4/3/19 – Medical centre mergers are on the increase

In the last five years, according to GP Online, more than 1,100 GP practices have closed or merged. What has encouraged this latest trend in the primary healthcare market? Some reports suggest that the NHS five year forward plan and the number of mergers are connected. The NHS five year forward plan states that they would like the Primary Care industry to work more closely to make fuller use of facilities, in order to provide a better overall service for all patients. This does not specifically suggest or propose mergers, however has potentially triggered an increase.

In addition to this, many partners are opting for mergers because of the increase in patient list size, increase in practice income, and the potential to lower staff costs due to sharing and the potential for use of more sophisticated equipment.

The NHS has provided guidance on mergers and has also instructed the CMA to review and determine whether these merges are likely to have a detrimental effect on patients due to the decline of competition resulting in a reduction in choice for the patients. This review is voluntary for Practices unless they hit the specified thresholds.

Although the guidance identifies the NHS requirements for the merger and also indicates the specific Acts that need considering, it does not provide guidance relating to legal agreements and the building management, despite the fact that premises are often a key element in the finances of any merged partnership.

Dependent on your situation, the Practice may either lease the premises or own them with a Partnership Deed in place. Both these documents will confirm your obligations in relation to any mergers and need to be fully considered. For many mergers, partners will be left with a range of premises, old and new, compliant and non-compliant, leasehold and freehold. Some may require extending/improving, others replacing. How the premises are managed is often a key factor in any merger.

Asset and building management should be a key role where the Practice will need professional advice from a specialist company such as Aitchison Raffety. Before any merger is progressed, we advise that a report is obtained considering the value and lifespan of the buildings and any necessary costs for repair or essential improvements. In addition, if there are any future aspirations for expansion, you should ask yourself the following – is the building suitable? Will the NHS/CCG provide a grant and/or reimburse the increased rent for proposed improvements? Is the cost of the expansion or improvement appropriate when considering the potential end value? All of these questions could be answered by one of our specialist Healthcare Surveyors.

Although merging practices could be beneficial, there are also premises liabilities which can all be managed easily with the correct professional advice. A specialist firm of Valuers and Building Surveyors such as Aitchison Raffety should be treated as your ‘Estate Department’ providing advice on capital and rental value, repair and improvement, disposal and acquisitions.

For further information, please contact Paula Mace via email to paula.mace@argroup.co.uk or call 01727 844 555.