Practice Finance

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Overview Independent Contractors Permanent nationally-determined

contract until PMS

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Important History 1948 Formation of NHS 1966 GP Contract 1990 New GP Contract 1990 NHS Trusts 1992 Fundholding 1998 Primary Care Groups 1998 PMS Pilots

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Sources of information

SFA (Red Book) Medeconomics AISMA guide Accountant Library

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Doctors’ and Dentists Review Body

Advises Government on what average Doctor should earn

Government allocates a non-cash-limited budget for GMS activity

If budget exceeded nationally, Government adjusts next year’s pool

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Partnership A group of Doctors working

together Usually in the same or linked

premises Co-operating in on-call and

rota arrangements Assuming responsibility for

one another’s patients in absence

Pooled resources and expenses

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Premises Partnership finds appropriate

premises from which to practise (LHA to approve)

May be purpose-built Finance

Partners finance Private Finance Initiative Health Centres

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

General Medical Services Independent contract Nationally-negotiated Within DDRB framework 24hr care responsibility Statement of Fees and Allowances

(SFA)(Red Book) Payments on quarterly cycle

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Personal Medical Services Employed contract fixed-term Payment system bases on central

budget based on previous GMS activity, with additional development money

Contract: initially to be locally-negotiated, but now centrally-imposed without national bargaining or safeguards

Pension rights as yet unclear Potentially big winners and big losers

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

NHS Income

Allowances Fees per patient Item of Service Reimbursement Dispensary Cost-Rent Scheme

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

NHS Allowances Basic Practice Allowance Seniority Allowance Quality Allowance Postgraduate Education Allowance Out of Hours Allowance Other

Designated Area Assistant Associate

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Fees per patient Capitation

3 bands (<65, 65-74, >75) Deprivation Child Health Surveillance Target Payments

Cervical Cytology, Childhood immunisations

Health Promotion Asthma, Diabetes

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Items of Service Maternity Care Contraceptive Services Out-of-Hours consultation Vaccination/Immunisation Temporary Resident

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Reimbursement Cost-Rent Scheme Rent & Rates Maternity Locum Fees

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Dispensing Income Can dispense for patients >1 mile

from chemist in non-urban area Get paid:

Cost of Drug LESS Discount (NHS assumes

discount 9%) PLUS Container Allowance AND Dispensing Fee

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Cost-Rent Scheme Partners own building Partners need loan to pay builders etc Cost Rent Scheme provides parameters

for paying loan interest on certain things – fixed room sizes, purposes etc

Variable interest rate different borrowing rate from cost-rent rate

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Private (non-NHS) Income Legal & Insurance Work Local Authority Work Work for Private Business Use of Premises Private Patients

hobby/work/driving medicals travel health services

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Expenses Include

Staff Costs All drugs and

equipment used Heat/Light/Water Financial

Accountancy, Banking

Administration: Telephone Postage

Important that DDRB gets accurate view of what expenses are incurred

Beware “netting-out”

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Taxation Income Tax

Schedule E Schedule D

Value Added Tax (VAT)

Capital Gains Tax (CGT)

Inheritance Tax

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Schedule E (PAYE)

Can claim as an expense against tax the cost of buying or maintaining any item used “wholly and necessarily” for business.

i.e. any item without which you cannot carry on business

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Schedule D (Self-Employed)

Can claim as an expense against tax the cost of buying or maintaining any item used “wholly or exclusively” for business.

i.e. any item used wholly or mainly (in which case you claim a proportion of the tax) within the business

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Tax Payment Tax calculated on whole-year basis Two payments made: January and

July Each payment consists of an actual

amount plus an estimated “on account” payment

Practice will probably set aside money

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Retirement GPs can retire from age 50 onwards Early retirement will mean reduction

in pension Age 50 multiply by 0.599 Age 55 multiply by 0.754 Age 59 multiply by 0.943

Can buy “added years” superannuation

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Added Years Allows GP to buy added years of

benefits to increase up to maximum 40 years at age 60

Pay fixed percentage of NHS Superannuable income every year

Price according to age

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

NHS Pension Scheme Basic contribution 6% NHS income per

year Benefits:

Lump Sum 4.2% Annual Pension 1.4% Ill Health Retirement pension Death benefit Widow(er)’s pension Children’s allowance

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Pension Pension calculated on whole-career

earnings Different portions are pensionable

(superannuable) to different degrees Dynamised upwards to represent

career earnings at current prices 4.2% lump sum 1.4% per annum

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Profits and Losses Business makes a profit Profits divided among

stakeholders partners profit-share staff

Partners take drawings in anticipation of profits

Losses equally shared

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

Equity Business has assets

Premises Stock Equipment Furnishings

May require capital investment

Equity Partners draw more than non-equity partners

GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

What to look for … Check Partnership Agreement

property ownership equal division of profits?

Inspect Accounts: ?recent (less than 18m old) assets > liabilities parity profit share regular sustained drawings (may need to ask) expenses <50% of turnover