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Finance diary, July: Ensuring a federation works for you

The 31 July tax deadline may trigger anxieties for many GPs. Most practices have gone some way towards improving efficiency but as the first quarter of the new contract ends, they must look at their long-term financial strategy. 

Thoughts are turning to federations as a way to win more work but a federation’s success depends not only on what services are shared, but how the practices maintain performance, and ensure any profits are shared out fairly. 

They are not a ‘sticking plaster’ solution that will make financial problems go away, but they can offer opportunities for practices brave enough to take them up. 

Common problems

There are three main financial issues that are often overlooked by GPs who are considering federating.

First, be aware that federations will have to cover administration costs and operate under Service Level Agreements (SLAs), which will reduce the value of the contracts compared with what GPs could earn from them last year. Overall, GPs will work harder to achieve the same funding. As the GPC has said for some time, there is no new money; revisit your profit margins on a quarterly basis to calculate which work is worth the effort.

Second, while some targets under old LES contracts were flexible, they will not be under SLA contracts. Quality will be under much greater scrutiny this year and GPs will no longer be able to make a case for poor performance. 

Finally, contracts are not open-ended; at some point they will go to tender again, with no guarantee that the original price will not be reduced. Don’t assume winning an AQP contract means you’re ‘safe’. You will need to pitch for it again when the contract ends. 

Having said all this, federations provide a great opportunity for GPs with the expertise and appetite for more work. The Government wants to move work out of secondary care, and investment in community services will allow GPs to pitch for appropriate work from trusts on a subcontract basis.

But GPs should ensure their federation is looking beyond CCG enhanced service contracts. Subcontracted work should generate new money, not merely safeguard recycled LES funding.

Bob Senior is chair of the Association of Independent Specialist Medical Accountants and head of medical services at Baker Tilly