A guide on trading in goodwill

Providing additional, enhanced and out-of-hours services may generate super profits for a practice to earn – the fees from such work substantially exceed the cost of the provision. This guidance, put together by the BMA, covers goodwill in relation to those earnings

The Department of Health and Social Care (DHSC) revised existing arrangements prohibiting the sale of goodwill of a medical practice so that:

• there were no barriers (eg., a ban on the sale of goodwill) that would stop alternative providers from seeking to provide certain services (out-of-hours services, enhanced services and additional services);
• existing subcontractors’ rights would not be infringed.

Some elements of the new general medical services (GMS) contract have led the DHSC to decide to change the arrangements in relation to goodwill. Changes include:

• the categorisation of services, with distinctions between essential, additional and enhanced services;
• the transfer of responsibility for out-of-hours services from practices to primary care organisations (PCOs);
• the desire for contestability, choice and competition when PCOs develop their commissioning strategies for enhanced services;
• the clear distinction between the types of providers in primary care GMS practices, primary medical services (PMS) practices, alternative providers and the PCO directly providing services. 

The General Practitioners Committee (GPC) has consistently opposed this policy. The BMA believe it increases the threat to co-ordinated, practice-based care, and the highly regarded UK model of general practice.

What the regulations say

The critical part of the PMS regulations is paragraph 3(1).

• As a GMS contractor has to provide essential services to a registered patient list there is no reference to having a registered patient list in 3(1)(a).
• A PMS contractor does not have to have a registered patient list but, if they do, this will relate to the provision of essential services.
• For providers to trade in goodwill for additional, enhanced and out-of-hours services, they will need to set up a separate entity. This is distinct from the provider that contracts with the PCO to provide essential services to a registered patient list.
• Once established, the separate entity may bid in open competition to provide additional, enhanced or out-of-hours services.
• Practices will need to have opted out of providing those services as part of their original contract with the PCO.
• This might be treating practices unfairly compared to commercial providers in terms of what they would need to do to get themselves into a position to compete.
• GMS practices have preferred-provider status for the additional services they were already providing, or for any contracts from before 1 April 2004 for the duration of that contract.
• The series of hoops the practice may have to jump through might be necessary to level the playing field.

Options for practices

Before making plans to change provider arrangements to be able to trade in goodwill for additional, enhanced or out-of-hours services, practices must take legal advice.

Here are the options available to you.

1. Continue as you are

GMS practices that provide essential, additional, enhanced and out-of-hours services, or PMS practices providing essential services and equivalent services, may wish to continue as they are. No trade in goodwill will be possible for these services.

• Set up a separate provider entity for enhanced services

GMS or PMS practices could expand a number of enhanced services. To achieve this they may wish to set up a separate provider entity to contract with the PCO to provide these services. Goodwill may be traded for these services.

• Set up a separate provider entity for out-of-hours services

GMS practices may have opted out of providing out-of-hours through their GMS contract, but may wish to set up, or join, a separate entity to provide these services. Goodwill may be traded for these services.