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GP practices refuse to accept ‘400%’ increase in premises costs

Exclusive GP practices are refusing to sign up to new premises leases which would see their fees hiked by up to ‘400%’, Pulse has learned.

Several GP practices are now challenging new leases proposed to them by NHS Property Services, which supposedly reflect the rates the premises would fetch on the open market.

One LMC said practices received new leases from PropCo which would see total fees including rent, services charges and facilities management rise by almost 400%.

But PropCo said just a small part of the increase was actually based on the rent recalculation – in fact only amounting to 14% – and the biggest difference was that GPs now receive their full bill and have to recoup the cost from NHS England, rather than as in the past it being picked up by the Primary Care Trust.

While the dispute is ongoing, four GP practices in one area of England are refusing to pay the new rates, paying at last year’s levels instead.

Minutes from Berkshire, Buckinghamshire and Oxfordshire LMC raised the example of one local practice which has paid ‘approximately £15k per annum historically but are proposed to rise from £1,200 approx per calendar month to £5,200 PM (£53k per annum) or £7,500 per annum per room of which £5k approximately is management’.

GP leaders in the area, who are concerned about long-term reimbursement guarantees, are disputing whether the market valuation reached by the PropCo was accurate due to lengthy NHS underinvestment in GP premises upgrades, and the size of management costs which they said exceeded commercial rates.

The LMC minutes said there ‘is no detail on how the figure was calculated’ and that as there was ‘no signed lease in place between the practice and the site landlord’, the practice is ‘currently paying the historical rental figure without prejudice while they challenge the proposed new charges’.

It added that PropCo wanted practices to pay for dilapidation (deterioration of the condition of a tenant’s occupied area during their occupancy) while seemingly being ‘unaware’ that GP practices in the area had been advised not to invest in premises in recent years because they may move to a new health centre in development.

Berkshire, Buckinghamshire and Oxfordshire LMC medical director Dr Jim Kennedy told Pulse that refusing to pay new rates was ‘usual practice’ in cases where the contract was contested.

He added that he thought it was ‘very rare’ for one party to propose such radical changes without discussion with the tenant.

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Dr Kennedy told Pulse: ‘The reality is a lot of these properties have been underinvested in by their landlords, the NHS, for a long period of time. So the issue is, are they really worth market rent? The cost of bringing them up to standard should not fall completely on the practices.

‘Another big area of concern is the scale of management charges being imposed by PropCo. All the commercial guys have told us “if I were getting that sort of rate I’d have died and gone to heaven.’

Dr Kennedy also said that there was ‘a lack of clarity on long-term reimbursement’ from NHS England.

An NHS Property Services spokesperson told Pulse: ‘From April this year, what has changed is that the total cost of occupation is now transparent in bills, as is the way NHS England subsidises practice costs. Through this transparency, commissioners can make well-informed decisions about service locations and encourage efficient use of space.

‘When contacting occupiers, both the Department of Health and NHS England have been clear that any increases in rent will be fully reimbursed and recently, all CCGs have received full details of the processes they need to follow to complete the reimbursements.’

Premises service charge increases

The news comes as NHS Property Services, a commercial company wholly owned by the Department of Health, switched the way it calculates rents to use a new ‘market value’ approach, which it says will give a better indication of the value of properties and allow commissioners to better plan their estate.

As Pulse reported earlier this year, some 900 GP practices have received rent increases as a result, although PropCo said practices would not be affected as they are reimbursed for costs by NHS England.

At the same time, it has also moved to charge the full amount directly from practices rather than CCGs, which accountants have warned in the past would impact on the financial viability of GP practices.

Other LMC areas which have complained about hikes in fees included Northumberland LMC, which warned in May that five-figure rises were ‘financially crucifying’ practices.