There has been a lot of activity within primary care recently – particularly mergers between practices or one practice taking on another’s NHS primary care contract.
In my experience there are many triggers for practice mergers, such as the opportunity to increase the patient list size and practice income, the desire to achieve economies of scale (including lower shared staff costs), and the desire for larger better equipped premises. A practice merger may also take place to enable a sole GP practitioner to trigger his/her 24 hour retirement or to address succession issues where it has been difficult to attract new GP partners to smaller individual practices.
Other trends include the number of GP provider companies that successfully tender for, and win, significant contracts for the provision of healthcare services, and the establishment of new care models which seek to integrate acute hospital services with GPs and social care services.
The fact that GP practice mergers is on the increase is no surprise – NHS England’s Five Year Forward View confirmed the need for practices to come together to explore new, innovative ways of delivering primary care at scale.
If your practice is thinking about a merger, then you should consider the following:
- Cultural fit: carefully consider the culture of the practice you are contemplating merging with to assess whether there is a good fit with your practice. Ask if you can see yourself working well with any partners coming across and other key members of the relevant primary care team.
- Shared vision: using your good cultural fit as a springboard, agree between practices what the shared vision for your combined practice will be – what will your key combined objectives be going forwards and how could your primary care service be delivered differently/improved through a shared approach?
- Regulatory approvals: engage in early dialogue with NHS England, who will need to approve and structure the proposals from a regulatory perspective. Notifications to the Care Quality Commission are also likely to be required as part of the merger process.
- Business case: I would recommend that financial due diligence is carried out at an early stage by a healthcare specialist accountant to assess the financial viability of the proposed merger and whether there are likely to be any key sticking points from a financial perspective. Where the practices differ significantly in terms of profitability or net assets, this stage of the process also helps determine what the merged practice will look like in terms of profit shares and property ownership and whether these changes will be acceptable to the partner group.
- Structure: careful structural advice needs to be provided from a legal perspective, not only with regard to what assets and liabilities will form part of the merged organisation, but also to take into account how NHS England proposes to document the merger from a regulatory perspective and whether this has any knock on legal implications for your practice.
- Risk: carry out a detailed risk analysis regarding the merger and take steps to mitigate risk where possible. This may involve each practice carrying out a degree of due diligence on each other, particularly with regard to employees. You will also need to consider how supply and other contracts should be consolidated for the merged practice.
- Employee transfers: the transfer of a practice’s NHS contract and assets to a merged organisation will typically involve the automatic transfer of the practice’s employees on their existing terms to the merged organisation, together with all rights and liabilities that have accrued in connection with their employment. As part of this process there would usually be obligations to provide information and to inform and consult the employees, which will need to be carried out in good time before the merger and built into the proposed timeline to merger in accordance with applicable regulations. Issues such as how to deal with differences in the terms of employment of the employees will also need to be considered and agreed.
- Legal documentation: a new Partnership Deed is usually required governing the terms that apply to the running of the merged practice, identifying the assets of the merged practice and confirming the new profit and property shares. In addition, a form of indemnity agreement is usually required to prevent the merged practice from inheriting the pre-merger liabilities of the individual practices.
- Engaging with stakeholders: clearly patients and other stakeholders will need to be consulted as part of the merger process and this needs to built into the timetable leading up to merger.
Helen Wallwork heads up the Healthcare team at Stephens Scown and regularly advises primary care organisations on a wide range of different matters including GP practice mergers. For assistance or advice on GP Practice mergers or any other issue please contact Helen on firstname.lastname@example.org or 01392 210700.