Sector report: GP practices in the NHS

NHS care

The shakeup of the NHS has changed the funding landscape for GP practices creating financial pressures for the sector, writes Rachel Fielding

Long working hours, demanding patients, unpleasant outcomes – there are lots of things that may cause us to feel sympathy for GPs but falling incomes is unlikely to be one. Evidence submitted to the most recent annual pay review for general practitioners (GPs) by NHS England found the number of family doctors earning more than £100,000 a year has quadrupled in less than a decade. Official documents show that some 16,000 GPs are being paid six-figure sums, including 600 earning £200,000 plus.

And yet funding upheaval has been a bitter pill for many of the UK’s 260,000 GPs at a time when the ageing population of GPs prepares for a huge brain drain over the next few years and the number of new entrants into general practice dwindles to an all-time low.

It is a decade since the introduction of a new contract for GPs, which effectively put them in control of deciding just how the lump sums they received from Primary Care Trusts (PCTs) would be spent. Practices had the choice as to whether to sign up to the General Medical Services contract – a predetermined contract between the practice and the NHS – or a generally higher-priced Personal Medical Services contract, which reflected the needs of the local area, the terms of which were locally negotiated.

The contracts are made up of a number of components in addition to a global or baseline sum; the Quality and Outcomes Framework (QOF) rewards practices depending on the quality of care they provide using a points-based system. Practices are also paid for offering enhanced services and receive an allowance for occupation of property and support for business rates.

Because practices do not have an FD and the role of a practice manager is so broad, it is easy for things to slip through the net

Then in what was dubbed the most radical shakeup since the NHS was created in the aftermath of World War II, 151 PCTs and the 10 strategic health authorities that oversaw them were abolished in April 2013, with GP‑led commissioning consortia known as clinical commissioning groups (CCGs) taking control of deciding which enhanced services their local populations need. Responsibility for commissioning public health services transferred to local authorities.

‘Now things are much more centralised and automated and GPs are finding they are not paid for work they have done, waiting for several months after they should have been paid. And some of the work that was being done for PCTs is now being done for local authorities. It’s a totally different framework that means GPs are being paid by someone completely different,’ says Ann Tudor, a partner at Tudor Healthcare Accountants and chair of ICAEW’s healthcare special interest group.

Further changes to funding came into effect on 1 April 2014, which many see as an attempt to level the playing field and realign funding across practices. The minimum practice income guarantee (MPIG) – a payment introduced in 2004 to top up practices’ core funding so that they would not be worse off under the new deal and received by over 60% of practices – is being phased out over the next seven years.

‘For a lot of practices which had been extremely reliant on this correction factor, it is no longer commercially viable or reasonable for them to go on,’ says Sean McLernon, director of medical services at Baker Tilly’s Manchester office. Similarly, a seniority payment of up to £9,500 that acknowledges the expertise of experienced GPs is being withdrawn.

Funding transition

At the same time, the QOF is being reduced by more than a third over the next year. ‘When the big new contract came out in 2004, quite a lot more money was put into general practice. The idea was to reward good practice but since then there has been no real appetite for it and, from my perspective, the focus on quality from a funding perspective is dwindling,’ says Laurence Slavin, a partner at specialist medical accountancy firm Ramsay Brown, which works with 3,000 GPs across the UK.

While industry body the Association of Specialist Medical Accountants (AISMA) is warning that many GPs will be worse off once the reduction in the MPIG and the QOF funding are taken into account, McLernon is slightly more optimistic. He says: ‘Some of that funding will get diverted into the global sum that practices receive and some into enhanced services, so the money is still potentially there but in different places. PMS practices will be worse off. For GMS practices, it depends on the profile of the practice and whether they had an MPIG, but there are likely to be a lot more losers than winners.’

Either way, practices need to understand the new regime to ensure they extract maximum value from the services they provide. However, the transition to the new funding regime has not been without its problems; delayed payments due to the chaos of outsourced and multisource payments has resulted in some practices facing financial meltdown.

‘A lot of mistakes have been made about what payments they have received. GPs are broadly in favour of CCGs but it is still in a bit of disarray. And because practices don’t have an FD and the role of a practice manager is so broad, it’s easy for things to slip through the net,’ says Sarah Moss, a partner at BDO, specialising in the medical sector.

Some funding will get diverted into the global sum practices receive and some into enhanced services, so the money is still potentially there

But GP practices are under pressure in the light of reducing incomes, increasing costs and a growing workload. The combination of an ageing population and an increase in the number of people with multiple-conditions is driving a huge increase in the number of consultations in general practice – by 69m over the next three years. Despite growing pressure on the system, the share of funding spent on general practice has been falling since 2005/6.

A recent study conducted by Deloitte for the Royal College of General Practitioners (RCGP) predicts that funding for general practice will fall by 17% in real terms by 2017/18 from the current £9.29bn of the total NHS budget of £110.9bn to only £7.7bn, in today’s money. For many GPs, the motivation to plug funding gaps with new service offerings, or extended surgery hours, is simply not there.

AISMA chairman Bob Senior warned in an article to the association’s members that the government’s latest pay review for GPs giving them a 0.28% net increase in funding from April does not reflect what is happening in many practices. He said: ‘The continued increase in patient demand is causing many practices to increase staff hours, either by employing more staff, giving more hours to existing staff, or by paying more overtime. Many practices are therefore facing higher staff costs even before any annual pay increases are taken into account.’

Pension tax net

The latest below-inflation pay rise has done little to improve the morale of GPs, already hit hard by a recent tightening of the pension tax net. With most GPs treated as self-employed for tax purposes, but as employees for the purposes of their NHS pension, they pay both the employer and employee contributions. Tiered rates of superannuation contributions, and a top rate employee contribution of 14.5%, mean that those earning £100,000 could lose their personal allowance if they work extra hours.

‘If the growth in their pension is too large there’s an excess to pay,’ explains McLernon. ‘To avoid lifetime allowance higher rate tax, some GPs are dropping sessions so they stay within the limits on their pay threshold. If their assessable income exceeds £100,000, the first 20% over that is taxable at 60%.’

Further pension changes resulting from Lord Hutton’s review of public sector pensions are due to come into effect next year and will require doctors to not only pay higher contribution rates but also extend their working lives.

It is the final straw for those already struggling with the stresses of the job, according to a recent British Medical Association (BMA) survey which found that six in ten GPs are considering early retirement and more than half say their morale is either ‘low’ or ‘very low’. The survey of 420 GPs found that 28% had thought of leaving the profession and only 14% had not considered a move away from their current role. There is also a potential GP shortage with an increasingly ageing workforce. ‘Around 40% of all GPs are over 50 and a lot of these will go in the next five years,’ warns Slavin. ‘It will leave an enormous hole. Until 2004, GPs were heavily underpaid for the service they performed but they got a really good pension. But changes to the annual allowance are putting that at risk.’

Practice restructuring

The financial uncertainty facing practices has also forced the profession to face up to the changing environment. Helping GPs navigate the funding minefield is an increasingly important part of the job for advisers. ‘We spend a huge amount of time looking at how to structure their practices and understanding how they match resources to the services they want to provide,’ Slavin adds.

Not surprisingly there is much more of a financial element to the business of running a GP practice than in the past as practices are effectively transformed into businesses. ‘Some GPs are more switched on than others,’ says Alan Worsdale, managing partner of Essex-based accountancy firm Rickard Keen LLP and AISMA member. Many practices appoint a finance partner, and bigger practices will also have a finance manager who is not necessarily a qualified accountant but has the right experience to guide them through the intricacies of medical accounts. While the accounts themselves are generally straightforward, the main challenges centre on understanding the different sources of funding and advising GP clients on how best to capitalise on the opportunities available amid concerns about income streams. From an accounting perspective, the onus is on presenting partnership accounts in a way that offers maximum insight into the business.

At the same time, industry-wide benchmarking has become an invaluable tool in identifying opportunities to negotiate better contracts, understand missed funding opportunities or improve the efficiency of practices.

Although the average GP salary is £105,000, the disparity between the lowest paid at £30,000 and the highest earning over £200,000 means that there a number of ways for advisers to add real value.

‘What makes a difference is if they have a good contract, a lot of patients and run their practice well. We spend a lot of time on structuring their practice and understanding how they match resources to the services they want to provide,’ Slavin says.


There are 10,987 GP practices in the UK with some 8,230 in England, 1,025 in Scotland, 499 in Wales and 358 in Northern Ireland Source: BMA

Accountancy firm BDO produces its own benchmarking statistics from its GP practice clients. ‘Benchmarks are about aiding discussions with clients and teasing out why and what they can do about it,’ Moss explains. Despite uncertainty as CCGs continue to find their feet, she believes there are plenty of opportunities for GPs. 

‘A lot are not particularly entrepreneurial or financially minded but there are opportunities to bid for services that were originally in secondary care and provided by hospitals.’

And with public and NHS procurement rules often dictating that the commissioners of those services run a competitive procurement process, GP practices are increasingly joining forces in federations to tender for services. ‘This will allow practices to bid for much bigger contracts than they could on their own,’ Tudor says. There are also potential cost savings in terms of back office functions such as administration, accounts and HR.

But Moss also accepts that the challenges of the new regime can be daunting for smaller surgeries. ‘Because of all these changes, the paperwork and new policies, smaller practices are finding it very challenging. I am advising on a lot of mergers. How does a one-man band meet the Care Quality Commission requirements in the same way as a 10-man practice?’

Dr Paul Husselbee, GP and member of the Southend CCG in Essex says the pressure to do more with less is putting a strain on practices and forcing them to be more business-like. ‘Baseline funding is lower and how we make up our income is from lots of different schemes and pots of money which changes every year,’ says Husselbee. Managing income and deciding where to invest is much more of a strategic decision. ‘There is much more turmoil. I’m fairly happy that I’ll be looking to retire soon.’


Funding pressure

  • 17% predicted fall in funding for general practice in real terms by 2017/18 (Deloitte/RCGP)
  • £9.29bn funding for GP practices as share of current total NHS budget of £110.9bn, set to drop to £7.7bn by 2017/18 [Deloitte/Royal College of General Practitioners]
  • 8.39% proportion of NHS budget allocated to general practice in 2012/13 (Deloitte/RCGP)
  • 7.29% estimated proportion of NHS budget allocated to general practice in 2017/18 if current trends continue (Deloitte/RCGP)

Patient consultations

  • 69m predicted rise in patient consultations (Deloitte/RCGP)  [[[[Karen: this is rise from 2012/13 to 2017/18]
  • 304m number of patient consultations in 2008/09 (Deloitte/RCGP)
  • 340m number of patient consultations in 2012/13(Deloitte/RCGP)
  • 409m estimated number of patient consultations in 2017/18(Deloitte/RCGP)

NHS structure

  • 211 clinical commissioning groups (CCGs) in England [NHS]
  • 7,960 GP practices in England [NHS]

GP numbers

40,236 GPs in England comprising:

  • 20,435 female GPs [NHS]
  • 19,801 male GPs [NHS]


Types of GP

Contractor GPs

2010/11                2011/12

33,000                  32,950

Salaried GPs

2010/11                2011/12

7,550                    7,650

GP pay

The average income before tax for contractor GPs in the UK in 2011/12 by contract type:

•             £98,300 for those GPs working under a General Medical Services (GMS) contract (compared to £99,000 in 2010/11)

•             £111,600 for those GPs working under a Primary Medical Services (PMS) contract (compared to £113,400 in 2010/11, a decrease of 1.6 per cent)

•             £103,000 for those GPs working under either a GMS or PMS (GPMS) contract (compared to £104,100 in 2010/11, a decrease of 1.1 per cent)

The average income before tax for GPMS salaried GPs in 2011/12:

£57,000 in England (compared to £57,900 in 2010/11).


Who’s paid what: highs and lows

  • 16,000 GPs being paid six figure sums [NHS England]
  • 4,000 GPs paid more than £100,000 a year in 2005 [NHS England]
  • 600 GPs in England earning more than £200,000 [NHS England]

Earnings potential

GPs whose practices are categorised as rural have higher average gross earnings, total expenses and income before tax, than GPs whose practices are categorised as urban. GPMS GPs in rural practices have an average income before tax of £106,700 while GPs in urban practices have an average income before tax of £102,100. This can partly be explained by the fact that rural GPs are more likely to be in dispensing practices


NHS v private sector

GPs can perform both NHS and private work which can be done both inside and outside the practice, including the NHS Out of Hours service. GPs will usually submit a self-assessment tax return which contains information on all of their self-employment earnings, including both NHS and private earnings while practising as a GP, with the accounting year ending in the tax year covered by the return. As a guide to NHS/private earning proportions, the average NHS superannuable income for GPMS contractor GPs in 2009/10 was 94.8% of total earnings.



Rachel Willcox |Specialist writer and contributor

Rachel Willcox is a specialist business writer and regular contributor to Accountancy...

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