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Surviving the changes to enhanced services

Action points

  1. Prepare a cashflow forecast - It is good business practice to have a cashflow forecast. Prepare one now that includes existing income and expenditure and can be easily amended in case of a loss of income. Another useful exercise is to be aware of the lowest cash position throughout the month, not just at the month end. How much headroom does the practice have?
  2. Have contingency funding in place - There are so many changes afoot that processes might fail and come April 2013, there may be delays to practices receiving income. What would your practice do in this situation? Is there an unused overdraft facility in place? Would partners have to wait for their drawings?
  3. Be prepared to make tough decisions - Ultimately if significant income is permanently lost, the practice will need to make adjustments to expenses to compensate. This could mean making redundancies, cuts in drawings or reducing the number of GP partners.
  4. Consider other sources of income - Are there any opportunities to generate income from non-NHS sources, for example private medicals, medical student training or renting space to a third party? Be aware though that if more than 10% of a practice’s income is derived from private patients or non- public bodies, then notional rent will be abated.

These are anxious times for GP practices affected by cuts in services. But while there is a potential risk to income when CCGs take the reins in April, there may also be opportunities.

The background

From April, the NHS commissioning board will be responsible for commissioning directed enhanced services, but is likely to devolve the power to commission local enhanced services to CCGs.

Local authorities will be responsible for taking the lead in improving the health of local communities. This will include most of the health promotion and public health work currently commissioned as a LES, such as contraceptive implants, chlamydia screening, health checks, IUCDs, alcohol and substance misuse and smoking cessation.

Opportunities for GPs

First, the NHS Commissioning Board has recommended current LESs be extended into 2013/14 unless there is compelling evidence for a new approach, so there is unlikely to be any significant loss of enhanced services in 2013/14. Second, CCGs are being asked to make unparalleled savings and the evidence indicates the only way to achieve these is to move services from secondary to primary care. So rather than posing a risk to income, the changes to enhanced services offer huge opportunities for GPs to bid for and win contracts to provide care in the community.

However GPs cannot be complacent. One of our clients has described the changes as ‘a huge wake-up call to GPs and a call to arms’. GPs will be key to the new initiatives but they will need to stay involved with the process and ensure they have the capacity to bid for services by working together collaboratively.

The bidding process

There is no detail available about how the bidding process will work, although the scale will clearly depend on the service. For services of minimal value or where the GP practice is the only viable provider, there may not even be a bidding process.

Smaller GP practices may not have the resources to bid for larger contracts and this is where it is important for practices to work together to share staff, premises and expertise to show a quality service can be provided. In fact, smaller practices may have to ensure they have the resources to provide a minimum core of services, before being given the opportunity to bid for larger contracts.

The chief executive of one CCG, who is also a GP client of our firm, believes that there may be more certainty for practices. In
his opinion, many of the new services will need investment in terms of staff and equipment and, in recognition of this, many contracts will need to be extended beyond 12 months and could be awarded for two or three years.

Planning for tendering

Practices will need to ask the following three questions when deciding whether to tender for an enhanced service:

  1. Is any initial funding required for the bidding process? Who will fund it? Will the money come from practice finances or will partners contribute personally?
  2. Is any working capital required? What resources are required to deliver the service? Are additional staff required who will need to be paid before any cash for the contract is received? Practices should consider overdraft facilities or loans from the partners in these circumstances.
  3. How will you measure profitability? Practices will need to measure the financial success of a service by measuring the income and costs associated with it. Are there any hidden costs in terms of management time?

Melanie Thomas is a director at Hall Liddy Chartered Accountants, a member of the Association of Independent Specialist Medical Accountants