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Maximising Profits

In today's challenging healthcare environment, practices face decreasing profitability due to static private income, rising costs, and intensified commercial pressures. This guide discusses vital strategies for maximizing profitability, including organic growth, collaborations, and mergers. It emphasizes the importance of assessing financial viability, offering additional services, and optimizing operational efficiencies. With insights on managing staffing costs, service contracts, and leveraging APMS tenders, this resource aims to equip healthcare organizations with tools to enhance their financial performance and navigate industry challenges effectively.

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Maximising Profits

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  1. Maximising Profits Paul Ellis Partner 26 March 2009

  2. Background information • Profitability decreasing • No/minimal contract increases • Static or declining private income • Continuing cost increases • Increasing commercial pressure • Increase in private organisations entering the market • Private companies with bigger profits and resources • Can buy in necessary skills • Can fund property/equipment • Opportunities through APMS tenders • Switch in focus from secondary to primary care

  3. Background information cont… • Consequences of not adapting • Taken over by another organisation • Loss of patients leading to loss of profit • Inability to attract/retain quality staff • Worse case scenario – forced into merger • Remember things rarely stand still • Risk of inactivity

  4. Growing pains • Methods of growing • Organic growth • Collaboration • Merger

  5. Meeting the challenges – making it & keeping it • Maximising profitability • Assessing financial viability • Service delivery • Keeping it

  6. Maximising profitability – additional services • Extended hours • may cost to provide BUT • consider potential to offer additional services when opening surgery for extended hours • Enhanced services • consider all opportunities • prioritise the most profitable services • monitor achievement on target based services • Appointment income • Training practice • Nursing home retainers • Social developments • Practice website

  7. Maximising profitability – additional services • Little growth in private work but opportunities may arise • Potential to provide additional services to the NHS PBC - commissioner/provider conflict? - slow roll out to date APMS - tender opportunities are arising • New pharmaceutical needs assessments • May need to work with others to take advantage of some opportunities: • practice joint ventures/group working • formation of a separate entity to co-ordinate and provide additional services from a group of practices • practice mergers to form a larger business entity • working with the private sector.

  8. Minimising costs - Drugs • Ongoing monitoring essential to ensure: • over ordering and wastage does not occur • purchases are made at the best price • scripts are issued in all cases • monitoring of script receipts v scripts issued • Dispensing practices • ensure full VAT claims made • better discounts if order electronically • spread scripts over prescribing doctors • join a buying group • investigate reducing costs of bags, bottles, boxes

  9. Minimising costs - staffing • Main area of practice expense • Staff flexibility and skill mix • Recruitment and redundancies • Staff subscriptions and training • work load efficiencies • process reviews

  10. Minimising costs - Locums • Cover • internal locum cover • skill mix • Insurance • many practices moving to group policies • annual review • group discounts can make the cost cheaper • may not be immediately advantageous for all partners • reviewing your needs

  11. Minimising costs – service contracts • It is still possible to find cheaper contracts for services such as: • insurance • power • Telephone • Review contracts/costs • changing providers • altering terms/products purchased • Use of buying groups or the NHS

  12. Assessing financial viability • Financial viability • Profitability • Cashflow • Working capital requirements • Discipline of partner’s funds • Appropriate payments on account: • Tax • Superannuation • Forecasting peaks and troughs • QOF achievement • Enhanced services • Tax bills

  13. Assessing financial viability (continued) • Are you a QOF winner or loser? Changes are being made to the prevalence calculations from 1 April 2009 which will either increase or decrease your practice’s QOF income. • To find out if you are a QOF winner or loser – go to:- www.pulsetoday.co.uk/story.asp?storycode=4121914 • To calculate the amount your practice is likely to gain or lose use the online calculator at:- www.bma.org.uk/ and search for QOF prevalence calculator

  14. Assessing financial viability – budgeting and monitoring • Practices with better monitoring systems tend to be the more profitable • Consider: • Setting financial budgets and targets • Regular review of financial performance • Assignment of monitoring responsibilities • Ensure sufficient time allowed for corrective action if required • Cashflow and appropriate action

  15. Service delivery • Mix of work loads • Development of partner interests • Use of external consultants • PCT liaison • Business plan • Finding the best partner to move forwards

  16. Keeping it! • Maximising profit per partner • Minimising tax and other personal outgoings • Don’t miss out on fees you’ve earned • Look for tax savings

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