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News - January 2018
GP surgeries go large - the rise of the super practice
The Government has announced plans to drive transformation in the primary care sector within the next five years, with thousands of GP practices destined for closure and over 7,500 surgeries becoming 1,500 ‘super practices’.
The initiative is part of a campaign to improve access to services in the community, together with increased access to GPs in the evenings and at weekends.
With recruitment of GPs remaining challenging, compounded with a retirement bubble in the GP sector that sees practitioners retiring and leaving the sector for good with no natural succession, the primary care is under pressure.
Factor in urban regeneration, the Government’s initiatives to sanction green field developments across the UK, increases in immigration, and a shift for current GPs towards ‘part time’ working; and it seems there is necessity for a change of practice.
Fit for the future?
The NHS currently commissions healthcare services from a great deal of property which may be poorly utilised, some of which may not be suitable to meet future population needs.
The healthcare sector needs transformation, new vision, greater investment, and better property utilisation.
With more than 550 GP surgeries having closed in England since 2012, the remaining surgeries have, over the last 10 years, expanded to take on an 18% increase in patients.
Larger super surgeries with 50,000-plus patients may herald that step change, providing better patient care and offering services now normally only found in hospitals.
With such change in dynamics in the primary healthcare sector, this is partially the reason for the shift to working at scale, leading to the new ‘super practice’ model sometimes being a viable solution.
The capital value of the property with existing practices may be a driver for the super practice.
With interest rates being exceptionally low, it follows that investment yields are also low, which drives up the capital value of surgery premises.
While beneficial for retiring, or near-to-retiring GPs; such high capital values often deter younger GPs looking to buy into an existing partnership.
Safety in numbers
Issues include the long-term suitability of some properties, and GPs being reluctant to take on a significant share of the equity within an existing building when partnerships consist of no more than a handful of partners.
Super practices accommodating as many as 50 partners provide safety in numbers, with reduced fractional risk per partner.
But how will super practice property ownership be dealt with?
It may be that the property will be conveyed into the super practice.
Other super practices may consider leaving the property with the individual partners.
The outcome in each case does appear to depend on the age profile of the individual partners, together with details of the outstanding mortgages.
The existing mortgages may have many years to run or were granted at high interest rates, resulting in there being high redemption charges to exit those mortgages, often rendering the property illiquid.
For leasehold premises, the partnership is not a single entity and therefore cannot take a lease in the partnership name.
The individual partners are tenants under a lease.
Not all partners will need to be individually named as it is capped at six. However, those named tenants should be no more liable than the other partners if the partnership agreement has been drafted correctly to include joint and several liability.
With practices coming towards the end of their first leases, many of the original doctors could have retired and many may not have had their names removed from the lease before doing so.
It follows that those retired doctors remain liable for obligations under the lease, including payment of rent and any dilapidations for wear and tear to the building, until succeeded.
With leases coming to an end, this does present further opportunities for many practices.
Many of those premises are still suitable for the provision of healthcare, although a refurbishment may be long overdue.
The granting of a new lease creates a significant improvement in the investment value for the landlord.
It may also be the case that the landlord is required to undertake refurbishment of the premises in return for a new lease being granted, all at a rent commensurate with the refurbishment that has been undertaken.
There is much to be considered with the advent of super practices to ensure that issues of property, albeit freehold or leasehold, are considered.
Putting property to one side, a fundamental reason for the super practice is that it will ensure the delivery of improved healthcare services for the community.