Practice Finance
Jan 24, 2016
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