DoH plans a funding cut to limit GP profits

NHS Employers’ negotiators say they will underpay for new work or cut pay for existing work to limit the proportion of income practices take as profit.

But GP leaders could take legal action if profits are restricted to a proportion of total earnings, because it could destroy independent contractor status.

They also warned that GPs would not take on underfunded new work and would ditch work for which funding was withdrawn.

The threat comes as talks on a 2007/8 pay deal have stalled and it is unclear whether the Review Body will rule on a GMS rise.

NHS Employers’ chief negotiator Dr Barbara Hakin said GP profits had risen too far under new GMS, and pledged to address the ‘ratio of profits to expenses’.

Core financial negotiator for the organisation, Philip Grant, told GP that to maintain the ratio, general practice would be offered less funding for new work if profits grew too fast.

‘Another way is to look retrospectively at how we priced existing work, and apply differential uplifts,’ he added. Pay for highly profitable work would be cut.

However, GPC chairman Dr Hamish Meldrum said: ‘I am not agreeing to any arbitrary maintenance of an earnings-to-expenses ratio. The expenses of independent businesses vary year to year.

‘This goes against the whole concept of independent contractor status.’

A set level of profit would provide a disincentive for practices to be efficient, he said. Dr Meldrum said he would be interested to see any legislation that allowed a profits cap, and the legality of such a restriction.

The claim that GP profits are too high is based on NHS Information Centre statistics showing that GPs took 45 per cent of gross earnings as profit in 2004/5, compared to 40 per cent the year before.

However, the Information Centre is to recalculate figures for 2004/5 after GP revealed that the data contained an unspecified amount of employers’ superannuation contributions.

Head of the BMA’s health policy and economics research unit Jon Ford said: ‘You can’t just say a certain percentage of profit is good or bad. It’s unworkable.

‘Practices are independent contractors and they have obligations under their contracts. Provided they deliver those, there should be no restrictions on how they run their business.’

GPC member Dr Eric Rose said capping profits was ‘neither fair nor practical’.

‘The DoH wants constantly to renegotiate the contract. Both sides signed it but, the way ministers talk, you’d think we’d forced them to do it,’ he said.

He warned that willingness among GPs to take part in initiatives such as practice-based commissioning would suffer because GPs were ‘very angry’ about being under ‘constant attack’.

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Profits warning 

  • GPC rejects ‘arbitrary cap on profits’.
  • Independent contractor status ‘under threat’.
  • Claims of profit growth based on flawed data.
  • GPs to reject new work without new pay.

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