Key considerations for practices in handing back GMS/PMS contracts

The following guidance has been produced by the BMA with the aim of supporting practices who may be considering handing back their GMS/PMS contract and winding up their business

CREDIT: This is an edited version of an article that originally appeared on the BMA

This guidance examines the repercussions of termination and potential alternatives, yet it refrains from delving into the intricacies of asset selling, debt settlement, and the effects on partnerships and individuals resulting from staff redundancy.

These considerations should only be addressed subsequent to seeking expert guidance on the necessary protocols and procedures to adhere to, as well as the potential legal responsibilities that could arise.

Alternatives to handing back a contract

Handing back a contract should be seen as a last resort and only contemplated when all possible alternatives have been considered.

The GPC has produced guidance and advice that can provide practical support to manage daily workloads and also provides examples of different ways of working under pressure and at scale. GP partners are encouraged to read it and discuss strategies to take control of their workload within practices. 

It might also be possible to find another healthcare provider who might be willing to take over your contract. Note that if you are a member of a PCN, there will also be implications, particularly for any ARRS staff that are employed – read the BMA’s guidance.

For a single practitioner, an alternative approach could involve considering the possibility of bringing in a new partner or multiple partners who could assume control of the practice, enabling the current practitioner to step down. In any of these potential scenarios, it is strongly recommended that practices initially reach out to their LMC for assistance and advice.

Additional support may also be accessible from your local commissioner, who can collaborate with you to identify a viable solution, potentially involving financial aid or other forms of support. This is partly due to the fact that reclaiming the patient list is likely to pose a costly challenge for them to address.

Evaluating Your Vulnerabilities

As highlighted earlier, relinquishing a contract entails more than just termination; there are potential repercussions that necessitate careful consideration. It should not be seen as an easy option or a standalone remedy. Numerous financial and legal implications are involved, and it is imperative for practices to make informed choices about whether returning their contract could leave them vulnerable.

Property Considerations

Repaying Mortgages

If you have a mortgage and are contemplating early repayment, you could be subject to an early redemption penalty, which might amount to a significant sum. If you intend to retain the premises and any associated borrowing for the same period, it’s crucial to assess how you will manage the monthly repayments.

Traditionally, these repayments would have been covered by notional rent payments. However, it’s important to note that the ability to seek reimbursements under the Cost Directions is linked to holding a core NHS contract. Surrendering your core contract would result in losing this ability, potentially affecting your ability to meet mortgage repayments.

Lease Agreements

Break Clauses

Check whether your lease includes a break clause that allows termination upon ceasing to hold a core contract and review the conditions and timelines for invoking the clause. Without a break clause, your rent and service charges will persist until you can assign the lease, negotiate an early termination with the landlord, or reach the end of the lease term.

Should none of these options be feasible, you will likely bear the ongoing costs under the lease, unless third parties (such as your commissioner) have provided some form of comfort or guarantee. Your capacity to claim reimbursements under the Cost Directions will have ceased. To understand the possibilities and consequences of terminating a lease prematurely, refer to the lease agreement and partnership agreement.

Maintenance Obligations

Apart from assessing whether you can exercise a lease break, it’s crucial to identify the portions of the building for which you are accountable, especially in the context of dilapidations. Even if the building has not been properly maintained for many years, you might still be responsible for rectifying defects, as most leases require you to “yield up” the premises in good repair and condition.

Other contracts

Check to see if the partnership has any liabilities and/or other contractual obligations which would need to be wound up. These could include:

• Interests in any provider companies or GP federations
• Lease/hire purchase contracts for IT or telephone equipment
• Contracts for the provision of services (for instance HR support)
• Loans acquired to buy into the practice or buy out former partners which still need to be repaid.

Staff

In relation to your staff you will, unless your staff transfer to a new provider by operation of TUPE, need to go through formal procedures in connection with redundancy and ultimately pay the appropriate statutory (and potentially contractual) redundancy costs.

Extraordinary costs and obligations

• Locum cover
• Costs for handling an orderly handover of patient records and/or the service to any new
  provider
• Professional fees (financial, legal etc.)

Terminating the contract

To the extent that you operate as a partnership, before making the final decision to hand back your GMS/PMS contract, you will need to consider the existing partnership agreement (where relevant); in particular, those provisions concerning decision making. The termination of the contract will usually be covered within the agreement and this should be looked at before proceeding.

If your agreement does not cover this eventuality, or you don’t have a practice agreement in place (in which case you are likely to be operating as a partnership at will under the Partnership Act 1890) you should get advice to ensure that the taking of such action is not in breach of your contractual obligations.

Leaving aside the need to consider any partnership agreement, you will need to give notice in writing to NHS England in accordance with the Regulations. The GMS notice period is 6 months for a partnership and 3 months for a sole practitioner.

The GMS contract will come to an end on the last day of the month in which the notice period expires. The required PMS notice period is a minimum of 6 months regardless of the type of contractor.

Notifying patients

When a practice closes, NHS England becomes responsible for the continuity of primary medical services for those patients. The onus is on the commissioner to inform patients of their options and the other practices in the area where they could register.

The BMA would advise practices to advertise that the practice is closing with posters in the waiting room, letters that would be picked up at reception or notes on the bottom of repeat prescriptions.

At the point of termination, your patient list will return to NHS England and you will no longer have an obligation to provide patient care. However, this is not the end of the matter. The business will continue to operate until it is formally closed and therefore you will continue to have expenses associated with it that must be paid even though your primary income stream has ceased.