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How will your practice profits be affected by the new contract

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GPs will by now have been inundated with information about the new contract, will have had their indicative budgets sent to them by their PCTs, and are no doubt perplexed by the changed to the basis of their superannuation scheme. What does it all mean in practice?

We have been analysing the effects on the practices profits under the new contract and as usual with general practice the results are surprising. Based on the evidence of 100 practices, we are expecting practice profits to increase by an average of 18.85% from 2003/04 to 2004/05 and 33.19 from 2004/05 to 2005/06. Within that range there are substantial variations. For 2004/05, the bottom five practices expect their profits to actually fall by an average of 4.6% while the top five practices expect their profits to increase by 41.2%. For the following year, 2005/06, the bottom five practices expect their profits to rise by an average of 3% while the top five practices expect their profits to increase by 69.4%. This does assume that expenses will increase with inflation.

Why is this? There are a number of factors involved: Practices have been able to access funds from local development schemes and investing in primary care schemes prior to the new contract and will lose those funds and have them replaced with new sources such as the quality and outcomes framework. For those practices who were accessing substantial sums may not have those replaced with funds from the quality points, while those practices who had not really taken advantage of the earlier schemes and who are bidding for most of the quality points will reap substantial increases in profits.

For 2005/06 the further increases are explained by the increase in quality points from £75 per point to £120 per point (per average practice). The discount that PMS practices have to apply to their points also reduces in this year.

The real question is whether this increase is affordable and sustainable. Certainly, we rarely see a practice claiming less than 800 points, and frequently see practices claiming more than 1000 points. The estimate of increases in profits is more than has been anticipated by the Department of Health and the Treasury, and there is a history of cutting back funding on the basis of higher than expected achievement when you look at the old style health promotion clinics. It is hard to believe that GPs will be permitted to earn these sorts of increased profits which will be coupled with the increased superannuation contributions, but as they say, three years is a long time in NHS planning..

March 2004