roles did indeed remain unchanged, it was clear that the merger could only achieve success with the support of our team of practice managers and by developing our management structure. This meant that our managers were the staff who felt under greatest threat by the change but also had the greatest opportunity for career development. Practice managers all have a variety of skills, experience and specialist interests. We capitalised on this by being able to give our managers lead roles for the partnership in their individual areas of skill and expertise, for instance finance, HR, QOF, while maintaining their generic surgery manager roles. This worked well initially, but since then, and following subsequent mergers, staffing changes and retirements, it became clear that further development and restructuring was appropriate.
We have since recruited a high calibre general manager in overall charge of all staff and operations and specialist administrators for areas such as finance, HR and IT. The likelihood is that this direction of travel will continue, with more specialist middle-grade managers being recruited and the possibility that we will develop a role for regional managers responsible for more than one surgery.
The important principle, however, is that we are constantly revisiting how we work to ensure that we are best positioned to deal with what we have to do now and to adapt to all the inevitable changes that will occur in the future.
Dr Robert Morley is a GP in Birmingham and chairman of Midlands Medical Partnership (www.mmpmedical.com).