Sale of goodwill - letter to the profession
25 March 2004
Dear Colleague
Sale of goodwill
I am writing to you now because of the recent emergence of an issue of considerable importance for the future direction of general practice in England.
Under current arrangements a medical practice is not permitted to sell goodwill. Goodwill can be described as the value over and above tangible assets (for example, premises and equipment) that a business may earn in relation to its undertakings, or which potentially may be earned in the future. It tends to be based on the profitability of a business.
When the NHS was established in 1948, the Government compensated GPs for giving up their right to sell goodwill in order to become part of the NHS. This ban on the sale of goodwill for a medical practice has remained until the present day. The Department of Health, however, believes that the ban does not currently apply to certain alternative providers of primary care because they are subcontractors. Indeed, such providers, for example private providers of out-of-hours services, currently list goodwill as part of their assets. A ban does not apply in secondary care.
Some elements of the new General Medical Services (GMS) contract have led the Department of Health to decide to change the current arrangements:
- 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 strategy for enhanced services
- the clear distinction between the types of providers in primary care: GMS practices, Personal Medical Services (PMS) practices, alternative providers and the PCO directly providing services
In order to promote patient choice and competition within the public sector, a declared policy aim of the present Government, the Department of Health has now told the General Practitioners Committee (GPC) that it has decided that the ban needs to be partially lifted. Its reasons for this are based on removing barriers for alternative providers to enter primary care and rewarding all providers that invest in a wider range of primary care services.
To this end we believe the Department is intending to lay Regulations to deliver the following:
(a) a relaxation of the current ban in relation to enhanced, out-of-hours and additional services, but not in relation to essential services; and
(b) a relaxation that applies to all providers, including GMS and PMS practices, while retaining the ban in relation to the provision of essential services.
The Department intends to review the outcome of this decision in two years.
I must stress that at this time the Regulations have not yet been laid before Parliament for approval, but we expect they will be laid before 1 April. Therefore, the position set out in this letter is the policy we believe the Government is intending to implement, as stated in a recent meeting I have had with the Minister of State for Health, John Hutton, on this issue.
Nevertheless, because of the extremely important implications, we felt it was essential that we should alert you to this policy development as soon as possible.
The GPC has been opposing and continues to oppose this policy. This is because we believe it increases the threat to holistic, coordinated, practice-based care and, in essence, the highly-regarded UK model of general practice. Once that damage has been sustained, the possibility of recreating predominantly practice-based primary medical services may be lost for ever, to the detriment of a cost-effective, clinically effective, primary care oriented National Health Service. A trade in patient care would not be in the interests of patients, taxpayers, the NHS or doctors. The concept of continuity of care will be eroded as care becomes increasingly fragmented.
We accept that the categorisation of services, the out-of-hours opt-out and contestability for enhanced services are initiatives that will lead to patients not always receiving all their primary medical services from the practice with which they are registered. The main reasons for agreeing to these developments were to control GP workload and to ensure the explicit delivery of more resources into primary care and specifically general practice.
We believe that the scale of fragmentation that will result from the Department’s policy on the sale of goodwill, however, goes far beyond the impact of the arrangements contained within the new GMS contract. Furthermore, such a partial lifting of the ban will inevitably damage recruitment into general practice, owing to the resultant increase in the costs of buying into a practice that would act as a severe disincentive to a career as a GP principal. We believe that it is not necessary to partially lift the ban to encourage contestability in the provision of certain primary medical services.
There is further uncertainty caused by the fact that, at present, this change appears to be an England-only initiative. While it has been suggested to us that other UK countries might follow the position in England, we do not have confirmation that this is their intention. Indeed, if the other countries do not follow England’s lead we would be extremely concerned about further fragmentation, which would contribute to the growing feeling that the UK is developing four separate National Health Services.
The General Practitioners Committee, when it met last week, was appalled at the prospect of a partial end to the ban on the sale of goodwill and the damage to the future of general practice and recruitment to the profession that would result, with its inevitable detrimental effect on patient care, and decided to oppose such a change vigorously. We also decided it was imperative that we wrote to the profession to alert GPs to this policy development and to highlight our concerns publicly.
Yours sincerely
Dr John W Chisholm
Chairman
General Practitioners Committee