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Practice Finance

Practice Finance. Overview. Independent Contractors Permanent nationally-determined contract until PMS. Important History. 1948 Formation of NHS 1966 GP Contract 1990 New GP Contract 1990 NHS Trusts 1992 Fundholding 1998 Primary Care Groups 1998 PMS Pilots. Sources of information.

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Practice Finance

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  1. Practice Finance

  2. Overview • Independent Contractors • Permanent nationally-determined contract until PMS GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  3. Important History • 1948 Formation of NHS • 1966 GP Contract • 1990 New GP Contract • 1990 NHS Trusts • 1992 Fundholding • 1998 Primary Care Groups • 1998 PMS Pilots GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  4. Sources of information • SFA (Red Book) • Medeconomics • AISMA guide • Accountant • Library GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  5. Doctors’ and Dentists Review Body • Advises Government on what average Doctor should earn • Government allocates a non-cash-limited budget for GMS activity • If budget exceeded nationally, Government adjusts next year’s pool GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  6. Partnership • A group of Doctors working together • Usually in the same or linked premises • Co-operating in on-call and rota arrangements • Assuming responsibility for one another’s patients in absence • Pooled resources and expenses GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  7. Premises • Partnership finds appropriate premises from which to practise (LHA to approve) • May be purpose-built • Finance • Partners finance • Private Finance Initiative • Health Centres GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  8. General Medical Services • Independent contract • Nationally-negotiated • Within DDRB framework • 24hr care responsibility • Statement of Fees and Allowances (SFA)(Red Book) • Payments on quarterly cycle GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  9. Personal Medical Services • Employed contract fixed-term • Payment system bases on central budget based on previous GMS activity, with additional development money • Contract: initially to be locally-negotiated, but now centrally-imposed without national bargaining or safeguards • Pension rights as yet unclear • Potentially big winners and big losers GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  10. NHS Income • Allowances • Fees per patient • Item of Service • Reimbursement • Dispensary • Cost-Rent Scheme GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  11. NHS Allowances • Basic Practice Allowance • Seniority Allowance • Quality Allowance • Postgraduate Education Allowance • Out of Hours Allowance • Other • Designated Area • Assistant • Associate GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  12. Fees per patient • Capitation • 3 bands (<65, 65-74, >75) • Deprivation • Child Health Surveillance • Target Payments • Cervical Cytology, Childhood immunisations • Health Promotion • Asthma, Diabetes GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  13. Items of Service • Maternity Care • Contraceptive Services • Out-of-Hours consultation • Vaccination/Immunisation • Temporary Resident GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  14. Reimbursement • Cost-Rent Scheme • Rent & Rates • Maternity Locum Fees GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  15. Dispensing Income • Can dispense for patients >1 mile from chemist in non-urban area • Get paid: • Cost of Drug • LESS Discount (NHS assumes discount 9%) • PLUS Container Allowance • AND Dispensing Fee GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  16. Cost-Rent Scheme • Partners own building • Partners need loan to pay builders etc • Cost Rent Scheme provides parameters for paying loan interest on certain things – fixed room sizes, purposes etc • Variable interest rate • different borrowing rate from cost-rent rate GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  17. Private (non-NHS) Income • Legal & Insurance Work • Local Authority Work • Work for Private Business • Use of Premises • Private Patients • hobby/work/driving medicals • travel health services GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  18. Include Staff Costs All drugs and equipment used Heat/Light/Water Financial Accountancy, Banking Administration: Telephone Postage Important that DDRB gets accurate view of what expenses are incurred Beware “netting-out” Expenses GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  19. Taxation • Income Tax • Schedule E • Schedule D • Value Added Tax (VAT) • Capital Gains Tax (CGT) • Inheritance Tax GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  20. Schedule E (PAYE) Can claim as an expense against tax the cost of buying or maintaining any item used “wholly and necessarily” for business. i.e. any item without which you cannot carry on business GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  21. Schedule D (Self-Employed) Can claim as an expense against tax the cost of buying or maintaining any item used “wholly or exclusively” for business. i.e. any item used wholly or mainly (in which case you claim a proportion of the tax) within the business GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  22. Tax Payment • Tax calculated on whole-year basis • Two payments made: January and July • Each payment consists of an actual amount plus an estimated “on account” payment • Practice will probably set aside money GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  23. Retirement • GPs can retire from age 50 onwards • Early retirement will mean reduction in pension • Age 50 multiply by 0.599 • Age 55 multiply by 0.754 • Age 59 multiply by 0.943 • Can buy “added years” superannuation GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  24. Added Years • Allows GP to buy added years of benefits to increase up to maximum 40 years at age 60 • Pay fixed percentage of NHS Superannuable income every year • Price according to age GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  25. NHS Pension Scheme • Basic contribution 6% NHS income per year • Benefits: • Lump Sum 4.2% • Annual Pension 1.4% • Ill Health Retirement pension • Death benefit • Widow(er)’s pension • Children’s allowance GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  26. Pension • Pension calculated on whole-career earnings • Different portions are pensionable (superannuable) to different degrees • Dynamised upwards to represent career earnings at current prices • 4.2% lump sum • 1.4% per annum GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  27. Profits and Losses • Business makes a profit • Profits divided among stakeholders • partners • profit-share staff • Partners take drawings in anticipation of profits • Losses equally shared GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  28. Equity • Business has assets • Premises • Stock • Equipment • Furnishings • May require capital investment • Equity Partners draw more than non-equity partners GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

  29. What to look for … • Check Partnership Agreement • property ownership • equal division of profits? • Inspect Accounts: • ?recent (less than 18m old) • assets > liabilities • parity profit share • regular sustained drawings (may need to ask) • expenses <50% of turnover GP Registrar Tutorial Dr Andrew Mowat 18th June 2001

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