Few people ever take the time to think what an extraordinary job a General Practitioner (GP) does. For most, they are the first person they see for physical and/or mental health concerns. Many GPs may have been seeing members of the same family for generations – I remember my family doctor giving me a Tetanus shot after I fell off my bike over 30 years ago – he is still seeing my father to this day.
As a gateway to the NHS, GPs have been facing increasing pressure for many years, due to budget cuts and an ever-ageing population, creating more demands on an already strained health system. Working on the ‘front-line’ as it were, GPs have had to come up with creative, entrepreneurial solutions to continue to serve their patients and community’s best interests. As patients needs continue to become more complex, GPs are coming together to form GP Federations to provide the resource and support required to cope with the ever-changing demography. It also allows clinics to meet the challenges and take advantage of the opportunities presented by the NHS’s Five Year Forward View.
Most Clinical Commissioning Groups (CCG’s) support the concept of GP Federations, as does the British Medical Association and the Royal College of General Practitioners. They provide numerous advantages such as:
- the ability to pitch for contracts in which individual practices would not have the scale or resources to manage
- being able to share expertise, allowing a more entrepreneurial approach in creating alternative income streams
- a vehicle from which GPs can share resources and overheads
- individual GPs can specialise within a chosen field, allowing for greater career satisfaction
The alternative to a GP Federation is the Super Partnership. GP Super Partnerships differ from Federations, in that they result in a full merger of all the practices involved. This has advantages and disadvantages – although individual practices lose their full autonomy, they can streamline management and provide specialised and lucrative services more easily.
Both set-ups provide the ability to negotiate more favourable contracts with suppliers, CCGs, and NHS Trusts. It is also possible to offer a far wider range of services to the community and invest in technology which can improve the quality of care provided. In addition, if staff are ill or on sabbatical, absences can be quickly covered.
Define a purpose for setting up a GP Federation or GP Super Practice
Before getting into the legalities of setting up a federation or super practice, a word of caution. Often, we see GP practices set out to merge or form a federation with no real idea as to their reason for doing so. Some take steps to form a GP Federation simply because they have been told to do so by their local CCG. This is not the best recipe for success. Take the time to perform the foundation work for the venture – i.e. set down the purpose, vision, and values of the federation or super practice, and make sure you have buy-in from all the main stakeholders.
Questions that should be answered from the outset are:
- Why is the entity being set up? For example, is it to save costs, combine resources and talent, create new revenue sources, or a combination of all three?
- Are all the stakeholders like-minded and can they work together long-term?
- How will the entity be funded? Will each practice have to contribute capital, or will it apply for investment or a loan. Is the CCG offering funding?
The answers to these and other key questions should be set out in a Heads of Terms, which will form the basis for the organisational governance framework.
The legal issues involved with setting up a GP Federation and/or GP Super Practice
There are multiple legal issues which need addressing when setting up a GP Federation or a GP Super Practice, many of which concern both entities. They include:
- picking the right corporate structure
- good governance
- commercial property
- regulatory compliance
- contracts – with suppliers and the NHS
- intellectual property
Picking the right corporate structure for a Super Practice or GP Federation sets the tone of how the organisation will be run going forward. The type of structure you choose can also limit the types of contracts the Super Partnership or GP Federation can hold in its own right.
A Super Partnership is formed when several practices merge to form one entity, comprising of several operating practices spread out across an area. This can be done by merging all practices together in their entirety, leaving the organisation operating as one large traditional partnership or LLP. Alternatively, partners can put in place a corporate entity which owns the practices and provides the back-office services to each individual stakeholding practice or bids for new service contracts (which may only be implemented in one location). This latter option may prove less daunting, as it allows the individual practices to maintain a certain level of autonomy.
GP Federations offer even more independence for each individual practice. These are commonly structured as shares in a limited company being held on trust for the member partnerships. The value of each share, the capital contributions required by each practice and the dividends granted will be based on the size of the practice lists. Voting rights are normally allocated evenly between the practices. Alternatively, several practices can enter into a contractual joint venture without setting up a new legal entity. Although this arrangement allows for each practice to keep almost all its autonomy regarding day to day operations, the structure provides little security or scope for long-term development and scale.
A GP Federation will need directors. These are appointed from the partnerships, but it is crucial directors are aware they must act in the best interests of the whole federation, not just a particular practice. Directors can be appointed from outside the partnership; this is often done if there is a specific objective the business wants to attain, such as opening new business units within a set period of time.
Different GP partnerships can merge to form a Community Interest Company (CIC) or a Charitable Incorporated Organisation (CIO). These models are reserved for social enterprise organisations, defined as “businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.”
To ensure your organisation is governed correctly from the very beginning, invest the time and resources into correctly documenting the structure of your super practice or federation. You will need to decide from the outset whether the new entity will be a profit-making venture or a social enterprise. This is often a contentious issue among doctors; your Solicitor will help you understand how these two conflicting modes can be balanced.
Make sure there is a Shareholders’ Agreement and Director’s Service Agreement in place at the outset. Not only will this protect the entity should a dispute develop, but it also provides a clear signal to potential investors that the entity is well-run and highly-organised.
Governance is about putting in place a clear system designed to preserve and advance the quality of patient care and delivery of services and manage risks. GP Federations and Super Practices require both organisational and clinical governance frameworks. The implementation of Shareholder Agreements, distribution of voting rights and an agreed Articles of Association form the basis of good organisational governance. Careful consideration needs to be applied regarding the responsibilities of the Board and its obligations to the individual GP practices.
Each individual practice is likely to have its own clinical governance framework, led by senior members of the clinic who are accountable for the standard of care provided. As this framework is a critical part of CQC inspections, discussions will need to take place as to how individual clinical governance frameworks will be adapted to cover the super practice or federation.
The commercial property help by individual practices will need to be managed in circumstances where a GP Super Partnership or GP Federation is formed. How this will occur will depend on the corporate structure the entity takes. Loose joint ventures usually have no impact on tenancies, as each individual practice retains its operational independence. However, if GP practices merge or a corporate entity is formed, the assignment provisions in the Tenancy Agreement are likely to be triggered.
There are several compliance matters you will need to address when forming a GP Federation or GP Super Practice. These include:
- Registration with the CQC – the provider of the regulated services must register with the CQC. If a separate legal entity is established to provide a regulated activity, only that entity will need to be registered. The registration provided will attach a condition which restricts it to providing regulated activity at or from certain locations only.
- Pensions – how income flows through the federation will dictate its pension obligations. At the beginning of setting up the GP Federation or super practice, consideration needs to be given as to what income is pensionable and take professional advice to ensure all pension obligations are met.
- Professional indemnity insurance – In general, each practitioner will have their own individual indemnity insurance which covers their direct liability. However, the federation itself will need to consider indemnity insurance in respect of vicarious liability claims.
- GDPR – Although all individual practices should have completed GDPR compliance preparations such as data mapping and ensuring any subcontracted data processing providers are complying with GDPR principles, the decisions you take around how data will be managed in a super practice or GP Federation may require a fresh review of personal data processes and procedures. For example, if a GP Super Practice results in a complete merger, then all existing and new contracts which contain clauses relating to personal data will need to be reviewed and updated. In addition, if patient data is being moved or changed in relation to the merger, permission from the data owner may need to be granted. The best way to manage GDPR issues is to perform a thorough due diligence check on all the practices becoming part of the federation or super practice to identify and correct any potential issues before the new entity is created.
One of the integral benefits of setting up a GP Federation or GP Super Practice is the increase in scale and resources provides the ability to bid for and win larger service contracts. At the end of August 2018, Yorkshire Health Partners, a provider company set up by a federation of 10 GP practices, won a £10 million contract to provide seven-day access and care to patients across the NHS East Riding of Yorkshire CCG area.
As well as ensuring tenders are correctly structured, thought will need to be given to existing service contracts already in place. If a particular member practice is carrying out the functions of an NHS service contract, make sure a sub-contract is drawn up between the practice and the federation, which clearly defines how the responsibilities and liabilities will be apportioned.
The newly created federation or super practice’s intellectual property will be one of its most valuable assets and needs to be protected. Make sure your brand is protected by applying a Trade Mark to logos and any other distinctive features. Patents should be obtained to protect inventions; however, it must be recognised that although a medical apparatus can be patented, “methods of surgery, therapy or diagnosis performed on the human body means that claims to such apparatus “when used” in such a method are not patentable”.
Setting up a GP Federation or GP Super Practice requires careful thought and planning. It may be worth investing in an outside consultant to ensure the foundation work, such as that mentioned in the beginning of this article, is laid down firmly. Because general practice is such a dynamic field, it is crucial that professional advice is sought throughout the life of the federation or super practice to ensure compliance is maintained, patient care is at a premium, and the entity is in a strong position to bid for lucrative service contracts.
To find out more about how we can advise healthcare professionals, please call our office on 020 3588 3500.
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