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Sometimes, tinkering around the edges cannot convert a practice with below average profits into a high performer. Then, Radical Surgery may be necessary.

Generally speaking, Radical Surgery involves a fair degree of upheaval for the practice. It can be used to describe Cost Rent Projects for premises acquisition, for example. We have assisted dozens of practices in their move from Health Board run surgeries to privately owned Medical Centres. Done correctly, this can provide a major boost to practice profitability.

Another form of Radical Surgery is a Merger of two (or more) practices to form a larger economic unit. This can enable the employment of more highly qualified staff to take some of the strain off the partners.

Occasionally, the reverse applies, and a large practice sub-divides into two or more smaller practices. This is rarely done on economic grounds, however, and tends to be driven by fundamental differences between the partners. Handled carefully, the financial downsides of such a fragmentation can be minimised, however.

  

 

 

Premises Acquisition

We have been advising GPs on surgery acquisition for 17 years. We have a detailed knowledge of the cost rent scheme, and are presently assisting practices secure the best possible deal from PFI funded projects.

A recent development in the local area is the selling off of Health Authority owned premises to the occupying practices. In such cases, the premises will attract notional rent from the outset, and by borrowing the capital on a fixed interest basis at today's low interest rates, it is possible to cover capital and interest repayments in full with the notional rent. Needless to say, this is a very attractive proposition, allowing the practice to repay the borrowings and enjoy the capital growth in the value of the property without any adverse cash flow impact. Indeed, when the notional rent is reviewed at three yearly intervals, the practice potentially receives a further bonus.

 

With any new surgery construction or refurbishment project, it is essential to consider the tax position. Extensive capital allowances are available on a significant proportion of the costs - 100% of any computer or computer installation costs, and 40% of any other eligible costs in the first year - and these can have a massive bearing on the amounts of tax payable by the partners.

We have close contacts with the High Street banks who specialise in providing surgery funding, and also the GPFC, and can advise on the most beneficial funding package in any given situation. We are quite willing to act as premises advisers only to any practices embarking on such a project - if this is of potential interest to you, then contact our partner in charge, Ian Condie at ian.condie@condie.co.uk to discuss your requirements.

 

Mergers

It is not unusual to find two, three and even more separate partnerships operating in one Health Centre. The reason for this may be largely historic, and as the composition of the partnerships change over the years, the current partners may see the benefits to patient care, not to mention quality of partner life, by merging two or more practices into one larger unit.

Staffing can usually be rationalised, more highly qualified nursing staff brought in, reduced overheads, improved purchasing power - there are few disadvantages. The only one that springs to our minds is one accountancy fee instead of two - although we have a sneaking suspicion that the merging practices may see that one differently!

  

Through our detailed knowledge of the Blue Book, we can create a financial model of the merged practice, and illustrate with reasonable certainty how much each partner can expect to earn before and after the merger. That leaves the partners to concentrate on the patient care and practical working issues, without worrying about the financial implications. We will also consider any taxation implications and our Tax Strategist, Scott Hallesy, will help to plan the timing of any change for maximum benefit.

Occasionally, the reverse applies, and a large practice sub-divides into two or more smaller practices. Rarely is this done on economic grounds, however, and it tends to be driven by fundamental differences between the partners. Handled carefully, the financial downsides of such a fragmentation can be minimised, and as with merging practices the financial and tax implications can all be addressed before the decision to split is finally made.

If you feel that any of the situations outlined above could apply to your practice, contact our partner in charge, Ian Condie at ian.condie@condie.co.uk to discuss your requirements.