Roger Morgan -Flexible Partnership Models and Financial Issues€¦ · Premises • New Models – New Thinking • Basic partnership structure – no change • Large scale structure

Financial Issues of ‘Flexible’ Partnership Models

19th June 2018

Roger Morgan MBA FCCA01258 451234

www.sandisons.net

Legal & Financial Update

© Sandisons Limited 2018

GP partnership principles

The key drivers of change

The evolution of the partnership model

Managing the finances within new structures

Building ‘flexibility’ into the structure

Partnership – Your Flexible Friend



General Practice Forward View 2016

“The historic strength of general practice is being weakened by the relative under-investment in general practice that has occurred over the past decade”.

#GPforwardview – page 11


General Practice Forward View 2016

“The model of independent contractor status and partnership has proved a valuable foundation for general practice”.

#GPforwardview – page 23

5000 additional GP’s

Carr-Hill formula to be reviewed

A new funding formula to better reflect practice workload

A 14% real term increase in funding

Raising the proportion of investment into general practice to over 10% of healthcare budget

GP Forward View Fails


Independent review of partnership model

Reluctance of young GP’s to become ‘Partners’

Risk/Reward ratio

Richard Vautrey – ‘lots that can be done to modernise the partnership model, including providing flexibility for GP’s working as partners’

Questions over the partnership model



Parity

Balancing of sessions/commitment

Equal/proportionate profit shares

Equal/proportionate working capital

Equal/proportionate ownership of assets

The classic partnership model


Golden hellos with lock in periods (3-5 years)

Escalating pay rises after years 1,2 and 3

Loyalty bonuses / golden handcuffs

Annual bonuses based on performance

Incentivise to take a greater role in practice affairs

Offer roles as clinical leads, trainers, QOF leads etc

Salaried GP’s – Incentivise and Retain


Basic Pay for ‘Basic Role’

Say £8,500 + MDU per session – for basic role

Define the ‘basic role’ – patients per surgery etc

Emergencies – in practice or house visits

Telephone advice / medicine management

QOF / enhanced service work

Research / Document work flow

Salaried GP’s – Basic Service Pay Scale



Apply the same thinking to Partners

• New Models – New Thinking• Basic partnership structure – no change• Level 1 - effectively salaried (fixed profit share)• Level 2 - non-property Partner• Level 3 - non-property, low capital Partner• Level 4 - full proportionate partner• Level 5 – full proportionate partner +++



Financial Problems That Follow

• Merger • Super Partnerships• Federations • Maintain independence but form

alliances to deliver ‘at scale’work


Key Problems of Scale

• Corporate Governance

• Loss of Financial Control


Old Partnership Model Needs to Change (Flex)

• To allow for demands of scale• To reflect the reality of the new

model• Equality/Parity/Proportionality –

the old drivers• Flexibility and Fairness –

the new drivers


Financial Areas to Address

• Profit Shares • Premises• Working Capital• Areas of responsibility• Levels of commitment


Profit Shares

• New Models – New Thinking• Basic partnership structure – no change• Large scale structure – more corporate• Adjust profit shares to reflect working

capital, additional responsibilities and..• Levels of commitment



Key Principles

• Don’t overcomplicate it• Tax Out• Use corporate principles• Optimise scale• Retain partnership flexibility• Broaden the skillset – non GP’s as well• Reward commitment and loyalty


The Big Issue(s)

• Buying in - Premises• Buying in – working capital• Wish for a ‘portfolio career’• Workload – home commitments• Retaining long standing GP’s• Avoiding ‘Burnout’


Premises

• New Models – New Thinking• Basic partnership structure – no change• Large scale structure – more corporate• No automatic change of ownership on

retirements/partner change (watch out for tax consequences)• Sale and Leaseback possibilities


Working Capital

• New Models – New Thinking• Basic partnership structure – no change• Large scale structure – more corporate• Set core fixed level of Working Capital (use

bank overdrafts to cover fluctuations)• Current year profit retentions held until

cashflow permits release• Retentions to reflect levels of commitment


Think outside the box

• Address individual concerns• Be fair• KISS (as much as possible)• Balance risk/reward• Enjoy taking ownership• Enjoy ‘teamworking’


Partnerships – and the Corporate Mindset

• The larger the structure the more unwieldy• A more corporate outlook required• Delegated authority to management specialists• Overseen by partners/owners – but hands off• Financial control and management needs to be

restructured too• More risk? Less risk?• How will this work out at partner level?• Difficult choices to be made


Primary Aim

• Build the structure to achieve the aim• Governance• Workforce• Financial• Plan the future


Management Structure at Scale

• ‘How’ will you manage the business• ‘Who’ will manage the business• Split sites – how will that be managed?• One partner – one vote is unwieldy• Delegated authority = concentration of power in

hands of fewer partners• Trust…..


Merger Problems

• Premises• Loans• Harmonisation of earnings• Transfer of contract – partnership risk• Cultural issues• Costs of merger process (time and money)• Merging for the wrong reasons• Difficult to unwind


Merger Problems - Premises

• Valuation?• Loans• Risk• Last man standing going forward• Leasehold premises – who is on the hook?• Leasehold premises - dilapidations• New lease – SDLT issues?


Merger Problems - Legal

• Get INDEPENDENT advice• Do you need a pre-nup?• New partnership agreement• Liabilities brought forward?• TUPE• Leasehold premises - dilapidations• New lease – SDLT issues?


Managing Finances ‘At Scale’

• Dedicate sufficient resources• Online accounting • Keep up-to-date• Know where you stand on income• Keep control of your overheads• Prepare a budget• Regularly review performance against budget


DisclaimerThese notes have been prepared for the use of delegatesat the VWV practice management conference held on19th June 2018. They are not a substitute for detailedprofessional advice either for those delegates attendingthe presentation or any other person who may read thenotes. No responsibility can be accepted by the speakeror Sandisons Limited for the consequences of any actiontaken or refrained from being taken as a consequence ofreading these notes or attending the seminar for whichthey were prepared.



Documents

Roger Morgan -Flexible Partnership Models and Financial Issues€¦ · Premises • New Models – New Thinking • Basic partnership structure – no change • Large scale structure