GP practices facing a profit squeeze

20 July 2020

GP practices are starting to see a squeeze on profits after initially having significant protection from the financial impact of the COVID-19 pandemic.

Whilst core contract income which makes up around 65%* of total practice income remains unchanged; practices are starting to see a number of the income streams that make up the balance being squeezed. This includes a number of locally commissioned services where social distancing restrictions mean that activity is significantly reduced including learning disabilities, minor surgery and health checks. There is also growing debate as to how to efficiently perform the flu vaccination programme this winter as the usual format will need to be significantly adapted to ensure patient and staff safety, which all comes at a cost.

In the first few months of the pandemic there were significant reimbursements of COVID-19 related costs from CCGs to practices but now these claims are facing more scrutiny. This combines with a general reduction in private income that GPs can earn from services such as travel clinics and driver medicals.

It is not all bad news though. After the large scale implementation of Primary Care Networks (PCNs) last year, some practices are seeing a good flow of income to support their working models through the core funding and additional roles reimbursement schemes. Many PCNs have released additional sums from their core funding to help support practices through this challenging period.

The additional roles reimbursement scheme is also meaning that various clinical roles can be brought into the practice to create capacity and in many cases start to improve the workforce structure in primary care. There is also a lot of innovative thinking about how digital working models combined with face to face appointments could fundamentally improve efficiencies in delivering quality healthcare to patients in the long term. We have already seen great examples of how efficient digital working can reduce DNAs and therefore maximise clinical time available.

In this period of significant challenge on practice process as well as finance it is imperative that practices keep close to their finances. Practices should be working with their accountants to prepare profit forecasts for the year ahead to understand the impact of these factors and be able to take remedial action as early as possible. There should also be a rolling review of cash flow to quickly identify if there are likely to be additional cash flow needs in the short to medium term.

If profits in the 2021 tax year are anticipated to fall then tax payments on account can be reduced in January 2021 to help support cash flow. In addition to this practices should keep close to their costs – in particular where they may be coming out of fixed price contracts as the costs for most businesses will have increased as a result of the pandemic and these are likely to be passed on to customers. For help and advice on any tax payment issue please get in touch with your usual BDO contact.

Please contact our team for help and advice on the financial implications of the COVID-19 outbreak on your GP practice.


* Based on BDO client averages.