State-backed indemnity 'won't bring major GP pay rise' in 2019/20

Significant savings under state-backed indemnity 'will not deliver massive pay rises' to GPs as £60m is stripped from core pay, and staff and inflationary costs eat into savings, accountants have warned.

Indemnity costs (Photo: Andrew Brookes/Getty Images)
Indemnity costs (Photo: Andrew Brookes/Getty Images)

Indemnity costs for many GPs will fall by as much as 90% from April under the state-backed scheme, as GPonline reported earlier this month, with fees for many full-time GPs dropping below £1,000 per year.

For some the reductions could be even greater - one six-session GP told GPonline she previously paid £780 per month for medical indemnity and that from April her fees had dropped to just £52 per month.

Major savings for GPs on indemnity costs have led to concerns that a so-called 'balancing clause' added to the five-year GP contract agreement published earlier this year could be triggered - allowing the government to claw back funding from practices if GP income was unexpectedly high in 2019/20.

Indemnity costs

However, accountants have told GPonline that gains from indemnity will be balanced out by rising staff costs, funding removed from global sum payments and other inflationary increases to practice costs.

Government statements last year that existing GP funding would be used to pay for state-backed indemnity sparked deep concerns among GPs over the net benefit the scheme would deliver to the profession.

The NHS has not revealed the amount stripped from core pay as part of the five-year GP contract deal, although GP leaders said the overall deal would deliver a 1.4% increase in funding in 2019/20 even after funding was top-sliced.

However, accountants have told GPonline that around £60m has been stripped from GP practices' core funding - roughly £8,500 per average practice - as part of the implementation of state-backed indemnity.

Top-sliced global sum

Practices previously received around £1.02 per patient for indemnity under a long-standing element factored into contract funding.

This is significantly less than the gain delivered by reductions in annual fees for GPs, suggesting that doctors could be in line for a substantial pay rise after years of reductions in practice profits.

However, specialist medical accountant Andrew Pow - a partner at Hall Liddy and a spokesman for the Association of Independent Specialist Medical Accountants (Aisma) - told GPonline: 'The reduction in indemnity cost is welcomed. Will it give a big boost to GP income? Probably not.

'The rest of the contract changes gave minimal uplift and with inflationary costs, particularly around wages and the impacts of the minimum wage increase, it's likely that without the indemnity cut then practices would have been worse off.

Medico-legal costs

'While GP defence costs go down, they lose the [indemnity] reimbursement by NHS England (£1.02 per patient) and are likely to have a bit more practice cover to pay out for nurses [and other practice staff].'

Mr Pow added: 'A lot of the welcomed new investment will go into primary care networks (PCNs) and will need to be spent on staff. So while this is a positive investment in resource it won’t deliver a profit increase.'

Overall, he said, the five-year contract 'will not deliver massive pay rises'.

Specialist medical accountant Laurence Slavin, a partner at Ramsay Brown, said he believed that even before state-backed indemnity was taken into account, GPs could see a net increase of between 0.5% and 2% - and that with indemnity factored in this could rise above 5% for some doctors.

GP profits

GPC chair Dr Richard Vautrey suggested that major increases in practice profits were unlikely. He said: 'The 1.4% uplift for practice funding in 2019/20 is after the one-off adjustment made to remove indemnity costs from practices and practitioners.

'Practices will also benefit from a reduction in their expenses relating to the indemnity change and both the uplift and the expenses reduction need to be taken in to account to ensure all staff in the practice can receive a 2% uplift in pay and to cover other practice expenses.

'Every practice and GP has different indemnity costs and arrangements so it's not possible to generalise. You should also remember that this expense was tax deductible. However all GPs will benefit from the significant changes we have secured and the intention is to end the unfair variation between GPs and hospital doctors with respect to indemnity, and remove one of the barriers that has impeded GP recruitment and retention. This is a direct result of our negotiations and is part of the package we agreed.'

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