Practice Finance in a Nutshell

GP Registrar Tutorial Dr Andrew Mowat Overview Independent Contractors Permanent nationally-determined contract until PMS GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Important History 1948 Formation of NHS 1966 GP Contract 1990 New GP Contract 1990 NHS Trusts 1992 Fundholding 1998 Primary Care Groups 1998 PMS Pilots GP Registrar Tutorial Dr Andrew Mowat

Sources of information Medeconomics AISMA guide Accountant Library GP Registrar Tutorial Dr Andrew Mowat

Doctors’ and Dentists Review Body Advises Government on what average Doctor should earn Government allocates a non-cash-limited budget for GMS activity If budget exceeded nationally, Government adjusts next year’s pool GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Partnership A group of Doctors working together Usually in the same or linked premises Co-operating in on-call and rota arrangements Assuming responsibility for one another’s patients in absence Pooled resources and expenses GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Premises Partnership finds appropriate premises from which to practise (LHA to approve) May be purpose-built Finance Partners finance Private Finance Initiative Health Centres GP Registrar Tutorial Dr Andrew Mowat

General Medical Services Independent contract Nationally-negotiated Within DDRB framework 24hr care responsibility Statement of Fees and Allowances (SFA)(Red Book) Payments on quarterly cycle GP Registrar Tutorial Dr Andrew Mowat

Personal Medical Services Employed contract fixed-term Payment system bases on central budget based on previous GMS activity, with additional development money Contract: initially to be locally-negotiated, but now centrally-imposed without national bargaining or safeguards Pension rights as yet unclear Potentially big winners and big losers GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat NHS Income Allowances Fees per patient Item of Service Reimbursement Dispensary Cost-Rent Scheme GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat NHS Allowances Basic Practice Allowance Seniority Allowance Quality Allowance Postgraduate Education Allowance Out of Hours Allowance Other Designated Area Assistant Associate GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Fees per patient Capitation 3 bands (<65, 65-74, >75) Deprivation Child Health Surveillance Target Payments Cervical Cytology, Childhood immunisations Health Promotion Asthma, Diabetes GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Items of Service Maternity Care Contraceptive Services Out-of-Hours consultation Vaccination/Immunisation Temporary Resident GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Reimbursement Cost-Rent Scheme Rent & Rates Maternity Locum Fees GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Dispensing Income Can dispense for patients >1 mile from chemist in non-urban area Get paid: Cost of Drug LESS Discount (NHS assumes discount 9%) PLUS Container Allowance AND Dispensing Fee GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Cost-Rent Scheme Partners own building Partners need loan to pay builders etc Cost Rent Scheme provides parameters for paying loan interest on certain things – fixed room sizes, purposes etc Variable interest rate different borrowing rate from cost-rent rate GP Registrar Tutorial Dr Andrew Mowat

Private (non-NHS) Income Legal & Insurance Work Local Authority Work Work for Private Business Use of Premises Private Patients hobby/work/driving medicals travel health services GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Expenses Include Staff Costs All drugs and equipment used Heat/Light/Water Financial Accountancy, Banking Administration: Telephone Postage Important that DDRB gets accurate view of what expenses are incurred Beware “netting-out” GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Taxation Income Tax Schedule E Schedule D Value Added Tax (VAT) Capital Gains Tax (CGT) Inheritance Tax GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Schedule E (PAYE) Can claim as an expense against tax the cost of buying or maintaining any item used “wholly and necessarily” for business. i.e. any item without which you cannot carry on business GP Registrar Tutorial Dr Andrew Mowat

Schedule D (Self-Employed) Can claim as an expense against tax the cost of buying or maintaining any item used “wholly or exclusively” for business. i.e. any item used wholly or mainly (in which case you claim a proportion of the tax) within the business GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Tax Payment Tax calculated on whole-year basis Two payments made: January and July Each payment consists of an actual amount plus an estimated “on account” payment Practice will probably set aside money GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Retirement GPs can retire from age 50 onwards Early retirement will mean reduction in pension Age 50 multiply by 0.599 Age 55 multiply by 0.754 Age 59 multiply by 0.943 Can buy “added years” superannuation GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Added Years Allows GP to buy added years of benefits to increase up to maximum 40 years at age 60 Pay fixed percentage of NHS Superannuable income every year Price according to age GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat NHS Pension Scheme Basic contribution 6% NHS income per year Benefits: Lump Sum 4.2% Annual Pension 1.4% Ill Health Retirement pension Death benefit Widow(er)’s pension Children’s allowance GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Pension Pension calculated on whole-career earnings Different portions are pensionable (superannuable) to different degrees Dynamised upwards to represent career earnings at current prices 4.2% lump sum 1.4% per annum GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Profits and Losses Business makes a profit Profits divided among stakeholders partners profit-share staff Partners take drawings in anticipation of profits Losses equally shared GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat Equity Business has assets Premises Stock Equipment Furnishings May require capital investment Equity Partners draw more than non-equity partners GP Registrar Tutorial Dr Andrew Mowat

GP Registrar Tutorial Dr Andrew Mowat What to look for … Check Partnership Agreement property ownership equal division of profits? Inspect Accounts: ?recent (less than 18m old) assets > liabilities parity profit share regular sustained drawings (may need to ask) expenses <50% of turnover GP Registrar Tutorial Dr Andrew Mowat