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North East GP
Property &
Practice
Succession
20th March 2014
An Introduction to NHS
Property Services Ltd
Why NHS Property Services?
• Quality of the healthcare environment has a direct impact on how the NHS delivers care, and our patients’ experience of it
• The work environment isalso important for staff: the better it is the moreefficient they can be
Why NHS Property Services?
“It can’t be easy to be healed in a
soulless concrete box with characterless
windows, inhospitable corridors and
purely functional wards. The spirit needs
healing as well as the body.”
HRH The Prince of Wales ‘A Vision of Britain’
Enhancing the Healing Environment
The King’s Fund
Why NHS Property Services?
• We manage, maintain and improve NHS properties and facilities
• Work in partnership with NHS organisations
• Safe, efficient,sustainable and modernhealthcare and working environments
Background
• Created on 1 April 2013 by the Health and Social Care Act 2012
• 3,200 NHS staff
- most transferred from former SHAs and PCTs
• Unique, expert team of estates and facilities professionals
Background
• Private limited company, 100 per cent owned bythe Secretary of State for Health
• Important member of the NHS family
Our property portfolio
Our objectives
1.Maintain continuity of service and keep buildings safe, warm and clean
2. Place patients and the taxpayer at the heart of our business by supporting the NHS and the broader public sector to transform services
Our objectives
3. Use our scale and effective portfolio management to keep costs to a minimum, passing savings to the NHS
4. Establish ourselves as a truly national entity with a single corporate identity and consistent approach.
Our objectives
5. To ensure our estate is managed sustainably and that we support wider government initiatives in this area
6. To be recognised as an employer of choice.
Two roles:
• landlord function
• modernising premises
• disposing of assets the NHS no longer needs
Strategic estates
management:
• cleaning
• reception
• catering
• compliance
Dedicated Support Services
Core business: strategic
• Landlord and advisory services• Strategic estates advice• Property management advice
Core business: operational
Refurbishment and
maintenance of buildings,
plant and machinery
Health and safety, fire
safety and risk assessments
Assuring premises
quality and compliance
Mechanical and
engineering services
Local structure
• HQ in London
• Area team coordinators
in all 27 areas
• Most staff based locally
in our properties
• Business Redesign
Process underway
Benefiting health economies
1.Bringing together all those who manage and run NHS estate and facilities, we can deliver a more streamlined, strategic and professional focus
2. Drive efficiency through economies of scale
Benefiting health economies
3. Reducing the impact of the NHS on the environment by focusing on renewable energy sources, and improving the efficiency of our facilities
Primary Care focus
• Existing arrangements to continue
• SLA being developed to ensure NHS PS appropriately supports the NHSE primary care services function – service alignment and consistency.
Primary Care focus
• NHSPS staff supporting Primary Care leads
in developing premises business cases
• Support in CQC assessment in our premises
- evidence based compliance work
• Current inconsistencies in reimbursement
and billing process being considered
Primary Care focus
• Service Charges:
• Much work on gathering information (inc.
financial)
• Same billing arrangements as present for
now (2013/14)
• Moving towards looking at actual costs
• Service charge model review
• Documenting tenancies
Primary Care focus
• Premises improvements:
• Prioritisation process being developed
• No new commitments this financial year
• Area teams collating requirements for future financial years
• NHSPS capital arrangements –Landlord/Customer/NHS England
• A standard Lease will be used in our premises
We look forward to working with you
• We work closely with NHS England and the 211 CCGs
• Primary care tenants
• Community services providers
We look forward to working with you
• Scope to redesign or add value only realised through co-operation with commissioners and providers
• NHS financial and service transformation challenges are ours too
The Regional team
Kathryn Berry – Regional Director – North
Ray Goodier – Regional Head of Strategy & Performance
Emma Bolton – Regional Head of Asset Management
James Thomson – Regional Head of Finance
Catherine Grimes – Regional Head of Human Resources
Trevor Jones – Regional Head of Health & Safety and Compliance
Deborah Prince – Regional Head of Communications
Danny Bolton – Regional Head of IM&T
Contact us
• www.property.nhs.uk
• information@property.nhs.uk
• 020 7972 5255
• Twitter @NHSProperty
North East GP
Property &
Practice
Succession
20th March 2014
Premises: A Picture of Health or One Foot in the Grave?
Sarah Parish & Hilary Parker
20th March 2014
Who are we?
“The Advisor of choice of majority of GPs” Legal 500 2013
• Founded 1896
• Full service law firm based in
Newcastle
• 29 Partners and 250 staff
• Nationally recognised as leading
healthcare lawyers
Leading Healthcare Lawyers
“Sintons has recently overseen more than £100 million of new GP surgery developments” Legal 500 2013
Premises - New Developments
Ownership of Premises
Who is your Landlord?
• Owner Occupier
• 3rd Party Developer
• NHSPS/Prop Co
• LIFT Scheme
New developments of surgery premises
• Options
• Sale and Leaseback
• Don’t rest on your laurels!
Our experience so far in the new regime
• Acting for 15 practices sent NHS Property Leases
• S25 Notices
• Increased Service Charges
• Third Party Developers more friendly?
Key Contacts
Sarah ParishSolicitor
0191 226 3130
sarah.parish@sintons.co.uk
Hilary ParkerPartner
0191 226 7880
hilary.parker@sintons.co.uk
Thank you
North East GP
Property &
Practice
Succession
20th March 2014
Strategy & Planning
Maxine Pott
Phil Harnby
RMT Healthcare Group
RMT Profile
• Experience within medical sector in excess of 25 years
• Founder members of AISMA
• Contributor to Medical Press and Financial Seminars
• Expert team of 20+ dealing with in excess of 100 GP practices and over
1,000 other healthcare professionals
How To Be More Profitable
In simple terms
Increase gross income, eradicate expenditure
which adds no value
The National Picture
General Background
• GMS vs PMS
• GMS 0.28% increase
– DDBR Staff costs decreasing
• MPIG straight line loss over seven years
• Seniority lost over six years, nothing for new starters
• Lack of new partners
Increasing competition and cost
pressures
• Practice costs increasing at 3% pa
• QoF points are harder to achieve
• Are enhanced services viable?
• MPIG phase out over 7 years
• Seniority phase out over 6 years
• Extra costs for locums
• Squeeze on margins
• No new funding – cashflow mgt essential
Anatomy of a high earning practice
• Goal alignment (money vs patient care)
• Delegation and time mgt
• Cost benefit use of time
• Involvement with CCGs and other NHS entities
• Competent Practice Managers and other Specialist Advisors
• Stable Partnership
• Proactive teams
• Non NHS earnings
• Dispensing ability
• Significant list sizes
Strategic planning
Consider six key questions
• What do we want to do?
• What have we done well in the past?
• What must we do well to succeed?
• What could we do?
• What might we do?
• What should we do?
Contact details
Maxine Pott - Director
RMT Medical & Healthcare
T: 0191 256 9500
E: maxine.pott@r-m-t.co.uk
Phil Harnby– Healthcare Group Manager
RMT Medical & Healthcare
T: 0191 256 9500
E: phil.harnby@r-m-t.co.uk
North East GP
Property &
Practice
Succession
20th March 2014
48
North East Property & Practices
20th March 2014Presentation by
Ian Crompton
Head of HealthCare Banking Services
49
North East Property & Practices
• Primary Care Confidence Index
• Bank support
• Partnerships
• Property
• Federations
Agenda
50
GP
Pharmacist
Dentist
Combined Average
-70
-60
-50
-40
-30
-20
-10
0
10
2011B 2012A 2012B 2013A 2013B
Combined index – short and long plus Dental and Pharmacy
Primary Care Business Confidence Index
51
71%
24%
3%0% 1% 2%
40%42%
9%5% 4%
1%
39%
47%
6% 4% 3%0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Increase a lot Increase a little Stay the same Reduce a little Reduce a lot Don’t know
GPs
Pharmacists
Dentists
To what extent do you expect the financial pressures of the business/practice to increase over the next 5
Increase a lot
Increase a little
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
Wave 1 Wave 2 Wave 3 Wave 4 Wave 5
Key findings:
• Total 89% expect increase in financial pressures (94%
2013A)
• GPs also slightly more positive at 95% (100% 2013A)!
• General shift in ‘lot to little’ from 2013A to 2013B
• Doctors 77% to 71%
• Pharma 62% to 40%
• Dentist 54% to 39%
Primary Care Business Confidence Index
52
8%
13%
54%
23%
3%
0%
10%
20%
30%
40%
50%
60%
Definitely Probably Probably not Definitely not Don’t know
Key findings:
• Little change across last 5 surveys
• On average only about 20% expect
single-handed practices to continue longer
term
Do you expect single handed practices to still be around in 5 years time? (patient care conducted by one
GP)
Primary Care Business Confidence Index
53
38%
53%
5%
0%
5%
0%
10%
20%
30%
40%
50%
60%
Definitely Probably Probablynot
Definitelynot
Don’t know
Definitely
Probably
0%
10%
20%
30%
40%
50%
60%
70%
Wave 1 Wave 2 Wave 3 Wave 4 Wave 5
Key findings:
• The majority (91%) see more mergers
as inevitable (77% 2013A)
• Those now saying ‘definitely’ is also
hardening 38% v 25% 2013A
Are you expecting more practice mergers, co-locations and / or larger practices over the next 5 years?
Primary Care Business Confidence Index
24%
1%
30% 30%
7%9%
5%
0%
48%
30%
12%
5%
18%
0%
32% 32%
11%
7%
0%
10%
20%
30%
40%
50%
60%
Retired (retirementage)
New career outsidehealthcare
Definitely Probably Probably not Retired (earlyretirement)
GPs
Pharmacists
Dentists
Do you expect/intend to still be working in Healthcare in 10 years time?
40%36%
22%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
GP Dentists Pharmacists
Likely to retire
Primary Care Business Confidence Index
55
46%
21%
16%
6%
11%
0%
10%
20%
30%
40%
50%
Yes & up-to-date
Yes butneeds
updating
No Singlehanded GP
Don’t know
Key findings:
• Little change across last 5 surveys
• Consistently 15/20% of partnerships do
not have a formal agreement
• Consistently 15/20% of agreements
are in need of updating
Do you have a formal Partnership Agreement?
Primary Care Business Confidence Index
56
20%
7%
10%
34%
29%
0%
10%
20%
30%
40%
Yes - part ofa localservice
provider grp
Yes as apractice on
our own
Yes some ofboth of the
above
Not planningto bid for any
contracts
Don’t know
Key findings:
• The number answering ‘yes’ has been 37%
for last two surveys
• Only move has been reduction in ‘no’s’ to
34% (48% 2013A)
• Suggests more are now in the ‘undecided’
camp
Not planning to bid for any contracts
0%
10%
20%
30%
40%
50%
60%
2012A 2012B 2013A 2013B
Are you currently or planning to bid to provide services under the new AQP (or similar) criteria?
Primary Care Business Confidence Index
57
56%
38%
1% 1%
4%
0%
10%
20%
30%
40%
50%
60%
Definitely Probably Probably not Definitely not Don’t know
Definitely
Probably
0%
10%
20%
30%
40%
50%
60%
Wave 1 Wave 2 Wave 3 Wave 4 Wave 5
Key findings:
• Few pharmacists doubt benefit of
taking on more services
• The only shift in the last year has been
‘probable’ to ‘definitely’
Pharmacy - Do you intend to bid to provide additional primary healthcare services within the next 5
years?
Primary Care Business Confidence Index
58
Definitely56%
Probably38%
Pharmacist
Yes - part of a group
20%
Yes on own7%
Yes mixed10%
Doctors
Key findings:
• There is clear and consistent evidence that pharmacists are more enthusiastic about taking on private work
• There is however some signs that GPs are beginning to recognise the potential benefits
Primary Care Business Confidence Index
59
Retirement, Succession & Mergers
What can we do as a bank:
Partnership:
• Lend to partners to buy-out exiting partner
• Lend to new partner to buy-in to partnership
Property:
• Lend to partnership to buy-out exiting partner
• Lend to new partner to buy-in to property
Mergers:
• Lend to partners to buy-out any leavers
• Lend to help equalise capital accounts
• Lend to buy, develop or improve premises
60
Retirement, Succession & Mergers
Some basic considerations:
Professional Advice:
• Invest in good advice; act in haste.....
• Plan and have a partnership agreement
Serviceability:
• Banks lend to serviceability not security
• Track record and projections
Commitment:
• Consider longer-term A-Z
• Make sure all parties have interests aligned
• A loan is only profitable in the last two years.....
61
Retirement, Succession & Mergers
Partnership (capital account) borrowing:
Options:
• Take advice; new partner or salaried.
• Buy-in for cash; trial period, staged buy-in
Who will lend:
• Many banks but ‘stand-alone’ less attractive now
• Practice Bank should offer best rates and sort quickly
Term & Rates:
• Term to suit your plans.
• Circa 2.3% to 3.5% over base depending on term
• Interest only unlikely and will carry premium
Retirement, Succession & Mergers
Property – things to consider:
Ownership:
• In/out of partnership; owner occupied or need for lease
• Limited Company; guarantees normally needed
Fabric:
• Life of asset; fit for purpose
• Alternative use; you and we need to know
Loan Structure
• One loan within partnership or individual partners
• Do you minimize equity and equalise capital accounts
• New partners may borrow ‘unsecured’ for their equity
63
Retirement, Succession & Mergers
Property - terms and rates:
Loan To Value (LTV):
• Up to 100% (105% developments)
• Owner Occupied v Investment (GMS/PMS space >75%)
Term:
• Up to 25 years but care re life of asset
• KIV plans and retirement schedule
Repayment
• Serviceability is the overriding issue
• Need sustainable ‘core’ income – e.g. Notional rent + Pharmacy
• LTV will reduce with lower certainty
64
Retirement, Succession & Mergers
Property - terms and rates cont:
Rates:
• Depends but secured base +2% with FFLS
• Fixed/float or mix.
Stress Test:
• Check you can afford if rates increase or income falls
• ‘Debt Service Cover’ plus 4% notional base
Caution:
65
Retirement, Succession & Mergers
66
Retirement, Succession & Mergers
Short term yields:
• Effectively cost of money in the market
• Similar principles to deposits
• Can be seen as a forecast of rate
expectations
• This rate influences current margins
Long term yields:
• Again can be seen as what is likely to
happen
• Consider impact on floating rate (e.g. at 2%
obr)
• £500k at 2.5% = £12,500 a year
• £500k at 6.0% = £30,000 a year
• Could you find the extra £17,500?
• Fix circa 5% i.e. £25,000 but can be
budgeted
67
Retirement, Succession & Mergers
Property - terms and rates cont:
Rates:
• Depends but secured base +2% with FFLS
• Fixed/float or mix.
Stress Test:
• Check you can afford if rates increase or income falls
• Currently use DSC plus 4% notional base
Caution:
• Is term committed at agreed rate for term of loan
• Can rates change during the term of the loan
• Are there any onerous covenants
68
Retirement, Succession & Mergers
Federations & Private Providing:
Structure:
• Take advice; limited company, CIC, partnership, tax, who manages
• Parties aligned on objectives, responsibilities, liabilities and money
Borrowing - who:
• Be clear who has the contract; who borrows, partnership or federation
• AQP procurement assessment includes financial viability
Finance options
• Overdrafts
• Asset Finance
• Commercial Finance
• Build finance costs into calculations
69
LBG Commercial Overall +5.6%
HealthCare +9.4%
Doctors +13.4%
Finally are banks lending?
North East Property & Practices
PAGE 70
Important notice
This presentation does not constitute or imply an offer or commitment whatsoever on the part of Lloyds TSB Bank plc(“Lloyds TSB”). Any such offer may only be made after the negotiation of satisfactory documentation and only afterappropriate credit authority has been obtained. The pricing discussed herein is based on our view of current marketconditions and is for discussion purposes only.This presentation and all ancillary documents relating to it (together the "Presentation") was prepared by Lloyds TSBexclusively for you for the purpose of analysing certain potential transactions. The Presentation is being made availableon a strictly confidential basis to you and is intended only for the internal use of authorised recipients (“Recipients”) andno part of it may be disclosed to any third party. This Presentation and the information contained herein are the propertyof Lloyds TSB. Recipients are hereby notified that photocopying, scanning, or any other form of reproduction, ordistribution - in whole or in part - to any other person at any time is strictly prohibited without the prior written consent ofLloyds TSB.The information in this Presentation reflects prevailing conditions and our judgment as of this date, all of which aresubject to change or amendment without notice and the delivery of such amended information at any time does not implythat the information (whether amended or not) contained in this Presentation is correct as of any time subsequent to itsdate. Whilst Lloyds TSB have exercised reasonable care in preparing this presentation and any views or informationexpressed or presented are based on sources they believe to be accurate and reliable, neither Lloyds TSB, nor any oftheir officers, servants, agents, employees or advisors make any representation or warranty, express or implied, as to thefairness, accuracy, adequacy, completeness or correctness of such information, nor as to the achievement orreasonableness of any projections, targets, estimates, or forecasts and nothing in this Presentation should be relied uponas a promise or representation as to the future. Neither Lloyds TSB nor any of their officers, servants, agents, employeesor advisors or any affiliate or any person connected with them accepts any liability whatsoever for any direct, indirect orconsequential damages or losses arising from any use of this Presentation or its contents or otherwise arising inconnection therewith. Lloyds TSB undertakes no obligation to update or correct any information contained herein orotherwise to advise as to any future changes to it. Applicable tax, accounting and legal considerations are subject tochange and in all cases independent professional advice should be sought in those areas.This Presentation is provided for information purposes only: there has been no independent verification of the contents ofthis Presentation. It does not constitute or contain investment advice. It is not and shall not be construed as an offer,invitation, recommendation or solicitation to sell, issue, purchase or subscribe for any securities in any jurisdiction or toenter into any transaction. It is not and shall not be construed as an offer to arrange, underwrite, finance, purchase orsell any security, financial instrument, assets, business, or otherwise provide monies to any party. Such offers may onlybe provided in writing after satisfactory legal, financial, tax, accounting and commercial due diligence, as well as approvalfrom the relevant business and credit committees of Lloyds TSB and/or their affiliates. The information contained in thisPresentation is in summary form for the convenience of presentation and may therefore not be complete.Products and services that may be referenced in the Presentation may be provided through affiliates of Lloyds TSB orany person connected with them.Lloyds TSB and their affiliates prohibits employees from offering a favourable research rating or specific price target orchanging a rating or target to get a mandate and Lloyds TSB and their affiliates prohibit research analysts from beingcompensated for involvement in investment banking transactions, except to the extent that such participation is intendedto benefit investor clients. Lloyds TSB, their affiliates, their respective directors or officers or persons connected with themmay have an interest in any financial instrument mentioned in this Presentation.Lloyds TSB Corporate Markets is a trading name of Lloyds TSB. Lloyds TSB’s registered office is 25 Gresham Street,London EC2V 7HN and it is registered in England and Wales under No. 2065.Lloyds TSB is authorised and regulated in the United Kingdom by the Financial Services Authority.
North East GP
Property &
Practice
Succession
20th March 2014
The Valuation Of Primary Healthcare Property
David J Downing BSc (Hons) MRICS
Partner
20 March 2014
The Valuation Of Primary Healthcare Property
• Agency, Acquisition & Disposal
• Architecture & Design
• Building Consultancy & Development
• Business Rates
• Rent Review & Lease Advisory
• Valuation & Consultancy
The Valuation Of Primary Healthcare Property
2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012 & 2013
Most Active Agents• Retail• Office• Industrial• Overall
The Valuation Of Primary Healthcare Property
• 2 Questions
– Why ? &
– How ?
• Why ?
– Partnership Purposes
– Funding
The Valuation Of Primary Healthcare Property
• Why ? Partnership Purposes
– The Valuation Clause
• “The freehold or leasehold assets of the practice shall be valued by a
Chartered Surveyor appointed by the partners (in default of such
nomination to be appointed by the President, for the time being, of the
Royal Institution of Chartered Surveyors) having regard to the (open)
market value as defined by the Royal Institution of Chartered Surveyors
of the premises having regard to both the existing use of the premises
and the benefits of any income or rent reimbursement (whether real or
notional) paid in respect of the premises but disregarding any element
of personal goodwill which may attach to them as a result of the
occupation of them by the partners or any of them or by any deceased
or retiring partner immediately prior to the death or retirement of that
partner.” (General Practitioners Committee)
The Valuation Of Primary Healthcare Property
• Why ? Partnership Purposes– The Valuation Clause – What Does This Mean?
• Market Value (Best Achievable)
• Both Existing Use and Alternate Uses
Considered
• Any Rental (Notional or Real) Considered
• Any Goodwill or Occupation Disregarded
The Valuation Of Primary Healthcare Property
• Why ? Funding
– Partner Joining/Leaving
– Extension Of The Premises
– Provision Of Additional Services
– Acquisition Of Assets
The Valuation Of Primary Healthcare Property
• How ?
– Residual Method
– Comparison Method
– Investment Method
The Valuation Of Primary Healthcare Property
• Residual Method
• Comparable Method
The Valuation Of Primary Healthcare Property
• Investment Method
– Current Market Rent (CMR) + Any Rents
– Deduct Non Recoverable Costs
• eg External Repairs, Insurance
– Net Effective Rent
– Capitalise at an appropriate yield
• Yield reflects many things
• Age, Location, Specification, etc
– Market Value
North East GP
Property &
Practice
Succession
20th March 2014
Independent financial advice only for BMA members
Pension Planning – Chase de Vere
What are the proposed public sector pension scheme
changes and how will they affect you?
Expected Implementation date
1st April 2015
Independent financial advice only for BMA members
Outcome
� 1/54 Career Average Revalued Earnings (CARE) scheme
� Revaluation of active members benefits by CPI + 1.5%
� Normal pension age linked to State Pension Age
� Further increased contributions
� Choice exercise to be revisited for service to 2015
*Transfer of Undertakings – Protected Employment
The Pension Tax Regime
Further Legislation Changes and their Impact
Annual Allowance
for
General Practitioners
Independent financial advice only for BMA members
Who is most likely to be affected?
� Members with long service and/or significant promotion or pay
rise
� High earners
� Members retiring on (non terminal) ill health or redundancy
grounds
� Members buying additional pension or added years
� Greater risk to all when inflation is low
Reduction to Lifetime Allowance
Independent financial advice only for BMA members
Key Dates - 6th April 2012 and 6th April 2014
Implication Reduction in total lifetime allowance
from £1.8m to £1.5m and further reduction to
£1.25m on 6th April 2014
Result Any amount over the lifetime
allowance will be liable for a tax
charge.
Taxation 25% or 55% charge depending on
whether surplus taken as an income
or as a lump sum
Independent financial advice only for BMA members
Fixed Protection 2014
� Application to be made before 5.4.14.
� Available to all UK pension savers
� Cannot have alongside existing protection
� Will protect lifetime allowance of £1.5m
� Strict rules apply
- No further private arrangement contributions
- For defined benefit scheme (e.g. NHSPS), no further benefits can accrue above the "relevant percentage".
Independent financial advice only for BMA members
Personalised Protection Option
� Under consultation for those with pension pots over £1.25 million on 5 April 2014.
� Planned to give individuals an LTA of the greater of the value of their pension rights on 5 April 2014 (up to an overall maximum of £1.5 million) and the standard lifetime allowance (£1.25 million from April 2014).
� Planned to allow people to carry on saving in their pension scheme without losing their protection (with any savings above the individual's LTA becoming subject to the LTA charge when benefits are taken).
� Consultation document issued 10.6.13 and yet to be approved and finalised.
� Three years to apply from 6.4.14
Independent financial advice only for BMA members
Other Potential Solutions
� Take higher Lump Sum
� Allocation of pension to a dependant
� Early retirement – actuarial penalty
What is 24 Hour retirement?
The ability to retire, draw pension benefits and return to work with unlimited earnings potential
Independent financial advice only for BMA members
Post Retirement Working (cont’d)
£1,500 per annum additional index linked pension
Cost of deferral £51,460 gross
Independent financial advice only for BMA members
Areas of Advice *
� Life Assurance
� Income Protection
� Pensions & Retirement Planning
� Investments & Savings Advice
� Estate Planning
� Mortgages **
** BMA Services has partnered with London & Country
who will provide the mortgage advice and will not
charge a fee.
Your home may be repossessed if you do not keep
up repayments on your mortgage.
*Advice provided by Chase de Vere
North East GP
Property &
Practice
Succession
20th March 2014
Thank you and questions
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