GP practice profits set to tumble by 8%
By Emma Wilkinson
GPs will see profits tumble for a third successive year after most had their income frozen yet again by the Government.
Practices that have already had to tighten their belts now face a further drop in profits of at least 3.5% in 2008/9, accountants are predicting. The BMA is forecasting a fall of as much as 6% in profits for this year.
Although there will be a 2.7% increase in global sum funding, after ministers accepted recommendations by the pay review body, for most practices this will be wiped out by a reduction in correction factor payments following freezing of the MPIG.
And with expenses rising, accountants contacted by Pulse predicted that on average practices will lose up to 8% of their profits over three years – with some smaller practices suffering even greater blows to their finances.
The falls in profits are less dramatic than those originally predicted by accountants last year, but only because GPs have done better than expected at making efficiency savings. And the Doctors and Dentists Review Body report itself admitted that GPs would struggle to 'indefinitely' reduce their costs.
The DDRB report also recommended GP partners award salaried colleagues a 2.2% pay rise, and practices nurses a near-8% rise over three years under Agenda for Change.
Bob Senior, vice-chair of the Association of Independent Specialist Medical Accountants (AISMA), predicted profits in south central England where he is based would drop by 3% for 2007/8, 3.5% for 2008/9 and 8% over three years.
But he said the falls in profits would be even larger in some areas. 'We don't account for a very high proportion of small practices and they have been very adversely affected,' he warned.
Mike Gilbert, a partner at RMT Accountants and Business Advisers, said even those practices that had been most efficient at reducing expenses were 'running to stand still'. For practices that had been less effective at reducing costs, he said, the fall in profits would be more like 10% over three years.
Paul Samrah, medical account director at Kingston Smith, agreed further falls were 'inevitable'.
AISMA is predicting that on current trends, it will be more than a decade before many practices see a rise in income. It added that practices with low lists, operating with branches or multiple surgeries, or with young patient populations would be hardest hit by the freeze to the MPIG.
Dr Fiona Cornish, a GP in Cambridge, said: 'It's sneaky that the DDRB has effectively given some practices money but is taking it back elsewhere.'
Why it's a freeze for most GPs Why it's a freeze for most GPs
• Previously the MPIG floated on top of the global sum, so any increase in global sum funding would not affect the additional correction factor payments.
• This year the DDRB recommended, under changes to the GMS contract made in 2006/7, that although global sum payments would increase by 2.7%, the level of guaranteed payments – the MPIG threshold – would remain frozen.
• This means only practices that receive no or hardly any correction factor payments will see any of the rise in the global sum.
• For around nine in 10 practices, it is not the global sum payment that determines baseline practice income, but the MPIG.
Because the MPIG has been frozen, these practices will get nothing.
• The Department of Health estimates that as a result of the changes, 2% of practices currently receiving only very small correction factor payments will now come off the MPIG.
• The DDRB recommendations will overall result in a rise in funding of just 0.2% – with the rest of the promised 1.5% increase in investment tied to additional work.