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‘Balancing mechanism’ axed in new GP contract

‘Balancing mechanism’ axed in new GP contract

A contractual clause that that could have seen funding moved between ARRS and core GP funding has been axed in the new contract.

The so-called ‘balancing mechanism’ was introduced in 2019 as part of the five-year GP contract but has never been used.

The complex mechanism could have meant GP core funding moving into ARRS if contractor income went up significantly, or ARRS funding moving to core funding in times of high inflation.

However, in a BMA GPC England webinar updating members on the latest about the contract coming into effect in April, it was revealed the arrangement will be removed.

There were fears it may have come into play last July, as inflation was soaring and practices were struggling to fund staff pay rises. But, at the time, Dr Richard Vautrey, the chair of the GPC when the five-year contract was negotiated, told Pulse that the actual process for the balancing mechanism had never been finalised.

He also explained that even if the mechanism was invoked, its effect on practice income wouldn’t be immediate but be retrospective because GP earnings figures (and thus how they are affected by economic factors such as inflation) are not published in real time.

In a webinar last night, acting GPC chair Dr Kieran Sharrock told attendees: ‘The balancing mechanism is a mechanism whereby practices would have money moved from their core funding into ARRS if contractual incomes rise. So when contractual incomes rise as what was expected [during the five-year contract], money could be moved out of core into ARRS.

‘This was a mechanism that was designed to stop funding that was put into the contract in 2019 going directly to contractors’ incomes.

‘Now, we worked really hard over the previous two years, because we’ve been vaccinating the population. We’ve worked longer hours than ever expected because of the Covid pandemic, and because our colleagues are leaving in droves the people who remain are having to work much harder, so contractor incomes have gone up. You’d expect them to. So this would trigger the balancing mechanism, which would mean that money would go out of core and into ARRS.

‘Now we argued that was a bad idea because it would disincentivise people from working hard. It would penalise people from hard working they’ve done in the past. And you can’t even spend all of the ARRS money, it is underspent already.

‘Our arguments landed and the balancing mechanism wasn’t kicked in.

‘Now unfortunately there may be a downside to that, because they’ve now said they’d remove the balancing mechanism. So if contractor incomes go down, money won’t move from ARRS into core, which is something we asked for. So that is one where we’re not 100% sure of the positivity of that decision.’

The recent contract letter set out other changes for 2023/24, including various stipulations on access to general practice, but mentioned no extra funding.

What is the contractual ‘balancing mechanism’?

Negotiated in the five-year 2019/20 GP contract, it aimed to protect practices and taxpayers against ’unexpectedly large increases in inflation or partner drawings’.

Its purpose was to – if required – ‘adjust between the practice level global sum and the network level Additional Roles Reimbursement Sum (ARRS) depending on levels of real-terms partner NHS earnings’ in the case of high inflation or deflation. 

If inflation was higher than expected, funding set aside for PCN staff could be used to ‘offset’ the rising costs incurred. 

In the event of deflation, funding could be removed from the global sum to prevent practices from receiving funding uplifts way above inflation. This money would then be added to the network staff funding pot.

This would ‘enable global sum adjustment equally in either direction’ providing ‘confidence to the profession and taxpayers alike’, the contract had said.

A version of this article was first published by Pulse’s sister title Management in Practice

Note: This article was updated at 12.57 on 30 March to reflect that the balancing mechanism was also intended to move money from core funding into ARRS.