Salaried vs Fixed Share Partners
Managing partnership changes and staffing are two of the most common issues any practice will deal with and how they are handled can have long term implications, especially in relation to a new partner joining the business.
One area that can cause confusion is the difference between a ‘Salaried Partner’ and a ‘Fixed Share Partner’. The two terms are often used interchangeably, but they are very different and it’s important that a distinction is made.
Here, we look at the key differences and the implications they may carry for your practice.
What is a fixed share partner?
A fixed share partner is an owning partner in the business. As such, they should sign the Partnership Deed and will have whatever rights and obligations are stated therein.
- As a partner they won’t have employment law protection
- They will have an agreed minimum monthly income and additionally some form of profit share
- They will share in the losses but may be indemnified against some or all of these by the other partners
- They will have injected some capital into the business
- They will be entitled to attend meetings and to participate in partnership decisions
- They will have voting rights
- They will not be controlled by other partners
- They will be taxed as self-employed individuals
- They will be entitled to opt in to the NHS partner pension scheme
- They will have some ownership over the GMS contract and potentially also the PMS contract
What is a salaried partner?
In contrast, a salaried partner is normally a title given to a senior employee. As such, they won’t sign the partnership deed and will be working under some form of employment contract (even if it is called something else).
- They will be entitled to a salary and potentially some bonuses – although usually not related to profit
- They will have full employment law protection
- They will be at no risk of sharing any losses
- They shouldn’t have any voting rights in the partnership and there will be elements of control by the other (owning) partners.
- They are taxed as an employee paying PAYE & NI
- They are entitled to opt in to the NHS employee pension scheme
- They will have no ownership over the GMS contract and would not normally have any interest in the PMS contract
- They must guard against third parties regarding them as ‘real’ partners and thereby inadvertently becoming liable for the partnership debts.
Why does it matter?
Typically, what practices are trying to achieve with a Fixed Share Partner is a partner who has many of the characteristics of an employee, while a Salaried Partner will typically be an employee with some of the characteristics of a partner. The problem is that the law only recognises employees or partners, there is no middle ground.
The most important point to remember is that the title itself does not determine the real status. That can only be established by analysing the detail of the arrangement.
If a title is mismatched to the actual legal status of the person, there is a risk of creating legal uncertainty. This could lead to any number of future problems, most of which will be costly to resolve.
Our recommendations
We will consider the pros and cons of each option in a future article, but our main piece of advice for anyone considering appointing or becoming a fixed share or salaried partner, is to ensure you are clear from the outset about the outcome you are seeking to achieve.
The starting point is to decide whether you are welcoming a new partner, or a form of senior employee. All other aspects of the role flow from there, and it is important to ensure that you don’t accidentally incorporate key features of one type into the other. This is all too easily done and the consequences of getting it wrong can be serious.
If you’re going to make staffing changes, especially if those changes are to a ‘partner’ role, please make sure you seek specialist advice to ensure the arrangement is documented appropriately.
For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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NHSPS lease – should you sign, take action or do nothing?
The new NHSPS lease and the prospect of significantly increased service charges continues to be a serious concern for many practices. It is a topic we have covered in detail on this blog and is one which raises many concerns for every practice affected. One question we are being asked frequently is ‘what action, if any, should we be taking now?’ With the application deadline for financial incentives to practices who sign up fast approaching, we thought it timely to update you on the current position.
The story so far…
We have successfully negotiated a number of beneficial changes to the Heads of Terms originally presented to our clients by NHSPS. However, some aspects of the service charge formula are proving difficult to agree. Our clients are awaiting revised proposals from NHSPS, but these have not been forthcoming and it is unclear when they might arrive.
Incentives to sign
The deadline to access the financial incentives on offer from NHSPS is currently set as 30 November 2017. However, given the lack of progress that has been made in getting practices to sign up, we anticipate that this deadline may be extended.
Options
Nationwide, there are very few practices which have signed the new NHSPS lease. Usually this is because the value of the incentives on offer is far outweighed by the ongoing future cost of the liabilities NHSPS is seeking to impose – particularly in relation to service charges.
This is an issue we have previously highlighted:
- What can you do about inflated NHSPS service charges?
- How to Successfully Negotiate a NHS Property Services or CHP Surgery Lease
It is important that you try not to be pressured into signing a new lease until any historic service charge disputes have been resolved and you are satisfied with the level of future service charges.
In the interim, we advise you continue to maintain service charge payments at historical levels.
Unfortunately however, this brings its own problems and cannot be seen as a long-term solution. Over time, your practice will change through partner changes, mergers, or increases/decreases in patient numbers. These changes may result in you having different requirements for your building.
If you then seek to change the basis of your occupation, such as by increasing the space you occupy, this will constitute a change in your current lease arrangements. NHSPS may choose to refuse consent unless you agree to an increased service charge for the whole.
Similarly, trying to share the potential liabilities on historic service charge claims between current, new and former partners will be a recipe for dispute.
Our recommendations
Overall, practices should only sign the lease once they are happy with the terms and any service charge issues have been resolved. It is a complex area and one with lasting financial implications, so it is always advisable to seek the advice of an experienced legal team.
If you would like our assistance, with this or any communication from NHSPS which has given rise to concern, then please do not hesitate to get in touch.
For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Is your surgery lease coming to an end?
GP practices are increasingly occupying their surgeries as leasehold tenants. It is a trend that has been happening for some time now, so many practices are approaching the end of their lease.
As a surgery lease is one of the most important and complex contracts a practice can enter into, it is important to plan ahead and take action early. Here are some of the key points to address in your plan:
Questions to consider
1. What are the key dates for your lease?
It is vital that you are aware of and understand the key dates specified within your current lease. Make sure you diarise the lease expiry date and also the dates of any break clauses, so you can begin to plan at least 12 months in advance.
2. Do you wish to vacate the surgery?
The default position at the end of a lease will be for you to vacate the premises before the lease expiry date. If this is what you intend to do, you need to ensure you have somewhere to move to and that NHS England is prepared to fund the new premises and change your contract accordingly.
If you wish to close the practice when you vacate the premises, then you must give NHS England sufficient notice – which is six months under GMS contracts. You would then need to close the business, which could be a lengthy process and is likely to involve staff redundancies, as well as settling various business liabilities.
3. Do you wish to remain in the surgery?
If you wish to remain in the surgery your negotiating position will be affected by the wording in your current lease. If it includes ‘Security of Tenure’ under the Landlord and Tenant Act 1954, then you will have the automatic right to renew your lease on terms similar to those in your current lease (subject to certain conditions). However, many surgery leases will specifically exclude this.
Regardless of whether you have security of tenure or not, you will need to negotiate a new lease with your landlord. Like any negotiation, it is important to understand the strength of your position, and to ensure that you negotiate in good time to secure yourself options. Bear in mind renewing a lease, can be a very different negotiation from a new occupation.
4. What happens if you do nothing?
Surprisingly, many practices continue to occupy a surgery after their lease has expired, but this can have serious implications and risks. Again, a lot will depend on the wording of your previous lease and also any correspondence you have entered into with your landlord about your current occupation.
If you continue to pay rent and it is accepted as such, then it will probably hold that some form of landlord/tenant relationship exists. But beyond that you face a number of potential problems, such as:
- The risk that the landlord could seek to recover possession
- The possibility that you may have inadvertently consented to some onerous lease terms
- The risk that you will be prejudicing your rent reimbursement.
Furthermore, any joining or leaving partner will want to understand any risks they are taking on, or be confident that they have fully left their obligations behind. These may be difficult to quantify in this situation.
In summary
There is an old saying that the ‘L’ in lease stands for liability. As some of these liabilities only crystallise around the lease expiry date, it’s important to understand what your obligations are.
Early planning for your lease expiring will both reduce your risks and improve your negotiating position. We strongly advise that you seek specialist advice early in the process.
For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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What can go wrong with a surgery move or redevelopment?
Making the decision to move to a new surgery, or to redevelop your existing surgery building, is a big step. In fact, it is likely to be one of the most complicated legal transactions a practice will ever undertake, carrying significant financial and legal risks.
Once you have successfully secured a share of the NHS premises development budget, you need to think about managing this complicated process.
There are too many differing scenarios for us to cover them all in this blog and not all of the issues we mention will be relevant to you, but we highlight below some of the more common problems we encounter during transactions of this nature.
1. Partnership changes during the process: change within any partnership is reasonably common, but in this situation it can create confusion as to who has certain obligations and who doesn’t. What obligations does an incoming partner take on, and will a retiring partner be released from his or her obligations? In addition, if you have agreed to sign up to a new lease, there is a risk that the number of partners may drop below the minimum number of tenants specified in the lease.
2. Signing a development agreement without District Valuer (DV) approval: the premises funding approval process must be followed to the letter. One common misconception is that DV approval can be sought once the building is up and you are ready to sign the lease. In all likelihood this is too late in the process as you are already committed.
3. Lack of understanding of the total lease costs: this is a very common issue, particularly when it comes to service charges: what non-rent costs are payable, and how will they be financed?
4. Using a limited company to try and manage risk: some practices try to manage their risks by putting the property or lease in a limited company. This is not something you should do without specialist advice, as it often results in significantly higher cost and no risk reduction.
5. Misunderstanding the difference between an agreement for lease (AfL) and a lease: the AfL binds the signatories to signing a lease – subject to certain conditions being met. All development works are therefore associated with the AfL and it can often be a year or more before they are completed. Some practices sign the AfL thinking they will be able to negotiate the lease at a later date, but this is not the case.
6. Overlooking the partnership agreement: it is important to bind all partners into the obligations under the lease and AfL. Since only a subset will be signatories of these documents, it is critical that the risk and obligations are properly shared through an up to date partnership deed. Remember that occupation of the surgery is a vital feature of the partnership so these documents must work properly together.
7. Not seeking advice from a specialist surveyor: a specialist surveyor needs to be involved in any surgery development, to ensure all works are compliant with the regulations. Otherwise, the funding will be put at risk.
8. Failure to properly consider tax: there are many potential tax savings associated with a development, but it requires careful consideration and planning if these are to be maximised. This will need to be done far in advance.
Our recommendations
In certain circumstances, it can make sense for a practice to work on resolving an issue itself – but developing a surgery, or moving premises is not one of them!
With the amount of complexity involved and so much at stake, we would advise any practice considering development, to enlist the support of an experienced team, including a specialist solicitor, surveyor, and tax adviser. That way you can ensure you have everything covered and are fully compliant and protected.
If you need help in this area, we are always happy to introduce clients to the extensive network of contacts we have built up, to help ensure the success of your practice.
For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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PMS contractors and the BMA model contract
The BMA model contract is a topic we recently covered in our blog: ‘What is the BMA model contract and does it apply to me?’.
Many PMS contractors assume the need to provide such a contract does not apply to them. However, the issue isn’t quite so clear cut and this may be leading some practices to inadvertently put themselves at risk.
In this post, we look at the issue in more detail to help clear up any confusion.
Which PMS contractors does the BMA Model contract apply to?
While all GMS contractors must offer the BMA model employment contract – or ‘terms no less favourable’ – PMS contractors are only obliged to if it has been stated in their contract.
In our experience, problems arise when a practice is unaware what is written in its contract. This can lead to salaried GPs being employed on non-BMA model contracts, despite there being a contractual obligation to do so.
Any PMS contractor who has signed the NHS England Standard PMS Agreement 2015/16 will have the obligation, and indeed the majority of PMS contracts we have seen over the last few years include it.
Sometimes practices can accrue the obligation unwittingly. For example, if a practice has signed a new contract following a PMS review they may not realise that the clause has been included and that they should move all their salaried GP staff onto new employment contracts.
What are the implications?
If salaried GP staff believe they are being underpaid, or have the incorrect contractual provisions, then they may seek to take action.
Whilst there is some debate about who can enforce the BMA model contract clause, there is the potential for NHS England to issue a contractual breach notice if they become aware that a PMS contractor is not offering the terms they should.
Most PMS contracts have a clause preventing third parties (such as employees or patients) from enforcing the terms of the PMS contract, however we are aware that some do not. In this case it may be possible for an aggrieved employee to enforce the clause directly, which could lead to a successful claim for historic loss of earnings.
With changes in partnerships, mergers and super-partnerships, where any such liability actually falls would be a complex legal issue to resolve.
Our recommendations
If you’re a PMS contractor and you are not sure what your current status is, then start by looking at the most recent version of your contract. Check whether or not it specifies that you have an obligation to offer the BMA model contract.
If it does and you are in breach, then we would recommend you seek advice from a specialist legal team, who will be able to guide you on your options and the best way forward.
For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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What can you do about inflated NHSPS service charges?
Around 1,500 GP practices in England currently operate from premises owned and managed by NHS Property Services (NHSPS). Many of these surgeries have now been contacted by NHSPS about entering into a new lease and are also facing demands for a highly inflated service charge.
The proposed service charge increases can be substantial, with charges reaching up to six figures in certain cases. So, it’s little surprise that we have been contacted by many practices who are extremely concerned about the impact the increased costs will have on their business.
The first point to bear in mind is that unless you have signed a lease and agreed to these charges, you shouldn’t feel immediately pressured and you may be within your rights to challenge them. There are also practical steps you can take that may help you negotiate with NHSPS and agree on a more manageable figure going forward.
Breaking down the costs
The invoices themselves are sometimes not very clear, as they simply lump all costs together. Begin by checking the backing sheet to break down the cost, so you’re clear on exactly what you are being charged for.
In accordance with the Premises Cost Directions, certain expenses are classed as ‘reimbursement costs’ and should sit outside the service charge. They are:
- Rent
- Rates
- Clinical waste
Other elements may also be reimbursed in part, depending on what they include. Such as:
- External repairs and maintenance for which the tenant has responsibility
- Buildings insurance
The repair costs may not be recovered in full, as they depend on the District Valuer looking at the Current Market Rent figure. This will usually include an ‘uplift’ of a small percentage (usually around 5%) which includes reimbursement for these items but in practice may not cover the whole cost. That is why it is important to control service charges; as they often not fully recovered.
All remaining items will form part of the service charge, which will typically include landscaping, litter picking, gritting and the cleaning and lighting of common areas.
Action you can take
1. If you have a lease – Check what it says about your obligations in regard to payment, as the terms of the lease will ultimately prevail. If you have signed a lease and agreed to them, then you are legally obliged to pay in accordance with the lease terms. Check what the lease says about which services the landlord must provide, how the service charge costs are worked out and what the optional services are. Ideally, your lease may have a cap beyond which the landlord cannot charge.
2. If you don’t have a lease
Our recommendations
In this situation, there is no ‘one solution fits all’. While there has been some talk of a national resolution, nothing has yet materialised. It is difficult to imagine how a single solution can suit all practices, since this kind of approach is likely to generate winners and losers.
If you don’t have a lease in place, our advice is not to feel pressured to pay the inflated charge. Follow the steps we have outlined above and try to negotiate a more acceptable amount. Resist the temptation not to pay anything, however. The safest course of action will usually be to keep paying the amount you have historically paid, and get assistance to negotiate revised terms. Be careful not to sign or commit to anything until you have professional advice!
Also, be wary of time sensitive incentives, such as offers to pay legal fees or stamp duty land tax. Whilst these are nice to have, a one-off payment is unlikely to offset the impact of a large recurring annual service charge, so make sure you understand the cost/benefit.
For more information about NHSPS leases, or any other related issues, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
- Continue to pay what you have historically paid. Paying any more could set a new precedent and that’s something to be avoided as it may harm your negotiations if you decide to enter into a formal lease later. If you’ve been in occupation for a long period of time without a formal lease, then you may have a periodic tenancy that secures your rights. This could also be helpful when negotiating a service charge cap.
- Consider starting a maintenance fund – Begin putting some money aside regularly, so you have built up a contingency pot should things get difficult in the future.
- Negotiate – The final step is to try and negotiate an amount you can afford to pay and a service charge cap in your new lease. The advantage of having a cap will be the certainty it provides, but it does have the drawback that charges are likely to end up at that amount, so think about what you can afford going forward. If a cap cannot be agreed, the services and method of charging should be carefully reviewed – for example, any additional services should only be provided with your consent to the proposed costs.
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Ceasing contributions to the NHS Pension – what are the partnership implications?
There are many reasons why a partner may decide to stop contributing towards the NHS Pension – from 24hr retirement, to approaching the ceiling of the lifetime allowance, or simply deciding to make other pension arrangements.
At DR Solicitors we are receiving an increased number of enquiries from partnerships seeking clarity on this matter, as stopping contributions is becoming more common.
The good news is, it’s a relatively straightforward process. The key is to have an accountant who understands the NHS pension scheme and a Partnership Deed which correctly defines the allocation process.
The main areas that can sometimes lead to confusion are:
The role of NHSE
NHSE pays the contract sum to the practice net of estimated pension contributions. NHSE then pays these withheld contributions across to NHS Pensions. This payment is sometimes referred to as the ’employer contribution’ but this is incorrect. NHSE is simply paying across the partner contributions on behalf of the individual partners who are members of the scheme.
How pension contributions are treated in the accounts
If NHSE didn’t make these payments, the contract sum would be paid gross to the practice and the individual partners would make the contributions instead. A common mistake is to forget that practice income is not the monies actually received from NHSE, but rather the monies received PLUS the pension contributions withheld. It is this gross amount which should be shown in the accounts and split in profit sharing ratios.
The pension contributions should then be treated as an expense attributable to individual partners. As such, when a partner ceases to make contributions, the expense will disappear and so the net profits they receive will increase.
The only way this process can give rise to problems for a practice is if income is shown as the net amount received, rather than being grossed up with the withheld contributions. This would, however, be an error in the accounts and contrary to accounting policy.
A simple worked example
Imagine a two-partner practice operating with a 50/50 profit share, where Partner A contributes £100 towards the NHS pension and Partner B contributes nothing:
- The practice receives £900 from NHSE (the contract sum minus £100 pension contribution)
- Practice income = £1000
- Partner A net profits = £400
- Partner B net profits = £500
The Partnership Deed
The Partnership Deed simply needs to state that all pension contributions are an individual expense. It may also state that all income should be shown gross, but this is normal accounting policy so is not strictly necessary. There will be other circumstances that the deed needs to cover, such as dealing with over and under accruals on retirement, but that is a topic we will cover in more detail at a later date.
Our recommendations
Allocating pension contributions is an area that any specialist accountant should be familiar with, and only a poorly drafted Partnership Deed would get wrong, but if you’re at all unsure then please feel free to get in touch and we’d be happy to help you.
For more information, please contact Nils Christiansen on 01483 511555 or email n.christiansen@drsolicitors.com
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Due Diligence – is it worth the effort?
For any major commercial transaction, you need to know exactly what you’re getting into and ensure (as far as is possible) that there aren’t going to be any nasty surprises further down the line.
In the same way that you would call on the services of a surveyor when thinking about buying a house, due diligence when you are merging or acquiring a practice can help you see what’s below the surface and avoid you making a costly mistake.
A GP practice merger or acquisition will typically involve:
- Legal due diligence – which focuses on all legal arrangements associated with a practice; and
- Financial due diligence – which examines the accounts and all financial dealings, usually from the last 3-4 years
For this blog, we are going to focus on legal due diligence.
Who can carry it out?
You may choose to carry out due diligence yourself, or ask your solicitor to deal with it. Using a solicitor has the benefit that everything will be documented in a business transfer agreement, with appropriate legally binding warranties and indemnities.
While certain issues are easy to identify, others are not. An experienced solicitor will know what to ask and recognise potential risks which you will want to know about.
What kind of risks may be identified?
In a GP practice merger or acquisition, the biggest risks will often be associated with:
- property
- the core contract
- staff
- pensions
but there may be others and it is important to undertake suitable investigation and raise enquiries.
Examples of issues you need to be aware of are onerous business contracts, unresolved disputes, and pending or threatened legal actions. Some of these will be documented, but others might not be.
Warranties & Indemnities
If there is any uncertainty, then you have the option to ask for a warranty from the partners, whereby they legally confirm what they have said is true. This may offer some comfort, but you may also want a series of indemnities to protect you from future liabilities crystallising. Just bear in mind that an indemnity is only as good as the financial standing of the person who gives it.
Our recommendations
At the end of the due diligence exercise, you should feel confident that you understand any risks and can make one of three choices: accept the position, mitigate the risks or walk away.
Undertaking a merger or acquisition is a big decision. The benefit of due diligence is that it can help you identify early on where the high-risk areas may be. It isn’t something you have to do, but we would always recommend it.
Fortunately, most practice mergers go through without incident and due diligence doesn’t reveal any problems. However, for those unlucky few where a major problem is highlighted, it will have been time and money well spent. Think of a due diligence exercise as similar to taking out an insurance policy.
For more information, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Why succession planning is vital for any GP partnership
When you’re busy dealing with the day-to-day responsibility of running a GP practice, planning for the future can sometimes take a backseat. But there is one area you cannot afford to overlook and that’s succession planning.
There will naturally be some level of movement within any GP partnership, from individuals moving on, to those retiring or choosing to leave general practice altogether. Indeed, figures from Health Service Journal reveal that more than 20 per cent of GPs are approaching average retirement age in some areas of the UK.
These ‘normal’ problems are however exacerbated by the current recruitment crisis in General Practice, such that in many areas it is proving near impossible to recruit new GP partners.
Knowing how you will manage losing a partner and taking steps to eliminate or reduce any potential issues, is a vital part of the process. Having a robust succession plan in place is key, for the protection of the practice, the patients, and the interests of partners.
Problems you may encounter when the number of partners declines include:
- Potential breach of lease – A surgery lease will often specify the minimum number of tenants, with the figure commonly set at two.
- Difficulty getting a mortgage – It may prove difficult for a practice with just a couple of partners to obtain a mortgage on a large/valuable building. As a minimum you can expect to face higher interest rates and have to contribute greater equity.
- Profitability at risk – Locums and salaried GPs are now frequently more costly than partners, so the loss of a partner may threaten the underlying profitability of the business.
- Increased pressures and commitment – Dealing with the management and regulation needed to run a GP practice is much easier when it’s shared between a number of partners. The fewer people involved, the bigger the commitment each partner needs to make.
- GMS/PMS contract issues – Once the partner to patient ratio becomes too skewed questions may get asked about your ability to deliver your clinical care obligations. NHSE can terminate a contract if they consider “that the change in membership of the partnership is likely to have a serious adverse impact on the ability of the Contractor or the PCT to perform its obligations”.
- Fear of the ‘last man standing’ issue – If the Partnership Deed obliges you to buy out a retiring partner, this can trigger a run as everybody tries to avoid being the ‘last man standing’. But even if you aren’t obliged, the result may be the surgery being part owned by people who have no interest in the business, which can create its own problems.
So, what can you do?
There are several steps you can take to try and reduce the risk of problems. They include:
- Increase the timeframe within which partners must leave their capital in the business following a retirement – ideally, until a replacement has been found
- Reduce the risk of a rush to exit by requiring a gap between retirements within the Partnership Deed. This should give you more time to recruit a replacement
- Consider undertaking a merger to increase the size of the partnership
- Make yourself a teaching practice and thereby more attractive to junior doctors who may be interested in becoming a partner in the future
- Agree what will happen to the mortgage following retirement. For example, specify whether retirees will be liable for a percentage of any early redemption penalty
- Consider promoting or recruiting a practice manager as a partner, to share the management load and further spread any risk
- Open channels of communication with NHSE and establish what additional support may be available to you
Our recommendations
Prevention is always better than cure, especially when it comes to handling a retirement and the loss of a partner. It will always be far easier to plan ahead, than to deal with an issue should it arise. Taking time to consider all the potential implications and having a robust succession plan in place that is fully documented within the Partnership Deed, will offer you the greatest protection.
If you are facing any of the problems we’ve mentioned here, or for advice on undertaking a comprehensive succession plan, we’d urge you to seek the advice of an experienced legal team, who will ensure your interests are protected.
For more information about succession planning, Partnership Deeds, or any other related issues, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com
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Are you in breach of your GMS or PMS contract?
A GMS contract is a legally binding agreement made between a GP practice and NHS England (NHSE) that sets out certain obligations for both parties. It is the most important asset a practice will hold.
Running to over 270 pages plus lengthy appendices, it is a substantial and complicated document, both to navigate and understand.
Unless a practice has read it from beginning to end, and has very careful monitoring in place, it is likely that most practices will be in breach of their obligations at some point or another – in many cases, without realising.
So, what can practices do to protect their contracts?
Dealing with a breach
There are many reasons why a practice may be in breach of their GMS contract. Some are minor and some more serious.
If you do become aware of a contractual breach, you should rectify the problem as soon as possible and put procedures in place to ensure it doesn’t happen again. You should then assess the impact of the breach.
An example of a minor breach might be a failure to keep the practice leaflet or website up to date. There is not normally any obligation to inform NHSE of these minor breaches, although a practice would be obliged to provide such information if requested. If NHSE were to find out they would probably issue a breach or remediation notice. Once a practice receives two or more of these, NHSE become entitled to terminate the contract on notice, subject to a cumulative impact test.
For more serious breaches, you may be obliged to notify NHSE. In particular you should notify NHSE as soon as reasonably practicable, of “any serious incident that, in your reasonable opinion, affects or is likely to affect your performance of your obligations under the contract.”
Whilst this leaves room for ambiguity, a breach would certainly be considered ‘serious’ if it put patient safety at risk. An example of this might be a failure of the vaccine fridge, combined with inadequate records to prove that the no vaccines had been compromised.
Once NHSE becomes aware of a serious breach, they would consider whether to deal with it under the breach and remediation notices procedure outlines above, or possibly to terminate the contract forthwith. They could only do the latter, however, if they could show that patient safety was at serious risk.
There are particular notification requirements for breaches where:
- a contractor is no longer eligible to hold a contract – for example, if there is no General Practitioner left in the partnership
- if a partner becomes bankrupt, convicted of a serious criminal offence, is disqualified or suspended, or if a partnership is dissolved
In these instances there is a requirement to notify NHSE, who then need to consider contract termination (although there is not necessarily a requirement for them to terminate).
It is worth noting that while we are talking about GMS contracts in this blog, PMS contracts usually – but not always – have very similar clauses so always refer to your individual contract to be sure.
Our recommendations
We advise practices to familiarise themselves with their core contracts and ensure they understand their obligations. Put systems in place to help monitor compliance and if a breach occurs, attempt to remedy the situation as soon as possible and put processes in place to prevent it happening again.
In the case of more serious breaches, for which practices are obliged to inform NHSE, you should let them know as soon as you can, include an impact assessment, and show that procedures have been put in place to reduce the risk of re-occurrence.
The complex nature of the core contract means it is not always clear whether you might be in breach, nor whether you need to notify NHSE. If you are in any doubt about your compliance, the severity of a breach, or if you have received a breach or remediation notice, then always seek the advice of an experienced legal team.
For more information about managing a breach, or any other related issues, please contact Daphne Robertson on 01483 511555 or email d.robertson@drsolicitors.com