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Developing a federated model of General Practice: For Profit or Not for Profit

When making a decision about whether to opt for profit or not for profit, there are a number of factors to consider, key being are there any distinct advantages to either model?  

The answer to the question really lies in why you are forming the company. I'm not going to explore anything beyond the federation for General Practice, as to do so would take pages and be of little interest, instead, we will focus in solely on the need for a legal entity to deliver services within the NHS and over in to private patients.

Keeping in mind General Practice are all "for profit organisations" I often find the debate and the length people go to difficult to follow; however, we do spend a lot of time on this question - and that's before we look at the type of company (an item for a different BLOG). Patient perception is often to the fore at this point; however, there are MANY ways that this can be effectively managed with excellent communications (we have many examples).

The first point to make is that there is no advantage when it comes to the NHS.  They have to treat all providers equally and cannot distinguish between for and not for profit organisations. Additionally, lets "myth bust" - there are no extra points in procurement for being not for profit! 

Whichever route you pick, you will have to make a profit - even not for profit organisations need to deliver a profit to reinvest in the projects they wish to support. Not for loss is the place to start; both for profit and not for profit organisations have this as a start point you need a profit to stay in business.

Keep in mind these companies are normally simply a vehicle for channeling income to practices for service delivery - everything beyond the scope of the GMS or PMS contract, where for that work the practices are absolutely free from the federation and each other. With that in mind what little profit you may generate after paying practices, the board and any federation staff, is likely to be very limited, particularly when your focus is on income for members. 

Additionally, as you are highly unlikely to ever sell the company or to trade the shares (provide an ability for them to be sold anywhere other than back to the company) we are quickly narrowing down to a point where you can make a decision.

My final point is flexibility; whichever route you choose what you do should you generate a profit is the key. In a for profit organisation you can choose exactly what you want to do with any surplus, and that includes being able to invest it in community projects. In a not for profit organisation you will already have defined what you will do with any profits, and will be limited to that list of options for investing any profit.

In both instances, all of this will be defined in the shareholders agreement and/or articles of association, in which you can set limits, thresholds and criteria for use of any profit. You must adhere to both documents unless you wish to make changes to the company shareholders agreement or articles of association to add new options - this will be a matter reserved for shareholders. 

Both "for profit" and "not for profit" options are fully debated within our workshops to help you form a federation, and we will happily handle any questions within our free of charge initial exploratory meeting with practices interested in exploring the federated model. Please don't hesitate to make contact if you should have any questions, or if you would like to hold an initial meeting for local practices.

In our next issue, we will look at the role of a Director and why when you form a legal entity you are quickly going to find it a very different way of working when compared to a CCG or Locality within a CCG.

For more information on how our specialist team can support you in forming a federation, or to arrange to speak to one of our experts please contact enquiry@bw-medical.co.uk or call 0191 653 1022.

Scott Mckenzie

Scott Mckenzie

NHS Management Consultant

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