Incorporation of GP practices – what the NHS may require

GP practices wanting to incorporate will be considered in line with new guidance issued by the NHS. 

GP enquiries about incorporating their practices or forming PCN companies have risen in part driven by the added liability created by PCNs and other “at scale” providers.

While it does not change the position that there are potential procurement issues when a contract is moved from an individual or partnership to a limited company, it does introduce a procedure for commissioners to follow, and suggests requirements to be met before agreement is given to a novation of a GMS or PMS contract from a partnership to a company.

The guidance suggests a commissioner could:

I.  prohibit changes in company control and ownership that could otherwise pose sustainability challenges

II.  prohibit the company from entering into significant financial arrangements (for example, high value financial loans)

III.  place conditions on the company which must be satisfied before dividends can be distributed

In addition, the guidance states that commissioners could prescribe:

I.  any actions that rest with the provider upon contract termination

II.  minimum working capital requirements to provide confidence that the company will always be able to cover routine business running costs and its liabilities

It is common to have provisions to promote greater transparency for provider health and performance monitoring within other NHS contracts. It is envisaged that such a provision would include transparency in reporting on matters including a) the annual company business plan b) financial accounts c) management information d) staff pay e) dividend payments

It is expected that a due diligence template will be issued together with a Commissioner Assessment Framework.  Hopefully these will be published as well, so anyone considering incorporation is able to prepare in accordance with such requirements, or provide justification why some are not appropriate (which may be the case with smaller scale companies).

The full guidance is published HERE

For more information about incorporating your practice or setting up a PCN company, please contact us or ask to listen to our recorded webinar.

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PCN Incorporation – should you?

Have you thought of incorporation? Creating a company with limited liability and a strong legal governance structure to follow can help to mitigate some of the risks for PCN member practices. 

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