Trading in goodwill

This guidance is to help GPs and local medical committees (LMCs) with decisions relating to trading in goodwill and to better understand the sale of goodwill regulations.
Location: Scotland Wales England
Audience: GPs Practice managers
Updated: Thursday 16 January 2020
GP practice article illustration

Providing additional, enhanced and out-of-hours (OOH) services may generate super profits that the practice can earn. The fees from such work substantially exceed the cost of the provision. This guidance cover goodwill in relation to those earnings.

 

The history

DHSC (Department of Health and Social Care) 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)
  • that existing subcontractors’ rights would not be infringed.

Some elements of the new GMS contract have led the DHSC to decide to change the arrangements in regard of goodwill:

  • 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, PMS practices, alternative providers and the PCO directly providing services.

Read the regulations for:

 

The GPC has consistently opposed this policy. We believe it increases the threat to coordinated, practice-based care and the highly regarded UK model of general practice.

BMA general practitioners committee
GPC view

 

We were advised there would only be a slim chance of a successful challenge.

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.

The below sets out options available to you.

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.

If these options are not appropriate for your situation, you can contact our advisers for guidance.

 

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