Mergers in primary care
Whilst the term ‘merger’ is used to cover a very broad range of transactions between providers in primary care, it is generally used to cover a situation where two or more practices come together under common ownership.
This common ownership model may take several different forms. For instance, in a situation where two practices are merging (Practice A and Practice B):
- The owners of Practice A may take over the ownership and operation of Practice B with the owners of Practice B falling away
- The owners of Practice A and Practice B may join together to jointly operate both practices
Whichever model applies, any practice thinking about merging will need to weigh up the potential benefits as well as disadvantages in order to determine whether it is the right decision for all parties.
Benefits that come from working at scale
There are several potential advantages of merging, depending on the circumstances they may include:
- Creating greater stability as a practice or group of practices (this is usually achieved through the creation of a larger partnership owning and operating the practices or through the practices falling within a larger existing organisation)
- Creating a greater opportunity to establish broad multi-disciplinary teams that enable an effective output to proper triage
- Creating the ability to offer increased or extended patient access
- Reducing costs by bulk buying supplies across multiple sites/practices
- Creating the opportunity to reduce the base line costs through the sharing of functions, facilities, and premises
- Creating the ability to reduce workload pressures and the over reliance on temporary staff by establishing a broader more permanent practice team
- The potential to gain greater clinical expertise and skills
Potential pitfalls of a merger and mitigation strategies for success
Other legal, regulatory, and operational considerations
NHS England, Integrated Care Board and CQC approval
Depending on the structure of the merger (in particular, how the core NHS contracts will be handled), the approval of your ICB and/or CQC may be needed. Any such approvals must be factored into the process and timelines.
The practices should evaluate what they will do with the premises and how best to utilise them. There are several options available including operating from separate premises, operating from one of the current premises (albeit the approval from the ICB will likely be needed, as this will represent a variation to the core NHS contract that stipulates the need to provide services from the locality that is being dropped), or investing in a new purpose-built surgery premises. Consideration must be given to how premises are owned, whether they are leased or owned and if the latter, whether the premises are owned as a partnership asset or a personal asset – and how they will be handled on completion of the merger (i.e. will there be a sale and leaseback, will they be acquired by the continuing partners/ owners etc). Any tax consequences that arise from the proposed handling of premises (whether CGT, SDLT or otherwise) should be considered early and borne in mind.
It may be agreed that some partners will retire either before or after the merger. Where this is the case, the terms of the partner’s retirement should be agreed and documented. If they are to continue in a salaried role, the terms applicable to their employment will need to be agreed and documented.
Employment and TUPE
The practices will need to give thought to the workforce and consider whether there is a need to take measures in connection with the staff, as a result of the merger. For example, issues concerning duplication in roles, inconsistencies in duties or differences in salary and leave entitlements may arise. Depending on the structure of the merger, there may well be a need to inform and consult with staff in accordance with TUPE regulations.
This article provides a high-level summary of several key factors to consider when deciding on a practice merger. It is essential to not only make sure that the merger process runs smoothly, but that the operating and legal structure is one that puts you in the best possible position to realise the number of benefits that can come from working at scale.
If you need advice and or support in relation to a merger, please do not hesitate to contact our primary care team.
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