Now is the time to get fighting fit for the boom in private work post-Covid. Ian Tongue provides some excellent tips.
The impact of Covid on the private medical sector will be felt for several years to come as both the NHS and private sector try and cope with a surge in demand and finite resources.
I am hearing from clients of significant private waiting lists and it is encouraging to hear that the capacity in the private hospitals is opening up.
Coping with this increased demand from a financial perspective may be a challenge and it is important that you are prepared for the increased demand on your time. This article looks at some of the key areas that will help ensure that you are able to hit things running.
One of the key challenges will be the availability of clinical and theatre space to see patients and carry out procedures or operations.
Many of the private hospitals are juggling NHS usage with the private medical sector and often the spaces available are outside of normal clinic times. Therefore, being available and flexible will be key to utilising this available capacity until normal clinics are restored.
Having a reduction in volume can present an opportunity to change accounting or clinical database systems with less disruption than at busier times. These accounting and clinical database systems can generate significant efficiencies for your private practice and pay for themselves in a very short space of time.
Ensuring that you have robust systems in place should avoid situations of you not being paid for work that is undertaken and will enable you to invest time gaining experience on the higher-level features of those systems for when the volume increases.
Consider your tax structure
Many consultants have had personal factors which have prevented them from changing their trading structure.
Some of these issues can result in the acceleration of tax payable to change from one trading structure to another and can be a significant barrier; for example, a financial year that is not the same as the tax year-end.
A reduction in profit may present an opportunity to move a self-employed individual or partnership into a limited company, which may be more tax-efficient.
Conversely, with the proposed changes to corporation tax to increase the rate by 6% from 1 April 2023 and rumblings of changes to capital gains tax, it may be a time for certain practices to formulate a plan to move away from a limited company.
As always in these cases, your individual circumstances will determine the most appropriate structure for you and taking the advice of a medical accountant is extremely important.
Many employees have been furloughed since the Covid pandemic began and this was a welcome support to businesses. The furlough scheme is more flexible than it was at the start and therefore you can continue to use the scheme for the hours that are not worked and pay your employee for the hours they do.
This helps you with cash flow as you rebuild your private practice and the scheme is available until the end of September 2021.
Often the most significant expense within your private practice is your medical indemnity/defence fee.
Given the reduction in activity from Covid, many practices could be paying an incorrect premium, whether too much or too little.
It is important that you set your future anticipated activity level realistically and if this figure is too low, you need to contact your provider to advise them of your circumstances.
During the Covid pandemic, many consultants have diversified into new income streams and the most common of these is medico-legal work.
For those with practices growing in this area, it is important that you are keeping on top of payments for work done and reviewing your payment terms to ensure you are paid within a reasonable time-scale.
It is important you have robust accounting records to ensure you track work done and the date of payment – which can often be many months or even years in some cases.
Where payment does drag on, it is likely that will have to pay taxes in advance of being paid yourself.
Plan for tax
One of the most difficult financial situations consultants have faced from the reduction in activity is not saving enough for tax along the way.
Where taxes are paid out of current income rather than historic income, it can be particularly painful to settle your tax liabilities.
For many, the income tax payable for 2020-21 should have been reviewed to reflect the reduced activity and lower private practice profit. This will have a knock-on effect to the payments that are made in 2022 leading to a catch up in 2023.
It is really important that if you have struggled to meet your tax liabilities in the past that you are on the front foot going forward.
Often, it can be confusing how much to save and when tax liabilities will arise. So speak with your accountant who can help you with this to avoid any surprises later on from the combination of earnings falling and then restoring.
For those consultants with admitting rights in one hospital, your activity is likely to be restricted for a period, so consider whether there are any other opportunities to practise elsewhere to increase your capacity.
Certain specialties have been hit harder than others and we are likely to see more consultant-led private facilities arising.
These facilities are likely to be available to other consultants outside of the owners and could be an alternative for certain work, particularly if your usual private hospital is unable to offer you the required capacity.
Covid has certainly changed the landscape within the medical profession, both within the NHS and private sector. It is likely that the NHS will have to look to the private sector to manage the surge demand that is exacerbated by the increased demand in the public sector.
There will certainly be bumps in the road managing the two sectors, but private practices will restore, so being prepared for the surge in demand is extremely important.
Ian Tongue (right) is a partner with Sandison Easson accountants