Should I be a groupie?

‘Accountant’s Clinic’

Q. Are centres of excellence the way to go for the private medical profession?

Accountant Susan Hutter answers the question

excellence signIn recent years, there has been a movement in the private medical profession towards ‘one-stop shops’ of certain specialties, which lend themselves to trading as centres of excellence.

Many specialties are suited to trading in these centres, including urology, gynaecology and orthopaedics.

The centres aim to have all the services that the patient would need in one building for the relevant specialty.

For example, for orthopaedics, this would include not only the various consultants specialising in each area of the body, but also physiotherapists, acupuncture, massage therapy and all scanning equipment.

These centres are now being set up by new entrepreneurs in the market, not just the usual players that we have become used to.

Succession planning

One of the biggest problems that consultants face is planning their retirement and finding someone to take over their practice when they would ideally like to take things a little easier.

These centres provide an ideal opportunity for a consultant with, say, five or six years left to practise to wind down in an organised manner.

Financial advantages

Many of these centres are prepared to pay an established consultant a capital sum for their practices, which, subject to agreement with HM Revenue and Customs, will be regarded as sale of goodwill and so subject to capital gains tax.

This is charged at a lower percentage than income tax. If the transaction is planned properly, one should be able to obtain Entrepreneurs Relief, which means that the effective rate of tax payable on the capital sum would be 10%.

As always with these matters, it is important that specialist advice is taken.

Fast-track build-up of private practices

For consultants who are just starting out, joining a centre is a way of fast-tracking the build-up of their practice. The centres attract a wider patient base due to their reputation. The newly qualified consultant will then receive a decent share of referrals quite early on in their career.

Reduction of costs

Working in a group practice – which is effectively what this is –should reduce overheads regarding premises, staff costs and professional fees.

Furthermore, better terms can be negotiated for other goods and services due to the purchasing power of the centre.

Work satisfaction

Many consultants do not really like the stress of running their own practice, so, by reversing into a centre, this would be taken care of for them to a large extent.

Patient experience

As long as the centres are well run, this method of working should provide a better experience for patients, and quite possibly NHS patients where the NHS contracts out to these centres.

The downsides

But there are, of course, downsides which need to be borne in mind:

 Depending on the details of the offer, consultants are unlikely to have as much control over running their practices as in the past. For many, this is a bonus, but some may not like it;

 Consultants are likely to face competition within their own building;

 Consultants will be expected to work as part of a team. Some may relish this, but some may find this difficult, especially if they have been a ‘loner’ for most of their career.

How does the deal work?

Typically, the company owning the centre will make an offer to the consultant to buy out their practice for a capital sum.

In return, the consultant’s practice will be owned by the centre. The consultant will receive a salary and, typically, bonuses based on individual performance.

These payments will be taxed at source under PAYE.

Also, potentially, a share of profit from other parts of the operation to which the consultant contributes – for example, scanning – could be paid. Consultants will need to be ready to negotiate.

Susan Hutter 4 webAs well as accountancy advice, consultants considering such a move will also require legal advice.

The advice will need to include due diligence checks for the acquiring and selling companies, dealing with the sale and purchase agreement and tax advice.

These centres may not be right for everyone, but they do have a lot of things going for them and, before long, they may well become the norm in the medical profession.

Susan Hutter (right) is a partner at Shelley Stock Hutter LLP