GPs premises liabilities and reducing risk

• Recent survey suggests 54% of GPs do not want to own their premises now or in the future and one in three reports suggest that their practice premises have not been updated in more than a decade.
• The burden of ownership on GPs is putting them off becoming partners in practice
• Last man standing; crippling service charges, premises utilisation and funding premises so they are “fit for purpose” are all key issues
• GP practices have struggled to access funding available through the ETTF funding (Estates and Technology Transformation Fund) to expand or improve their premises.

Stewart Gregory, specialist GP and Healthcare lawyer examines these critical issues in more detail.

In our recent article we reported on Dr Nigel Watson’s interim report on the findings from the ongoing review of the GP partnership model. That report commented that the GP Partnership model was “fragile but not dead”. At the same time, The GP Premises Review has heard that the burden of premises on GPs is not only putting potential partners off joining a practice, but is also a reason for GPs leaving a partnership.

Ahead of the publication of the final review report (which is expected “early in 2019”) and the corresponding GP Premises Review also currently ongoing, we take a closer look at the key issues associated with owning and managing GP premises that have been so far highlighted by these reviews.

Rix & Kay will be hosting an informal briefing to further discuss premises liabilities and reducing risk – If you would like further information about the briefing then please email stewartgregory@rixandkay.co.uk

The GP Partnership review – interim findings

A range of issues have been identified in the interim report including:

• Partners being liable for the remaining years of a lease if a practice has to hand back its contract
• New partners being less willing to commit to a 20 to 25 year lease without adequate protection. For some, buying into a mortgage is a disincentive to joining the partnership
• Lack of transparency about the apportionment of costs where premises are owned and managed by NHS Property Services and Community Health Partnerships.

The GP Premises Review

In addition to Dr Watson’s review, there is a separate review of GP premises policy currently ongoing, jointly commissioned by NHS England and the GPC, to ensure that the system is “fit for purpose”. It should also conclude early in 2019.

It is liabilities that come with property ownership that are often seen as a major deterrent to prospective partners. The significant issues already identified include:

• Last man standing issues, whereby the last remaining partner could find themselves personally responsible for significant premises liabilities.
• Crippling service charges payable by some GP practices can go to the heart of their financial viability, with some practices considering handing back contracts as a result, and we know that a significant sum is owed to NHSPS and CHP for outstanding service charges. Whilst it might be possible to put a national deal on this in place with NHSPS and CHP, that does not help those practices with private sector landlords – for them it is the terms of their leases that will dictate.
• Premises utilisation – How to address sub-optimal utilisation of the estate, including through better enabling of mixed use of the estate and shared ownership.

Recommendations

Whilst both reviews are still to conclude, interim findings have mooted some areas for consideration to address the issues identified above. These include:
• Assignment clauses in leases – Where premises are fit for purpose, negotiate suitably robust and flexible assignment clauses in practice leases which could mean that practices are not left in the position of potentially being liable for the full term of the lease if the practice contract ceases
• Separate partnerships from premises – Consider whether pressures on GP partners could be reduced through promoting the separation of the partnership model and premises ownership as two distinct entities, so that premises liabilities could be “ring-fenced” from other practice liabilities.

Could the Scottish model offer any solutions?

Whilst the situation in Scotland is different, it would be worth considering whether anything of their model might work in England. Under the new Scottish contract there are interest-free “sustainability loans” available to property-owning partners. These aim to help partners transition to a system whereby GPs no longer own their properties by 2043. Meanwhile, NHS boards will take over responsibility for leased premises. Together, these aims should remove the significant last man standing issues. It will therefore be interesting to see whether the findings of the premises review include any similar proposals.

Funding GP premises to be ‘fit for purpose’ and the Premises Cost Directions

Ensuring GP premises are fit for purpose remains a key issue and is the driving force behind the premises review. Funding recommendations from the review will be interesting as evidence from the front line suggests that practices have struggled to access funding to expand or improve their premises. ETTF funding (Estates and Technology Transformation Fund) was launched as part of the GP Forward View and is due to have delivered £900m of investment into primary care facilities and technology by 2020. We are however aware that some ETTF funded schemes have been delayed, and that funding for larger scale work has been hard to secure. The fund itself is also under pressure with the number of applications outweighing what it can deliver.

Despite the fund, as recently as October 2018 one in three respondents to a GPOnline survey said that their practice premises had not been updated in more than a decade. Practices cite lack of investment, and over-regulation, as stifling innovation in the delivery of services from the primary care estate. Whilst that survey may not fully reflect the investment made through the ETTF fund so far, it clearly points to some underlying concerns.

What might help are the proposed changes to the Premises Costs Directions. In April 2018 the BMA reported on key changes to the Directions that had been secured as part of the 18/19 GMS and PMS contract negotiations. The new Directions are still awaited, but key amendments within the current proposals would allow improvement grants to purchase land to build extensions to existing premises, and provide that grants representing 100% of the project cost would be allowed (this currently stands at 66%). These amendments would indeed improve the situation in tackling the “fit for purpose” issue, but the “devil is in the detail” as to how much of this will actually come through when the new Directions are finally published. We will report further on the new Directions when they are finally issued.

Evidence that GP’s don’t want to own premises

Without doubt , there are a number of critical issues significantly undermining the benefits of premises ownership and current GP opinion appears to agree. According to a GPOnline survey published in October 2018, 54% of respondents did not want to own their premises now or in the future, and 41% would find partnership more attractive if premises responsibility was taken away.

The GPC’s workforce lead has said that for younger GPs (with their lower incomes and higher levels of debt), owning premises was “simply not feasible” due to the long-term commitment and considerable financial investment required from the individual GPs. The future of the partnership model is being eroded with many new GPs steering away from partnership “simply because of the risks of premises ownership or being tied into long term leases” (Dr Richard Vautrey, GPC chair, earlier in 2018).

GP premises ownership still has value

Despite these significant concerns, many GPs are still keen to retain the right to own premises and enjoy the benefits it can bring. Many see the attraction of having control over their property (rather than handing it to a landlord who may not invest properly in it) as significant. With new models of care and working constantly being developed it is important that the estate can respond. If GPs feel willing and able to make long-term plans then property ownership, allowing them to make changes to the property to promote flexibility of use, can only benefit the NHS as a whole.

With this in mind we look forward to seeing the final results of the GP Partnership Review and GP Premises review. Their outcomes will feed into contract negotiations for 2019/20, and could thus bring about the most significant changes to the contract for a number of years. If the reviews are able to address the key concerns of last man standing, accessing investment, and spiralling service charge costs, all of which have helped turn property assets into liabilities, then they will have achieved a great deal towards preserving property ownership and the partnership model for general practice.

Contact our specialist Healthcare and GP Team

Rix & Kay’s specialist Healthcare and GP Team is led by Stewart Gregory. Stewart has 20 years’ experience of working with GPs, helping them to plan, develop and manage primary care estates.

If you would like an informal discussion with Stewart to discuss any issues around your estate then please do not hesitate to contact him e. stewartgregory@rixandkay.co.uk