Spotlight on practice mergers

There are a number of reasons that a GP practice might decide to undergo a merger – for example, to work at scale, deliver a more robust healthcare service in the community, for financial reasons, or simply because it is an attractive model. Whatever the reason, there are some essential considerations that you will need to keep in mind

Working at scale is becoming the norm in primary care and general practice; by sharing resources – such as facilities and premises, as well as administrative work – practices can use economies of scale to their advantage. Furthermore, there is the capacity to share knowledge – in terms of clinical expertise and practice management – ultimately, rendering your practice more sustainable and delivering better healthcare outcomes for patients.

If your practice opts to take the merger route, understanding the right steps to take – and when to take them – will be critical to your success. While it is always recommended that you seek professional, legal advice, it is also essential that you understand what a merger will mean for your practice and pay due consideration to the planning process

For a successful merger, keep the following 10 points in mind

  1. Establish your foundations

This is crucial. At this point you will be building and understanding the relationship you have with the practice(s) you intend to merge with. It’s important that you have a shared aim and vision – and that this is clearly defined.

Think about who will be responsible for co-ordinating the merger. All parties may wish to nominate representatives who will meet regularly to discuss the merger, monitor progress and ensure that the required resources are  in place or accessible.

Effective communication is essential – lay the foundations for this from the beginning.

  1. Research the business

Carry out due diligence and tie up confidentiality. You will need to draw up your business case to set out whether or not the merger is a viable option. Your business should identify practice issues and solutions and why merging is the best option. A cost analysis of the merger is also recommended so everyone is aware of the cost-implications.

  1. Develop your business plan

This is your opportunity to set out the intended outcomes and time-frames. Your business plan will establish a clear and concise strategy detailing how the merger will achieve the aims set out in the business case. It can also be used as a measure of success and to identify areas for improvement.

  1. Speak to the professionals

Get legal, accounting and other professional input. Merging contracts or dissolving existing ones to create an entirely new entity can be difficult – and you must ensure that you comply with regulatory requirements every step of the way.

  1. Engage with regulators and commissioners

Establish the requirements of, and approvals from, NHS England, CQC, banks, etc. For example, NHS England will consider any application to merge in accordance with the NHS England policy Managing Regulatory and Contract Variations and in line with the local processes developed by the NHS England Area Team.

The CQC will also need to be notified of the changing status of a partnership – do this as soon as possible. The CQC will look at who is responsible for carrying out the regulated activity. They will want to see either a registration for a new provider or a change in registration for an existing provider.

  1. Engage with staff and patients
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There will usually need to be a workforce restructure; while there are benefits – additional experience, opportunity to share admin staff, as well as recruitment solutions – there are also some challenges.

Mergers can mean the duplication of roles, inconsistencies in duties and differences in salary and leave entitlements. Be aware that you will need to comply with TUPE obligations and remember that staff ‘buy-in’ aids success.

Patient consultation are expected. Ensure that you are clear about the purpose of the merger and how it will impact patients – providing them with the opportunity to share their opinions on the move.

  1. Plan the premises solution – what changes are envisioned and are consents required?

Optimising the use of practice premises and facilities is essential. You might decide that continuing to operate from separate premises is the preferred option, or this could be an opportunity to invest in purpose-built facilities. The decision here will depend on a number of things; for example whether the premises are leased or owned.

  1. Agree your governance arrangements

New partnership deeds, company constitutions, shareholder agreements, etc., will all need to be put in place. Making decisions within a large partnership can be complicated so having a robust decision-making structure in place is essential.

Depending on the partnership, an elected body – consisting of a group of partners who have the authority to make decisions on matters affecting the day-to-day running of the partnership, policy decisions, financial matters and human resources – may be preferred.

  1. Agree your merger arrangements

With your due-diligence undertaken, there are some final – and essential – merger arrangements that will need to be made. Consider your non-disclosure agreement, which seeks to protect certain information from being shared.

Heads of terms will set out the agreed principles and obligations upon which each practice is prepared to merge; while not legally binding, they show the intentions and expectations of the parties involved in the merger and should be signed by all parties involved.

Your partnership agreement needs to be up-to-date for the merger; while you can become parties to an existing agreement, you may wish to create a new one with provisions that deal with the merger.

A ‘merger agreement’ is a separate document which deals with the merger; it’s sometimes also referred to as a ‘business transfer agreement’. This document details how the merger will occur and the commitment of the parties to the merger – for example, how contracts are to be merged.

  1. Clean up the legacy arrangements

We all seek closure and, when you are an embarking on a new venture, it is important that you ensure that old arrangements are closed down.

Visit BMA Law for useful information on practice mergers.

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