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Family Doctor Association National Conference

6th September 2014

Access to Finance & other Banking & Sector IssuesA presentation by

David Wood-Griffiths ACIB

Relationship Director, HealthCare

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Agenda

• Confidence Index

• Changes in the sector

• Federations

• Mergers and partner changes

• Banking issues

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2011B 2012A 2012B 2013A 2013B

-70

-60

-50

-40

-30

-20

-10

0

10

GP

Pharmacist

Dentist

Combined Average

Lloyds Bank Primary Care Confidence Index

4

Definitely Probably Probably not Definitely not

Don’t know0%

10%

20%

30%

40%

50%

60%

38%

53%

5%

0%

5%

Wave 1 Wave 2 Wave 3 Wave 4 Wave 50%

10%

20%

30%

40%

50%

60%

70%

Definitely

Probably

Key findings:

• The majority (91%) see more mergers as inevitable (77% 2013)

• Those now saying ‘definitely’ is also hardening 38% v 25% 2013

Are you expecting more practice mergers, co-locations and / or larger practices over the next 5 years?

Lloyds Bank Primary Care Confidence Index

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Yes - part of a local ser-

vice provider grp

Yes as a practice on

our own

Yes some of both of the

above

Not planning to bid for any

contracts

Don’t know0%

10%

20%

30%

40%

20%

7%

10%

34%

29%

Key findings:

• The number answering ‘yes’ has been 37% for last two surveys

• Only move has been reduction in ‘no’s’ to 34% (48% 2013)

• Suggests more are now in the ‘undecided’ camp

2012A 2012B 2013A 2013B0%

10%

20%

30%

40%

50%

60%

Not planning to bid for any contracts

Are you currently or planning to bid to provide services under the new AQP (or similar) criteria?

Lloyds Bank Primary Care Confidence Index

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Definitely56%

Probably38%

Pharmacist

Yes - part of a grou

p20%

Yes on own7%

Yes mixe

d10%

Doctors

Key findings:

• There is clear and consistent evidence that pharmacists are more enthusiastic about taking on private work

• There is however some signs that GPs are beginning to recognise the potential benefits

Lloyds Bank Primary Care Confidence Index

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New Income (pull):• Potential of new income streams via joint working

• Potential to widen scope to more private work?

• Potential cost savings from economies of scale

Federations and Mergers – what’s driving change?

Demographics (fact):• Over 40% of GPs to retire within 10 years

• Some new GPs don’t want to be partners

• Demands for more work flexibility

Income Squeeze (push):• GMS/PMS >1% increase

• DES/LES and other elements under threat

• MPiG and Seniority Payments being phased out

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Options:• Increase productivity – do more with same

• Increase resources – do more with more

• Re-engineer – find a new/better way of doing things

Look at the Business of Primary Care...

Demands Issue:• Increasing demand from an increasing population

• Ageing population, more long term conditions

• Do not have the ‘pricing’ option

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Look at the Business of Primary Care...

Re-engineering:• Consolidate and benefit from economies of scale

• Make more use of technology; telehealth, internet self help

• Restructure workflows and refocus use of expensive resources

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Federations - do you see what others see..............

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A necessary evil to stop others:• Get in quick to stop others invading your space

• United you stand.......

• Would prefer not to but......

An opportunity to make money:• A unique (?) opportunity to expand services

• An opportunity to increase income/profits

• The start of a journey to consolidation

A friendly caring sharing group:• Sharing back office admin etc to help cut costs

• A means of providing better services to patients

• Working together for the greater good!

.........or a combination of the above?

Federations - do you see what others see..............

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Structure:• Partnership, Club, Limited Company, CIC

• Seedcorn capital; directors, ownership, rewards?

• Take advice regarding tax, VAT and NHS Pensions

Federations – banking considerations

Finance Options:• Who borrows; the Federation or performer?

Objectives:• Business plan; what are you trying to achieve; are all parties aligned?

• Run as a business not a practice – not all costs are covered!

• Procurement rules include financial viability – can you prove it?

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Mergers and partner changes – banking considerations

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Property:• Lend to partnership to buy-out exiting partner

• Lend to new partner to buy-in to property

• Potentially provide support to sale to third party (exiting partner?)

What can a bank help with?

Mergers:• Lend to partners to buy-out any leavers

• Lend to help equalise capital accounts

• Lend to buy, develop or improve premises

Partnership:• Lend to partners to buy-out exiting partner

• Lend to new partner to buy-in to partnership

• Change the account names; help/review bank mandates

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Who will lend:• Many banks but ‘stand-alone’ less attractive now

• Main Practice Bank should offer best rates and sort quickly

• Beware old loan terms; fixed rates, penalties etc

Partner changes

Term & Rates:• Term to suit your plans. Up to 25 years

• Circa 2% to 3.5% over base depending on term

• Interest only an option

Options:• Take advice; new partner or salaried GP

• Buy-in for cash; trial period and/or staged buy-in?

• Beware ‘last man standing’!!

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YOU

Bank

Solicitor

Accountant

Working together

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Finance:• Banks lend to serviceability not security

• Things are changing and not all costs are covered

• Track record and projections

Summary - some basic rules

Commitment:• Consider longer-term A-Z

• Make sure all parties have interests aligned

• A loan is only profitable in the last two years.....

Professional Advice:• Invest in good advice; act in haste.....

• Plan: do not put heads in the sand! Have a route-map of ownership over next 10 years

• Have a up-to-date partnership/federation agreement

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LBG SME lending growth +5.6%

HealthCare Sector +14.1%

Doctors +16.9%

July 2014

Finally are banks lending?

The advert

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