1. GP PRACTICE MERGERS Workshop – Spring 2014 Bob Senior, FCA
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GP PRACTICE MERGERS
Workshop – Spring 2014
Bob Senior, FCA
Head of Medical Services, Baker Tilly
Chairman of AISMA,

2. Real World Considerations
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To Merge or not to Merge ?
Real World Considerations

3. PRACTICE MERGERS WHAT ARE THE DRIVERS FOR MERGER ?
Threats to practice profits- stable at best
Succession issues- particularly single handers
Increases in workload
Contract changes- MPIG and PMS reviews, QOF, Enhanced Service provision and AQP threats
Premises funding and space availability
Delivering better patient care
The ultimate aim of Federation?
MANAGING A CHANGING PRIMARY CARE

4. PRACTICE MERGERS ADVANTAGES OVER FEDERATING
Operating from one single merged practice is no doubt easier from an admin perspective
Maximises economies of scale
Removes VAT and NHS pension membership issues
One practice- single vision
One practice- unity of patient care
One practice – unity of culture
One practice- unity of finance

5. PRACTICE MERGERS KEY AREAS TO CONSIDER Contract types and comparisons
Premises
Dispensing (vat registered) or Non Dispensing
Comparison of financial results
Staff terms and conditions
Working methods
Clinical approach
Partnership agreements
Year end dates
Governance

6. PRACTICE MERGERS CONTRACT COMPARISON
Can the contracts be merged or will they have to be kept separate?
GMS,PMS,APMS,SPMS
How long does the APMS contract have to run?
PMS contracts – is the funding per patient comparable?
How does this compare with what would be payable under GMS ?
PMS REVIEWS
MPIG CORRECTION FACTOR
How much could be lost on a full time partner basis
LAT agreement to vision needed at earliest opportunity

7. PRACTICE MERGERS PREMISES Watch out for nasty surprises:
Significant fixed rate loans with high interest rates and potential redemption penalties
Lease terms- how long to run and what are the terms?
Beware significant dilapidations provisions
Potential service charge issues- NHS Health Centres
Fixed Cost Rent? When does this expire and what could trigger a cessation
How does Fixed Cost Rent compare with Notional Rent value?
CQC issues?

8. PRACTICE MERGERS PREMISES Do you need new premises?
Terms of partnership agreement re retiring partners
How are premises currently financed?
What is the current yield?
Opportunities to refinance
Finance a partner buy out
Manage the interest rate risk
Capital recycling and extraction
Move to a new bank
Remember to consider future new partners ownership and property capital requirement

9. PRACTICE MERGERS
Dispensing or non Dispensing ? VAT registration and effects on private fee levels, administration and cash flow Two non VAT registered combined vatable T/O taking them over VAT registration threshold Consideration as to a separate company for private fees Differential dispensing profits ?

10. PRACTICE MERGERS
Comparison of financial results More complex than looking at profits per partner per the practice accounts Compare Apples with Apples! Different accounting treatments? Employers superannuation How many sessions are Full Time? How are expenses such as subscriptions, locum insurance, motor expenses dealt with? Exposure to PMS reviews or MPIG removal How is seniority shared? How are bank loans reflected- through practice or do partners pay privately?

11. PRACTICE MERGERS
Comparison of financial results Work done outside partnership time Additional contracts, skills, practice specific arrangements Make all necessary adjustments to compare like with like Then calculate the PROFIT PER PARTNER SESSION- single most important financial comparison If different consider how you will deal with A short term differential profit allocation may work initially BUT you must work towards harmonising profits within a couple of years

12. PRACTICE MERGERS
Comparison of financial results Calculate the staff cost per patient for each of these staff groups: Admin and reception Management Nurse practitioners Nurses Health Care Assistants Look for significant differences that may indicate very different working practices REMEMBER THERE WILL USUALLY BE A STRONGER PRACTICE FINANCIALLY BUT THIS DOES NOT NEED TO BE A BARRIER

13. PRACTICE MERGERS Other financial considerations
Drawings net or gross of tax who pays the tax ?
Working capital commitment-
If increases are needed how are these to be funded practice or personal borrowing
New partner working capital requirement and how this will be met
Methods to equalise
Do not ignore this is partner’s own money!

14. PRACTICE MERGERS STAFF TERMS AND CONDITIONS Look for differences
Agenda for change terms?
Do you pay overtime or give time off in lieu?
How do rates of pay compare?
Are contracted hours the same?
There will be some differences and if you merge you will need to move to whichever is the most generous
Get buy in of teams at earliest opportunity fear is counterproductive and staff may give great contribution of ideas

15. PRACTICE MERGERS
WORKING METHODS Could be a key barrier- How does a full time GP compare from one practice to the other: How many sessions are full time? How long is a session? Are all sessions clinical or is there a dedicated admin session? How many patients does a GP see in one day? Delegation of work to NP, Nurses ? How many patients does a FT doctor look after?

16. PRACTICE MERGERS CLINICAL APPROACH
Are there differences in clinical approach?
Can these be harmonised?
What does this really mean-
If you would not want a family member to be patient of the practice then should the merger go ahead?

17. PRACTICE MERGERS PARTNERSHIP AGREEMENTS
Look for material differences in the partnership agreements you will need to create a new partnership agreement that all are happy with
Key areas of potential difference :
Provisions re absence for sickness
How are maternity/paternity locum costs dealt with?
Are arrangements re practice and personal cost comparable
Are there consistent provisions for removal of a partner?
Provisions governing surgery ownership and what happens when a partner joins or leaves are these consistent

18. PRACTICE MERGERS
CONSIDER YEAR END DATES ARE THEY THE SAME? If not one practice will have to change This can lead to earlier crystallization of tax and superannuation liabilities Not extra tax and superannuation but it may be payable earlier and this can be significant in size you may need to plan to fund this Arises when a year end moves to March from a non March year end Consideration also needed to the Annual Allowance tax charge where superannuable profits are brought forward

19. PRACTICE MERGERS Who is going to drive the leadership of the merger?
GOVERNANCE
How large will the merged practice be ?
What are partner’s expectations?
Who is going to drive the leadership of the merger?
Different individuals to steer different areas:
Staff
QOF
Enhanced Services
Finance
Involve key staff members
Delegation of areas of leadership in merged practice

20. PRACTICE MERGERS CONCLUSION Where are you trying to get to?
What are the obstacles to achieving this?
Aligning partner’s expectations
What is the vision DON’T lose sight of the vision?
Is there united belief in the VISION?
Who will lead and make it happen?
PARTNERS MAY BE THE BIGGEST OBSTACLE CHANGES WILL BE NEEDED AND ALL MUST BUY IN
IT WILL BE A CHALLENGE!

21. Any Questions?