north east gp property & practice succession€¦ · • premises improvements: •...

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


“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


• 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

• [email protected]

• 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

[email protected]

Hilary ParkerPartner

0191 226 7880

[email protected]

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: [email protected]

Phil Harnby– Healthcare Group Manager

RMT Medical & Healthcare

T: 0191 256 9500

E: [email protected]

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


• 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%


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)


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%


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?


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


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?


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?


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%


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?


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


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


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


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


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


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


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


66


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


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


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?


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


• Agency, Acquisition & Disposal

• Architecture & Design

• Building Consultancy & Development

• Business Rates

• Rent Review & Lease Advisory

• Valuation & Consultancy


2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012 & 2013

Most Active Agents• Retail• Office• Industrial• Overall


• 2 Questions

– Why ? &

– How ?

• Why ?

– Partnership Purposes

– Funding


• 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)


• 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


• Why ? Funding

– Partner Joining/Leaving

– Extension Of The Premises

– Provision Of Additional Services

– Acquisition Of Assets


• How ?

– Residual Method

– Comparison Method

– Investment Method


• Residual Method

• Comparable Method


• 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


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


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


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


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".


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


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


Post Retirement Working (cont’d)

£1,500 per annum additional index linked pension

Cost of deferral £51,460 gross


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

north east gp property & practice succession€¦ · • premises improvements: •...

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