Setting target earnings

The real-terms value of GP earnings has in many practices eroded year on year, often in very small increments that may not always be obvious to practices or individuals as they occur. In other practices, profit levels are only being maintained or increased for partners due to vacancies in the GP and other workforce occurring.

It is more important than ever that practices take a strategic view on how their profitability is changing from year to year and the impact that this is having on partner earnings. As part of this, the BMA recommends that partners should consider what an appropriate level of profit per session would be for that year and use this, whether or not it is being achieved, as a benchmark against which to test business decisions. 

Practices may wish to consider what proportion of their income other practices spend on average on staffing costs and premises; trends in GP earnings growth compared to inflation; whether partner earnings are growing in line with DDRB pay award recommendations; and what a secondary care consultant might earn for equivalent amounts of work. 

Of the funding that went to non-dispensing practices, the most recent available data indicates that 55.9% of gross contractor income was spent on practice expenses. While there are as many ways of running a GP practice as there are practices, practices that are spending more than 55.9% of their income on expenses are spending above the Scottish average and may wish to consider what is driving this. Of these expenses, the largest expense type is staffing costs, accounting for 74.6% of expenses on average, followed by premises costs which account for 12.8% of expenses on average.

In establishing what an appropriate income per partner session to target might be, there are a number of benchmarks that could be considered. Practices may wish to look back through their historic accounts to find how much they were earning at a time when they believe their profit levels were appropriate. This figure can then be adjusted for inflation using the Bank of England’s inflation calculator to find what an equivalent target would currently be.

As well as the rate of inflation, practices should also consider year on year DDRB-recommended pay awards as illustrated below and whether individual partner earnings at the practice have kept pace with these or not.

Since 2008 the cumulative impact of pay award recommendations by the DDRB has tracked well below cumulative CPI inflation. Trends in GP earnings in Scotland between 2008 and 2018 largely tracked the DDRB’s recommendation. Between 2018 and 2021, a combination of new money from the 2018 contract, Covid-related temporary funding streams and reducing GP WTE workforce numbers meant that GP earnings increased, but only to the point that by 2021/22 they had recovered to what they would have been if they had followed CPI inflation since 2008. Since then however, GPs in Scotland have experienced two years of underfunded Scottish Government uplifts and earnings have flatlined despite a sharp increase in inflation. The lag in available data on GP earnings mean it is not yet possible to project where they now stand in relation to either inflation or DDRB recommendations, but it is likely they have eroded further compared to inflation. 

Practices may also consider what the equivalent earnings for a secondary care consultant in Scotland would be for the equivalent of a GP session. If the 2024/25 pay award for consultants is accepted, the BMA calculates that the average equivalent consultant salary to an eight-session partner would be £132,717. However, unlike consultants, GPs must also fund their own employer superannuation contributions at the new rate of 22.5% - though 7.6% of this is reimbursed to practices. This gives a final equivalent sum of £162,579 for an eight-session partner or £20,322 per session in 2024/25.  

For many practices, once an appropriate benchmark has been established for what partner earnings per session should be, they will likely find that they are earning below this level – potentially substantially below it. The rest of this guidance therefore looks at practical business considerations practices may wish to consider.

Core funding and services

Any business faced with falling profits will generally seek to either increase income or reduce costs in order to restore profitability. For GP practices, the vast majority of funding comes from the Global Sum and Income and Expenses Guarantee for the delivery of core General Medical Services/Primary Medical Services.

The Global Sum is allocated based on the proportion of patients that are on a practice’s list after weighting for factors including each patient’s demographics and deprivation. Practices that are in or near areas of expanding population may therefore wish to consider increasing their practice list size without recruiting additional staff – essentially increasing the patients to GP ratio and reducing the level of service that the practice can offer to maintain profit, but without altering current staffing levels. 

Based upon the most recently available 2022/23 figures practices received £170.77 per patient when all potential funding sources are combined. However, some of this funding will not be evenly distributed or contingent upon patient numbers, so when only ‘core’  practice funding is considered, this figure drops to £128.74 . 

Reducing the level of service that practices offer to patients is unpalatable and flies in the face of GPs’ natural instinct to go above and beyond to help their patients. However, the current situation of partners paying out of their own pockets to effectively make up the shortfall in GP funding is not sustainable and contributes to GPs feeling undervalued and likely to leave the profession, while also jeopardising practice sustainability.

It is important that practices also consider the BMA’s safe workload guidance in conjunction with this guidance and in particular bear in mind the recommended safe limits on the number of appointments that GPs can offer each day, including duty doctors. An increasing ratio of patients to GP sessions should not mean GPs routinely working beyond those safe limits, even if patient access to general practice is eroding. 

During periods of GP absence when locum reimbursements are claimed under the Statement of Financial Entitlements, it may not be possible to fund locum activity using reimbursements to the same level as that provided by the absent GPs. In such circumstances, the practice is not obligated to maintain the same level of service as would be the case without the absence. Appointment numbers and patient access should reflect the level of locum input the available reimbursement is capable of covering in the local market. That erosion in patient access is the result of political funding decisions and can equally be solved by adequate investment in general practice. 

Staffing

For practices that do not have the opportunity to expand their list size in order to generate income, the only real alternative is to seek to reduce GP sessions or staff complement in order to maintain earning levels. For practices that own their own premises in particular there will be added difficulties to any decision to reduce GP partner sessions as the impact of buying out a departing partner’s premises share without an incoming partner buying in will have a short-term impact on partner profit. The cost of this needs to be weighed up against the long-term impact of improving earning levels that might be achieved through a reduction in GP sessions offered by the practice. Providing Scottish Government resumes funding for the scheme, a sustainability loan may help practices manage this process. 

This is most likely to be feasible at times when existing partners or staff members retire or otherwise leave a practice and a decision can be made not to replace them, or not to replace like for like. Practices may wish to give particular consideration to whether practice employed staff are effectively duplicating services now provided by Health Boards under the 2018 GMS Contract MoU. In general, practices would be well advised to make any changes to their staff complement at points of natural change such as when staff move jobs or retire, however, where practices determine that the needs of the business leave them no choice, they may need to consider the unpalatable option of making staff redundant. Practices should be aware that their responsibilities are determined both by the requirements set out in law on redundancy as well as the provisions of individuals’ contracts of employment.

It is a statutory requirement that employers have a fair and objective way of selecting which employees are to be made redundant. Employees will normally be entitled to statutory redundancy pay if they have been employed by the practice for more than two years, though individual employment contracts are often likely to be more generous than these terms and must also be adhered to. There are also statutory notice periods for employees being made redundant, though individual employment contracts may also contain more generous provisions.

The BMA’s Employer Advisory Service can offer advice and support to practices who find themselves in the difficult position of having to consider making redundancies.

Enhanced services

The next largest source of income for most practices is Enhanced Services. These are optional additions to the core services that practices may choose to provide which will vary significantly from practice to practice and Health Board to Health Board. It is entirely at the discretion of practices whether they wish to continue delivering from an Enhanced Service and can withdraw at any time subject to providing required notice. Practices should give careful consideration to the extent to which the income from each Enhanced Service both covers the cost of delivering it, including staff and GP time as well as other expenses, and provides an adequate element of profit to the partnership. 

Practices should bear in mind that some costs of delivering Enhanced Services will include non-clinical staff time to a greater or lesser extent and any review should consider what admin tasks are associated with any particular Enhanced Service in addition to the cost of clinical time. 

If practices are unhappy with the level of profit generated by particular Enhanced Services compared to the work, staff costs and partner time involved in delivering them, practices should consider whether ceasing to provide one or more Enhanced Services would make it easier to support the kind of staffing changes described above. The key consideration should be whether savings realised by the practice in this way would outweigh the level of income generated by an Enhanced Service. If withdrawing from an Enhanced Service, practices should be aware that there should usually be an appropriate notice period set out in the practice’s contract – most often three months.

Withdrawing from an Enhanced Service may create difficulties for Health Boards who still wish a service that a practice is resigning from to be provided to patients in their area and would face increased costs in establishing new mechanisms for provision. However, there is nothing preventing Boards choosing to negotiate a range of Enhanced Services that are more financially attractive to GP practices.

It is important to recognise that in all cases, Enhanced Services are contracts to commission practices to do something that goes beyond the provisions of the Essential Services that are the core of GMS/PMS. That may be work that practices would not otherwise do under their core contract, or it might be to provide an enhanced level of access or recording of work relating to patients with particular conditions. It is important for practices to understand the details of the enhancement they are being commissioned to provide. While some work relating to some patients or conditions that were covered by an Enhanced Service might fall into core general practice in the absence of an Enhanced Service, the special access or recording or other enhanced aspects covered by the Enhanced Service do not. 

Private earnings

Practices should regularly review the private fees that they charge for reports and other services and ensure that they reflect the cost of the GP and other staff time involved in the work, including non-clinical staff, which will increase from year to year as pay awards and other factors change the cost to practices of this work. Fees should also reflect the cost of any consumables associated with performing the work. The BMA Fees Calculator can help you to work out how much time and cost is involved in different pieces of work and assist you in setting private fees at levels that are appropriate. Not all fees practices receive will be open to negotiation, but those paid by individual patients or insurance companies generally will be.

Much of the private work that GPs might find themselves undertaking will relate to providing reports or certification. These may result in fees being charged to statutory bodies, insurance companies or individual patients or collaborative fees charged to local authorities. Practices should however be mindful of the list of prescribed medical certificates for which no fee can be charged.

The GMS and PMS regulations set out that practices may not, either itself or through any other person, demand or accept a fee from any of its registered patients for the provision of any treatment whether under the contract or otherwise or for any prescription for any drug, medicine or appliance.