July-August 2014

THE BUSINESS MAGAZINE FOR DOCTORS WITH A PRIVATE PRACTICE

Today INDEPENDENT PRACTITIONER

In this issue

How to attract self-payers Some tips to help increase your share of this growing element of the private care market P14

What needs to happen now. See page 7

Are you a better ?

Take part in our quiz to find out how the business side of your practice is faring P34

Art of good management

The key elements of good management that can make your practice a success P36

Shake-up drags on . . .

...as costs to private healthcare sector top £50m. And there’s still more to come

By Robin Stride

Independent practitioners face at least an eight-month wait until they can consider the full implications for their businesses of the controversial Competition and Markets Authority (CMA) inquiry into private healthcare.

Hearing dates for the three appeals against parts of the final decision in the multi-millionpound investigation will not be heard until next year – on 19 January 2015.

Gathering evidence from the appellants – hospital group HCA, doctors’ body the Federation of Independent Practitioner Organisations (FIPO) and insurer AXA PPP – is then expected to last seven days.

Legal challenges usually take at least a month for outcomes to be announced, but a CMA insider this month told Independent Practitioner Today: ‘In a case with so many different issues like this one, I wouldn’t be surprised if it was two months or more.’

But even after the three-member Competition Appeals Tribunal in London makes its decision on the evidence – which is heard in public – the whole affair could drag on for many months more if there are any subsequent appeals over the verdict.

Cases could be taken to the

In association with

Court of Appeal in The Strand, adding a few more months to the process, which began over three years ago.

A further option could be the Supreme Court, but competition inquiry parties in the past have been unsuccessful in getting a hearing at this level.

Informed sources this month put the financial cost of the inquiry to the private healthcare sector at a staggering £50m.

That is enough to pay for the training of 100 doctors to consultant level or their salary, including employers’ National Insurance, for five years or 1,250 nurses’ salaries for a year.

Independent Practitioner Today has

been told the investigation has cost some hospital groups nigh on £10m, while insurers have forked out up to £5m and other parties have paid hundreds of thousands of pounds from much smaller budgets.

FIPO wants the Comp etition Appeal Tribunal to quash the stipulation that doctors and hospitals publish fee information and also the CMA’s decision that insurers’ substantial power to constrain consultants’ fees and insurers’ control over consumer choice does not lead to any adverse effect on competition.

HCA is fighting CMA plans to force it to sell either the London Bridge and Princess Grace hospi-

tals or the UK’s largest private hospital, The Wellington, and its nearby flagship diagnostic and outpatient unit, The Platinum Medical Centre.

The hospital group said this month the CMA’s proposed remedy ‘punishes healthcare innovation and is not in the best interests of patients’.

AXA PPP’s appeal alleges that, even after any divestiture, HCA would still retain a relatively high market share in oncology, ‘a key component of the bundle of services over which hospital operators and PMIs bargain’. It is also targeting anaesthetists, submitting that the CMA was wrong to approve group pricing.

MANCHESTER RISING: A view of one of two new private hospital developments planned for the city. See page 2

July-August 2014

www.independent-practitioner-today.co.uk

send in the clouds private doctors can make their lives easier by storing their data using the cloud P12

Taxman is ever on the prowl the taxman will initiate a probe when he suspects avoidance, not just evasion P18

you must shout to get to the top Watch that your innate conservatism does not stop you building your practice P26

a firm is most tax-efficient at its end t’s when you terminate a company that it can be at its most tax-efficient P29

a testament to good planning private practitioners are sitting targets when it comes to inheritance tax P38

avoid falling out with your partners an implied duty of good faith to partners may not be enough to rely on P42

Plus our regular columns starting a private practice: Medico-legal work

ediTorial commenT

The Indees is the place to be in

Brilliant soiree, brilliant venue and some brilliant people!

It was a pleasure to meet up with dozens of new and longtime subscribers from all specialties at The Indees’ summer reception in Bibendum on the Fulham Road, Chelsea.

Everyone was buzzing as they relaxed away from the usual clinical surroundings over canapés at the ‘flagship of the Conran gastronomic empire’. Although chiefly a social event, people enjoyed meeting up with like-minded independent practitioners they would never otherwise know existed. Some of their patients are ben-

efiting already from onward referrals. Doctors shared information and advice and were able to meet professionals from other fields who can help.

Thanks to all those who told us they would like to get an article published in Independent Practitioner Today. We will take up lots of your offers.

The Indees membership is open to doctors under 50. If you qualify and weren’t there, you’ll have missed out, so why not sign up at www.idf.uk.net.

We definitely need a North Indees (come on, Manchester!) and maybe East Indees and West Indees too.

Tell us your news Editorial director Robin Stride at robin@ip-today.co.uk

Phone: 07909 997340 @robinstride

To adverTise Contact advertising manager Margaret Floate at margifloate@btinternet.com Phone: 01483 824094

To subscribe lisa@marketingcentre.co.uk Phone 01752 312140

Publisher: Gillian Nineham at gill@ip-today.co.uk Phone: 07767 353897

Head of design: Jonathan Anstee chief sub-editor: Vincent Dawe Circulation figures verified by the Audit Bureau of Circulations

Manchester to get two private hospital parks

by charles King

Private practice potential in Manchester is attracting multimillion-pound investment from two more independent hospitals.

Global engineering firm Siemens plans to develop its Princess Parkway site in Didsbury to create a technology and healthcare ­ focused business park including a new Spire Healthcare private hospital.

Meanwhile, a Manchester Metropolitan University and Nuffield Health partnership will develop a hospital near the city centre incorporating wellbeing and rehabilitation services on the former Elizabeth Gaskell site on Hathersage Road.

Spire plans a phased development with building starting next summer, subject to planning permission, and completion at the end of 2016. The scheme includes an office park targeting businesses in complementary sectors including high tech and healthcare. The site also plans to host quality family and executive housing.

Other ancillary uses, including crèches, gyms and possibly leisure and retail, may be incorporated to support the scheme’s primary function as an employment ­ led development targeting ‘blue chip’ occupiers and inward investment.

The proposals have the potential to directly deliver up to 2,750 jobs on the site through the potential expansion of Siemens, employment opportunities within the hospital and some 1,400 jobs generated by the new offices.

The 100-bed Spire hospital, incorporating inpatient, daycase, level 2/3 care and a clinical trials unit, will be equipped for an range of activities, including complex surgery and medicine through a large ITU together with diagnostic and imagery equipment from Siemens.

Spire’s business development director Neil McCullough said: ‘Building and opening a new hospital is an exciting challenge and fits well with our plans to bring high quality healthcare to an increasing number of people.’ He told Independent Practitioner Today that Spire already worked with a large, supportive group of consultants in the city and looked forward to welcoming them to its new hospital.

The new hospital is within a mile of HCA’s service at The Christie and eight miles from its new day centre at Wilmslow.

Consultants or GPs wishing to discuss working with Spire at the new hospital should contact Chris Chadwick, hospital director, on 0161 226 0112.

Not just attractive earnings

Doctor entrepreneurs beware!

Women have rated male doctors third in a list of the most sexiest professionals – ahead of firemen.

The survey of 2,000 women, for IllicitEncounters.com, put entrepreneurs top. Bankers and stockbrokers were second.

The siemens site in didsbury will host a 100-bed spire hospital

Shield your pension – get it valued now

by leslie berry

Senior doctors waiting to apply for the Government’s new pension protection scheme can now obtain the valuations needed to defend their future benefits against tax charges.

Individual Protection 2014 (IP14) can be used to restore specialists’ personal lifetime allowance to the value of their pensions benefits on 5 April this year if they exceeded £1.25m up to a maximum of £1.5m at that time. The Lifetime Allowance (LTA) was reduced earlier this year.

The main advantage is that there are no restrictions on the growth of future benefits and in most cases, Individual Protection cannot be ‘lost’ in the same way as both Fixed Protection schemes. IP14 can also be used even if the

individual already has Fixed or Enhanced Protection in place.

Doctors claiming IP14 will need a value of their pension benefits, from all their pension providers, as at 5 April 2014. The NHS Pensions Agency now has the necessary application forms available.

Patrick Convey, technical director of specialist financial planners

Cavendish Medical, said: ‘The IP14 scheme is a valuable addition to the protection tools currently in place, as doctors can remain full members of the NHS Pension.

‘However, the taxation of pension benefits is a particularly complex area. The constant change in the types of tax protection available means this is an area where more senior doctors are coming unstuck.

‘It is impossible to give generic advice. The best course of action

to be taken will depend on the value of your pension pot, your pensionable salary and the number of years left until retirement.’

HM Revenue and Customs will accept applications for IP14 until April 2017. But advisers say it is important for doctors to apply now, particularly if considering retirement before 2017.

Mr Convey continued: ‘If the protection is not in place, the NHS will assume a lifetime allowance at the reduced rate of £1.25m.

‘If individuals establish IP14 after retirement, they would then be forced to reclaim any overpaid tax retrospectively – a much more complicated task.

‘The pensions agency is likely to take up to six weeks to produce valuations, so take action sooner rather than later, even if retirement is not a factor.’

surgeon wins business award for directorship

Prof mark whiteley, director of The whiteley clinic, guildford, has won the institute of directors’ director of the year – london and south east – for small businesses with a turnover of up to £9.9m He now goes forward to represent london and south-east in the finals in october when he will be judged against the best from every other part of the uK.

HCA rewarded for technology spending

HCA International has won the 2014 IT Innovator of the Year HealthInvestor Award for its ground-breaking work which has been welcomed by consultants, staff and patients.

It is the hospital group’s third success in as many years at the HealthInvestor Awards, which are chosen by a panel of 21 independent judges.

Last year, it won Public/Private Partnership of the Year and, in 2012, Private Hospital Group of the Year.

HCA won the latest award for providing the best possible patient care through continued investment in the delivery of innovative solutions and leading technologies.

One example cited was the use of VitalPAC, an award-winning handheld device which can help save patient lives by allowing teams to identify the most at-risk

patients across a unit and direct resources effectively and quickly.

Judges praised HCA’s technological innovation, calling it ‘a really innovative organisation, who invest in information technology well beyond the basic patient administration systems and websites’.

They said HCA offered a good use of a mix of leading new technologies designed to support staff in their work and to improve patient experience and safety.

Judges added: ‘HCA deserve this award for a range of IT innovations ranging from patient monitoring in critical care units, enabling medical staff to remotely review clinical information and streamlining patient booking-in arrangements.’

The firm’s head of IT programmes, August ine Amusu, said he was elated that the organisation’s commitment to improving patient outcomes had been recognised.

inTernaTional recogniTion: Hca international president and chief executive michael neeb is presented with another trophy – The Queen’s award for enterprise in international Trade – by sir ian Johnston, deputy lord-lieutenant of greater london, who congratulated the company on its ‘extraordinary success’. Hca was recognised for its considerable growth in international patients, and the associated contribution to uK patients by driving world-class health outcomes. mr neeb said: ‘This award is an extremely welcome recognition of the positive role that private hospitals can play in our economy and Hca’s position in attracting international trade in to london and beyond.’

Doctors win a say in way clinic is run

By Robin Stride

A unique consultants’ charter has been developed by a new management team at London Medical.

The plan, now in a consultation phase with doctors, is due to be launched at the Marylebone High Street private clinic this summer.

Managers said it would take the form of a six-point plan aimed at enhancing relationships between the company and consultants.

It is hoped it will also boost opportunities at the centre for key consultants to grow their practice and income.

The charter commits the clinic to be a multi-faceted service provider, provide latest equipment for core specialties and marketing for consultants as well as itself.

It also promises active encouragement of collaboration among

disciplines, support for formation of and partnership with groups of practitioners, and a ‘sharing’ of the benefits of success.

The company said the charter would be based on a number of guiding principles designed to ensure successful and long-term partnerships with consultants.

It said the development marked ‘a new era of transparent, collaborative and service-led management’ overseen by new general manager David Briggs.

Research feedback from over 80 consultants who practise at the clinic – whose specialist areas include diabetes, endocrinology, cholesterol, ophthalmology, cardiology and rheumatology – identified they wanted to:

 Work in a clinic with the highest level of facilities, service and equipment;

 Be able to influence the purchase of new equipment;

 Receive administrative and marketing support for new business lead generation;

 See encouragement of collaborative work among colleagues to help drive and support referrals and networking opportunities.

London Medical said it recognised that there was a benefit in facilitating the formation of subspecialty groups which fell under the umbrella brand.

The clinic believed having likeminded colleagues coming together to drive the service and determine the unique selling points and outline equipment and support requirements could provide a more attractive package.

Mr Briggs said it was understandable that consultants who contribute to the clinic’s success might

BMA chief attacks ‘bizarre market culture’ in the NHS

BMA Council chairman Dr Mark Porter has criticised the creation of a ‘bizarre market culture’ that has lead some commissioners to go to extraordinary lengths to meet the Government’s competition agenda.

In a speech to doctors at the association’s annual representative meeting, he said commissioners in Bedfordshire and Milton Keynes had spent over £3m asking 500 providers and clinics around the world for expressions of interest in running local services.

He said they asked an NHS trust that had been dissolved, healthcare conglomerates and even small hospital groups in the mid-west of America ‘who may not have even heard of Bedford, Massachusetts, never mind Bedford, England’.

Dr Porter told the meeting in Harrogate: ‘They wrote to 500 providers. 500! Let’s imagine the bureaucracy that this could generate. Let’s imagine the other commissioners that, right now, might well be doing exactly the same.

‘Now, the Government will no doubt say that commissioning decisions are made locally.

Monitor has told us that not all services need to be put out to tender. But whatever the reassurances, a bizarre market culture has been created.’

Dr Porter also criticised the Government’s policy of targeting doctors and other staff as a way of finding efficiency savings, and for failing to find a sustainable solution to the NHS financial crisis.

‘The so-called efficiency savings

london medical’s entrance in marylebone high Street

wish to have an influence in the direction of the business, as well as sharing in the wider benefits.

He added: ‘Within the new charter, we are also proposing that a nominated representative from each core specialty be granted a two-year seat on the London Medical medical advisory committee. This will allow a genuine influence over the policies, protocols and direction of clinical services for each core group.’

A number of new initiatives as a result of the charter have already been put in place, including a review and upgrade of IT services and operating systems, upgrading to an integrated billing and patient database system, and buying new equipment such as an ophthalmic laser.

Nuffield ups spending to £89m a year

are cuts. The experience of every healthcare worker, every doctor, is of having resources cut every year.

‘Does anyone really believe that the teaching and medical research at King’s College, London, is going to become more efficient if it carries out its plans to make 120 people in the health schools redundant?

‘We are seeing cuts that are driven by an uninformed and arrogant assumption that the NHS is bloated and inefficient.

‘But when they have gone looking for savings, the bulk has not come from reducing waste. They have come from reducing tariffs, and this has destabilised services. They have come from targeting the staff who themselves are keeping the service going.’

Nuffield Health invested £84m into its hospitals, wellbeing and corporate sites in 2013 – an increase of £15m on 2012.

Its annual report said its hospitals division saw revenues for continuing activities increase by 1%, driven primarily by the growth in NHS activity.

The hospital portfolio saw significant investment with £44m put into the improvement and expansion of facilities, including:

 Completion of the new Chesterfield Hospital in Bristol;

 Finishing refurbishment at Brentwood, Brighton and Wessex hospitals;

 Equipping with the latest minimally invasive endoscopy gear;

 Installing of digital technology into hospital operating theatres.

300% disparity in op price

By a staff reporter

Huge variations in the price of some cosmetic operations has been highlighted in a major new report into the current state of the market in the UK.

The Cosmetic Surgery Market Report 2014 revealed the range of prices for some procedures varied by more than 300% from the lowest to the highest.

Breast reduction, for example, over a range of 209 providers, varied from £2,180 to £7,400.

Report publishers Private Healthcare UK found there was no

obvious regional or provider bias.

Researchers collected and analysed over 2,700 prices for the most common cosmetic surgery procedures in the UK.

They found the cosmetic surgery market showed little sign of contraction during the recession and had been faster to pick up than the rest of the private healthcare market.

A big cause for concern, however, is the continued practice of discounting or offering ‘late availability’ deals by some providers. This runs contrary to recom -

mendations from The Independent Healthcare Advisory Services (IHAS) and is noted in NHS medical director Sir Bruce Keogh’s recommendations last year as a practice that could adversely affect an individual’s ability to make a balanced decision about an invasive surgical procedure.

Keith Pollard, managing director of Private Healthcare UK, said the report gave much cause for optimism for both providers and patients: ‘The Cosmetic Surgery Market Report has become

Key findingS: coSmeTic SuRgeRy maRKeT RepoRT 2014

The main findingS of The RepoRT include:

 Social media plays a far greater role in marketing and promotion of cosmetic surgery than in other parts of the private healthcare market. it is also used to capture and share patient experience and is increasingly being used by surgeons and clinicians to interact with potential and existing patients.

 The pip breast implant scandal only briefly affected demand for cosmetic surgery, although it has led to patients seeking more information and taking longer to make a decision about surgery.

 cosmetic surgery is no longer the preserve of the wealthy or older patient, but is prevalent in all demographic and socio-economic groups.

 There is also a corresponding difference in the ‘typical’ cosmetic surgery patient in a large private acute provider and a cosmetic-only independent provider or clinic. patients in the latter are likely to be

something of a barometer of the state of the sector in the UK.

‘Providers will be pleased to know that consumers are continuing to look for a wide range of cosmetic procedures, but that they’re demanding more information about safety and transparency in pricing before making their decisions.

‘For patients, cosmetic surgery is now considered socially acceptable and the availability of information via the media, social media and reports such as this gives them growing confidence in seeking surgical intervention.’

between 21 and 40 and likely to be seeking procedures such as breast augmentation; while in the former, the typical patient is over 45 and likely to be seeking facial rejuvenation surgery and liposuction.

 an emerging trend is the demand for cosmetic surgery following weight-loss surgery. after bariatric surgery for weight loss or successful dieting and lifestyle changes, patients are now seeking to ‘solve the problem’ left by excess skin folds and seeking body reshaping surgery. This is fuelling the growth in procedures such as tummy tucks and liposuction.

 The report was based on in-depth interviews with the leading figures in the uK provider market – including both large chains and individual clinics – as well as clinicians and representatives of professional and advisory groups. The full report is available to purchase for £450 from www.privatehealth.co.uk/selfpay

Insurance surge based on NHS fears

Fears over the future of the NHS have sparked a rise in the number of people taking out private medical insurance.

According to a new state of the market report based on a survey of 1,000 adults, 4.5% of respondents with private medical insurance said they have cover because of concerns over problems in the NHS.

Market intelligence provider Key Note, which conducted interviews in February 2014, said this compared to a level of 3% in June 2011.

In its report, Private Healthcare, the firm reported the total private healthcare market in the UK grew year-on-year over the past five years, benefiting from an ageing population, growing demand for health services and higher levels of NHS outsourcing.

However, the rate of growth slowed in recent years, to 1.4% in 2013, as consumer spending was squeezed and public healthcare funding flatlined.

The market is dominated by the longterm care sector, which accounted for 47.4% of the total private healthcare revenues in 2013.

This was followed by the acute medical care and the psychiatric care sectors, with market shares of 22.1% and 16%, respectively.

Key Note’s 2014 market report Private Healthcare analyses the market for private healthcare – including long-term care, acute medical care, psychiatric care, private medical insurance and primary care – in the UK. Price £575 from www.keynote.co.uk

Key findingS

 Key note forecasts that the uK private healthcare market will grow by 2.6% in 2014

 people who underwent a routine procedure privately increased from 4.7% to 5.6% between June 2011 and february 2014

 Those who had emergency/non-routine treatment privately in the last 12 months also went up from 2.2% to 3.6%

 over 80% of respondents said they would prefer to use the nhS for routine procedures, emergency and acute care if waiting lists were reduced and conditions improved

 48.2% of respondents believed the nhS was superior to private healthcare for emergency and serious complex healthcare treatments

Keith pollard

Patients want care via smartphones

By Edie Bourne

Four in five people would like the option to use their smartphones to interact with healthcare providers.

This finding from a global survey, commissioned by predictive analytics and decision management software company FICO, also showed that 76% of people are keen to be reminded of their medical appointments in this way.

Private doctors would also be offering a popular service if they issued smartphone reminders to patients about appointments – or even alerts prompting them to take their medication. Nearly seven in ten told the study they would like this.

Stuart Wells, FICO’s chief product and technology officer, said: ‘The way healthcare organisations communicate is changing as individuals become more and more sophisticated about using technology to make health-related decisions.

‘People are especially interested in mobile services that can help them manage their health. The leading healthcare providers are increasingly turning to mobile technologies to meet this demand, and to engage frequently and proactively with consumers.’

The survey showed that 56% of

people worldwide trust healthcare organisations with personal data.

While eHealth records have yet to take off in many countries, simple innovations around mobile alerts and information services are helping to build the trust necessary for the trend to continue.

Mr Wells added: ‘Mail-order pharmacies are checking customer orders via mobile applications, insurers are validating policy details and medical service providers are requesting feedback on the quality of their services or managing follow-up care.

‘Privacy is critically important, and consumers are required to opt in, but given the benefits of mobile technology in the healthcare field, that doesn’t appear to be an impediment to adoption. People are eager to have a dialogue with their healthcare providers in ways that are convenient to them.’

The potential for mobile technology in healthcare ties in with another emerging trend – an increase in the use of alternative advice channels.

a lmost two-thirds of smartphone users want to receive medical advice through digital channels instead of visiting a doctor.

a nd 71% are open to offers of relevant healthcare services from businesses, and 53% are open to provider-initiated communications.

The survey looked at consumer preferences and tendencies with regards to mobile, online and inperson interactions with healthcare providers. 2,239 adult smartphone users were surveyed in the UK, australia, Brazil, China, France, Germany, India, Italy, Japan, Korea, Mexico, r ussia, Turkey and the US.

wHaT PaTiEnTS wanT FRoM TEcHnoLogy

 80% would like to be able to interact with healthcare providers on their smartphones

 76% would like to be reminded of medical appointments

 69% would like to receive reminders to rearrange appointments, or be prompted to take their medication

 56% trust healthcare organisations with personal data

 2 in 3 want to receive medical advice through digital channels instead of visiting a doctor

Source: Survey of 2,239 smartphone users for analytics software company FICO

Registration lapses on the rise

Shocked doctors and nurses have had to stop practising with immediate effect after discovering their registration has lapsed and they must immediately stop seeing patients.

Defence body advisers have reported a series of calls this summer after practices found their nursing staff had unwittingly ‘dropped off’ the Nursing and Midwifery Council register, caus-

ing considerable disruption to patient care.

The Medical and Dental Defence Union of Scotland warned it regularly took calls from doctors and dentists who had accidentally allowed their GMC or GDC registration to lapse.

It said often a simple change in personal information, such as home address or direct debit details, was to blame.

Ethical aid for research with child patients

Children and young people should routinely be offered the opportunity to participate in and to benefit from medical research, according to updated guidance from the royal College of Paediatrics and Child Health.

Guidance on clinical research involving infants, children and young people provides updated practical guidance on ethical issues in relation to research involving children, aimed at research councils.

It reflects many changes that have taken place with regards to e U regulations over the last 14 years. Key principles include:

 r isk: r esearch should ideally carry no greater than minimal or low risk. However, research that involves greater than minimal risk may be acceptable if the interventions involve diagnostic procedures or treatments that are important for the individual child.  a ssent or consent: In most instances, the child’s assent or consent should be underpinned by parent consent. But, in research, dissent should be respected, even if parent consent continues.  Sedation: researchers must justify the use of sedation and provide evidence that appropriate monitoring will be in place during the procedure, and that they possess the necessary competencies and skills to carry out the procedures and to deal immediately with any adverse effects.

 r ewards: The nature of any token of thanks should be in proportion with the age of the child, approved by the research ethics committee, and made clear in the parent/patient information sheets.

The MDDUS said it was always wise to ensure bank details are up to date rather than risk being erased from the register.

It warned on its website that applying to be re-instated onto the register could be a time-consuming, stressful process with the potential for loss of earnings and even disciplinary action. a nd there is often a fee to pay to have your name restored.

New faces at Barclays team

Barclays has appointed anthony Nash and Lisa attenborough to its corporate Banking Healthcare team. They will be responsible for managing portfolios of the bank’s healthcare clients.

Status quo not an option

The ‘Future of Private Healthcare’ summit, held at the Royal Society of Medicine last month, brought together 150 representatives of the UK’s private healthcare sector to debate the impact that the recent Competition and Markets Authority report would have on the market. Keith Pollard reflects on the flavour of things to come

We are, of course, a market that continues to struggle in the context of falling demand for private medical insurance and pressure on healthcare costs both in the NHS and the private sector.

So it was fascinating to observe the overriding themes of the conference: how the various industry players view the way forward and consider how changes in the industry might affect the role of the private consultant.

In his keynote presentation, BMI Healthcare group chief executive Stephen Collier highlighted how the industry has become more complex with a mixed economy of public and private sector involvement both as payers and providers of healthcare.

He told the meeting the Competition and Markets a uth ority (CM a ) report should be seen as ‘an agent for change rather than a lucky escape’.

The key themes of the conference were reflected throughout the day. These were that, if the industry wants to grow, then it needs to be prepared for change and reach a consensus on:

 How it adopts a better consumer orientation;

 Provides differentiated quality;

 Del ivers joined-up healthcare and increased value for money.

So what is the likely impact on the private consultant?

The patient as a consumer

There are some interesting times ahead for consultants, stimulated by the CMa’s recommendations on price transparency and publication of outcome data to inform patient choice.

Patients as consumers want to know how much things cost and what they are getting for their money.

But how many consultants are happy to publish their consultation and procedure fees? Will the growth of consumer review sites in healthcare, as highlighted by

Communication’s Philip Archbold. Go to http://summit.privatehealthcare.co.uk

Neil Bacon of iWantGreatCare, drive consultants to become more consumer-focused and take on board online feedback from their customers?

Technology is also driving consumer choice in healthcare. With the advent of the internet, healthcare information has become free to access, enabling patients to self-diagnose.

But according to Jill Watts, chief executive of ramsay Healthcare, providing meaningful information that patients can understand is not going to be an easy journey. In areas of chronic disease, patients can often be better informed than their doctors when weighing up the options for treatment.

Healthcare entrepreneur a li

Parsa’s presentation on the provision of patient care via the Babylon mobile app promoted

the ‘democratisation’ of access to healthcare.

Patient access to advice from private GPs and specialists at significantly reduced cost implies lower remuneration per case for those providing the advice. But it could also vastly expand the consumer base for ‘paid for’ healthcare.

Differentiating the product

With the increasing usage of private-sector facilities through NHS Choose and Book, the demarcation between NHS and private care is becoming blurred.

a quarter of private hospital revenues are now generated from NHS-funded patients. The development of ‘consultant chambers’ may present an opportunity to develop new service models whereby the clinicians are offering a managed care package which embraces an integrated and co-ordinated approach to the complete patient journey, with the private hospital provider seen as a supplier of services.

Promotion of the private sector option based on better outcomes, better quality and better service levels may be one route to differentiation rather than the private sector being seen as a quick-fix solution for a patient – or an NHS commissioner – seeking a shortening of an NHS waiting list.

Increased value for money

Increased value for money inevitably means downward pressure on costs. a s one hospital provider

The Future of

Private Healthcare summit, held at London’s Royal Society of Medicine, was attended by all of the big names in the UK private care market

commented: ‘Hospitals that control consultants are more efficient’. If private hospitals are able to exercise greater control over how consultant-led services are delivered, then better quality and better value can be achieved. But many consultants may see this as interfering in their clinical decision making.

Consultants will need to review the way they are involved in the delivery of private healthcare. Under pressure from insurers to reduce fees, the current model of fee for service needs a rethink.

There is also an undeveloped market for the ‘middle income’ self-pay patient who does not have the benefit of private medical insurance but cannot afford the current price of ‘going private’.

New models of delivery for private healthcare where consultantled treatment is delivered by nurse practitioners or non-consultant clinicians may be an option. Delivery within a lowcost, NHS-run private patient unit may present an opportunity to expand the market.

There is no doubt that it’s

time for change

Henry Ford summed up the situation faced by the motor industry many years ago, and it applies to today’s private healthcare sector: ‘If you always do what you’ve always done, you’ll always get what you’ve always got’.

No change means a declining private patient market. New ways of working, new models of service delivery, and a greater focus on the patient as a healthcare consumer will require some significant changes in philosophy and approach from payers and providers – hospitals and consultants – if we are to create a new future for private healthcare. 

Keith Pollard is chief executive of the meeting’s organisers, Intuition Communication

Healthcare business guru Philip Housden is interviewed at the summit by Intuition

Press here to enter

Often when private consultants and hospitals talk to the press, they are responding to journalists’ inquiries.

HCA’s London Bridge Hospital turned that on its head by taking the initiative in organising its first press event at Soho House, the private members’ club for those in film, media and creative industries. Leslie Berry reports

Ear L i E r TH i S summer, HC a’s London Bridge Hospital took its Pr initiative one step further by hosting a press event at London’s iconic Soho House venue.

London Bridge Hospital organised the get­together to highlight the growth, development and variety of the hospital and its outpatient centres.

The event aimed to consolidate relationships with the key media in the lifestyle, health and wellbeing sectors in particular and it provided a unique opportunity for journalists to meet some of London Bridge Hospital’s consultants.

a n array of consultants from specialties including rheumatology, physiotherapy, nutrition, dermatology, oncology, gynaecology and psychosexual health were on hand to meet with the media and answer their questions.

The evening drew a number of journalists from target media including Vogue magazine, the Daily Mail and Top Santé. all were given specially printed London Bridge Hospital press books highlighting the array of consultants available for expert comment and health guidance.

Orthopaedic surgeon Mr Simon Moyes said the evening had been a fantastic opportunity to speak to journalists about what he does and the latest arthroscopic and minimally invasive techniques.

Journalists heard how, for example, stem cell treatments were coming on stream and how new arthroscopic techniques were permanently evolving.

Mr Moyes’s verdict was that it was ‘great’ to educate the press about these treatments and how they related to their readership.

The event has resulted in numerous subsequent media exposure, including a feature in Top Santé and an opportunity with the BBC.

London Bridge Hospital and Pr firm Spreckley Partners said they

(L-R) Miss Gemma John, consultant gynaecologist, and Mr Simon Moyes, consultant orthopaedic surgeon

London Bridge Hospital chief executive John Reay and Joani Walsh, Daily Mail writer

were now keen to work together to co­ordinate a follow­up press event to build on these relationships and extend coverage of London Bridge Hospital as a world­leading private hospital.

a s chief executive of London Bridge Hospital since 2000, John r eay’s dedication to taking the hospital forward has witnessed the brand’s steady increase of incoming consumer press inquiries.

He said he regarded it as one of his primary roles to communicate the world­class standards of the practitioners and staff at the hospital.

Mr reay told Independent Practitioner Today : ‘We have demonstrably excellent outcomes and the multidisciplinary teamwork we have at London Bridge Hospital is second to none.

‘We were thrilled with the outcome of the event and the enthusiasm of the journalists that attended. i t was a thoroughly interesting night, with some lively debates and conversations

being had all around the room. ‘There were some imminent editorial opportunities that each journalist went away with and it was great to see that the consultants are being recognised for the excellence they achieve at the hospital – we would certainly look to recreate another evening like it.’

Manuela Bernhard, project and business development manager, said: ‘What was great to see on the night was that the journalists were learning from the consultants, as well as the consultants understanding how the journalists operate and their specific interests – we have already witnessed an uplift in press coverage as a result.’

Juliet Francis, account director for Spreckley Partners, said: ‘London Bridge Hospital has increased its relationship with consumer media over the years and yet many still weren’t aware of the breadth of services that the hospital provides, so the event turned out useful for everyone.’ 

Natalia Lubomirski, Top Santé journalist, and London Bridge senior specialist dietitian Evelyn Toner

Elsa Messi, lifestyle blogger, plus friend with hospital physiotherapist Lucie Noble

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Where you put down roots is up in the air

There is a changing market in the location of consultants’ clinics and many alternatives for where doctors base their practice. Accountant Susan Hutter gives her advice

Over the years, many consultants who have run their practice out of private hospitals or the private wing of an N h S hospital have been offered below-market value room rental or even free accommodation, with support staff thrown in for good measure. Obviously, there was, and still is in certain circumstances, a quid pro quo.

the private hospitals are keen to accommodate ‘high-profile’ consultants with excellent clinical reputations. And the consultants use hospital facilities and equipment, such as scanners and laser machines, and the in-house pharmacy.

In return for this, the hospital receives a financial benefit.

While this may have worked for both parties in the past, it seems changes are already underway in the wake of the Competition and Markets Authority (CMA) report, which called for a restriction or banning of incentive schemes and some benefits for consultants from private hospitals ( Independent Practitioner Today , April 2014).

Some consultants are finding that they are now being asked to pay in line with a market rental rate for their accommodation and support services and/or being allowed fewer clinics.

For example, consultants who were once able to work four full days a week out of the hospital have now been reduced to threeand-a-half or even three days.

And some have been given notice because the hospitals wish

Consultants could take the lead of others in the industry, who have already decided to look outside the normal locations to house their private practice

to use the rooms for other purposes.

So, if that happens to you, what are the alternatives? Consultants could take the lead of others in the industry, who have already decided to take a different approach and look outside the normal locations to house their private practices.

More flexibility

As long as they can secure the correct medical use in the lease, consultants are considering locations that they think are better for their businesses.

In many ways, this opportunity offers more flexibility. Some consultants, for instance, are taking on larger premises so that they can expand their practices.

If a consultant is, say, within five years of retirement, this is a chance to bring in younger, like-

minded consultants in the same field, possibly with a view to selling their practice to them when they retire.

Consultants are also bringing in other specialists who complement their own practice.

For example, dermatologists who are keen to build up the cosmetic side of their practice are renting out rooms or even employing beauticians who can provide specialist facials.

Also, it is a chance to introduce a retail side to the practice. there are a number of possibilities:

 Face and body creams – in the case of the dermatologists;

 herbal and nutritional supplements;

 Appliances to assist with daily living.

Consultants deciding to adopt the above route will obviously have to kit out their premises with

furniture and equipment, such as scanners or lasers.

they will need to make a decision about whether or not it is best to lease or buy such items. there are a number of considerations to take into account here, one of the main ones being cash flow.

External funding

It is advisable to have a robust business plan and cash flow forecast covering, at least, the first three years.

In many cases, the project will need external funding and therefore you will need assistance in approaching the various lenders. this includes traditional banking arrangements. In addition, depending on the amount of money needed, it may be sensible to incorporate your practice and look at the private equity market. t he other avenue to consider regarding equipment and kit are the finance houses and there are a number specialising in medical equipment.

One very important thing to bear in mind, and an aphorism often quoted in Dragons Den-style tv programmes, is ‘turnover is vanity, profits are sanity!’

So, as always, advice should be taken. Do be prepared to be openminded about the potential of the practice. 

Susan Hutter is a partner with Shelley Stock Hutter LLP. She provides specialist accounting, taxation and business advice to the medical and healthcare industry

Send in the

Clouds

Data storage and management using the Cloud is one of the main ways that healthcare professionals can make their own lives easier and safer, argues Sam Beavan (below)

I FIND mANY healthcare professionals don’t know what the Cloud is and how it works, so let’s talk basics.

What is the cloud?

The Cloud is not a single thing. It is actually made up of numerous powerful computers, usually called servers, housed in special secure locations – a ‘server farm’ –around the world.

These machines do all the storage and processing that your own machine could do, but much faster, more reliably and more safely. A typical server can hold 20 terabytes of information – roughly enough to store 549 X-ray images. A server farm can have dozens of machines of that size in it.

is the cloud the same thing as the internet?

No, although they do get confused. The internet is a system that connects devices together almost anywhere. It’s what allows you access to the Cloud, but it isn’t the Cloud itself.

if the cloud is just a super version of my own laptop, why use it?

Your data, and the programmes you use, are not on a single machine but in the Cloud. This means you can work on your own stuff on any machine that is connected to the internet – you don’t

have to have your own machine with you. This is what allows paramedics to read a patient’s medical details halfway up a mountain after an accident. They don’t have to carry a machine with everyone’s medical details on it; they just have to have access to the internet.

can’t the data be hacked? While it would be unwise to say that any data is forever secure, the information in the Cloud can be encrypted so that it is almost impossible for the wrong person to read it. This applies to the data as it is transferred to your machine as well as when it is stored.

can the data be lost?

It is possible, but the chances are almost too remote to consider. Unlike a laptop, where the memory failing means everything is gone, the Cloud stores your information on a number of different machines, so that if one stops working or there is a power failure, your information can be pulled from another source.

What about back-ups?

It usually happens automatically. It is said that a third of all data lost is due to operator error and about half the remainder because of the memory on the laptop ceasing to function or things like that. This is not an issue in the Cloud, as the information is backed up to multi-

ple locations, often several times a minute.

do i have to have an internet connection?

No, any kind of network will do –intranet, a local area network (LAN) or wide area network (WAN) – as long as it can connect you to the servers.

is it expensive?

No. In fact, one of the advantages of the Cloud is the low cost. The machines that hold your data don’t sit idle if you aren’t using them – unlike the machine on your desk. Other people’s data is there too, and the same machine – and the same running costs – are shared with everyone who uses it. It is also cost-effective because the machines you use don’t have to have huge amounts of memory, just enough to run the programmes. That makes it very green as well.

can others see my data?

No. It can all be stored securely and in a way that only you can access, usually using a commercial data security programme and passwords. Just because it’s stored on the same machine as other people’s stuff doesn’t mean anyone can see it. The service providers in the Cloud would go out of business very fast if people weren’t sure their data was secure.

What is the advantage for healthcare professionals?

In 2013, Health Secretary Jeremy Hunt proposed that all medical records should be ‘paperless and fully compatible’ by 2018 so that they can ‘follow patients around the social and medical care system’.

As this can be upward of 150 organisations, having a secure central storage system has to be the way to go. The Cloud makes this cheap, easy and safe.

How many people use the cloud?

In healthcare, it was around 4% in 2011. Now the figure is closer to 10% and the recent Heartbleed computer virus scare has demonstrated that enhanced data security has become vital.

In the general population, it is used daily by anyone who uses a smart phone to access emails or the web. As at June 2013, that was

72% of the UK population. It is also how you access Facebook, LinkedIn, Dropbox, Pintrest and all the other social media applications that your patients will be paying attention to.

Any other advantages?

Storage can be an issue for people who use large numbers of large files, such as X-ray images. They can be over 20 megabytes each, so storing hundreds of them a day – a commonplace thing for a busy radiology department – would use up a lot of storage space on a single machine. In the Cloud, storage of that size is considered tiny.

can it help communications?

Yes. Email is an everyday part of life now, but accessing them when not at your own machine is only possible because of the internet and the Cloud.

It also has a part to play in making Skype (video phone) contacts

work smoothly and allowing the sharing of images, data and voice recordings.

It is even possible for audio dictation to be done off-site and passed directly to the transcription service.

How will this help the public?

Nobody in healthcare can doubt how important data security is. It is not just the threat of a Data Protection Act prosecution, but the loss of trust. If patients aren’t sure you can keep their data safe, they simply won’t come to you.

Hackers recently stole the confidential details of over 500,000 people from an insecure machine in one of Britain’s best-known cosmetic surgery providers, then tried to blackmail the organisation for the return of the data.

To be able to tell potential clients that your data has double encryption security can only enhance your offering.

Why should i adopt it?

Using the Cloud is rapidly becoming industry standard for healthcare. Apart from all the benefits for your organisation, patients will soon be asking why you aren’t using it. ‘We haven’t got round to it’ isn’t going to be a satisfactory answer.

There are many service providers who offer Cloud access. What doctors need to do is ensure that the package on offer covers everything that they require.

These can include secure Cloud storage for patient forms, diagnostic images, audio dictations and patient notes, Cloud-based patient booking systems, secure Cloud messaging services between healthcare professionals and video hosting, streaming and storage. 

Sam Beavan is chief executive and founder of One Vision Health, a provider of Cloud-based services for healthcare professionals

PracTice

How to attract the self-payers

Follow these tips from Catherine Harriss (below) to help increase your share of this growing element of the private healthcare market

There has been much in the medical press recently about the changes in the way medical insurance companies are re-imbursing consultants in private practice. The privately insured market is more uncertain and variable than ever before.

But as recorded previously in Independent Practitioner Today (March 2012), there has always been a percentage of people who have sought private healthcare without having insurance cover.

hospital waiting lists and rationing of procedures on the N hs means that more people are being pushed into the private sector. a nd there is also a growing

demand for individuals to selfpay for one-off treatments, which they than can do by a fixed-price option.

Figures from market analysts LaingBuisson indicate that 15% –and growing – of independent hospital revenue comes from selfpay patients.

self-pay spending grew by 2.8% in real terms in 2011, the third consecutive year it did so. however, payouts from private medical insurance policies showed a fall in real terms of 2.9% in 2011 and 3.2% in 2010.

recent figures for the Bupa On Demand show that more than a third of customers are aged 25-39,

dispelling the myths about older populations being the prime target audience.

Market intelligence provider

Key Note forecasts that the total UK private healthcare market will grow by 24.8% over the next five years, with a growth rate of over 5% forecast annually. Certainly, our experience at MultiWorks Marketing is that of sustained growth in the self-pay sector.

A typical self-pay patient

Be under no illusion that your patients have searched for you online before they come and see you. some will visit you because

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you have been recommended, but the majority will have taken time to search for you, find out about you, find out about your success rates, find out about your costs and find out about how other people have perceived you.

Your private practice is entirely generated by you. s ome practitioners think that all private practice is finite and that if Dr X appears to have the lion’s share, that will mean that there is not much left for others.

This is not necessarily true, as market forces and competition are always healthy aspects of any market and, certainly, accurate and appropriate marketing has a major role to play here.

a s a private practice practitioner, you are providing a service and it is in the provision of this service that you can make a difference with the information you provide and with the transparency of your practice.

Our clients are encouraged wherever possible to make this the focus of their practice, such is its importance. While this might go against the grain, it is proving to be very successful for many.

Where do self-pay patients originate?

Increasingly, they are coming less from their GP. They are finding information for themselves online, in publications or from friends and making their own choices.

Coming from a medical background in nursing and research, we focus on providing information in a simple way that can be understood by the majority. Together with the correct marketing, you can be in control of this and ensure that the right information is being disseminated and understood.

Our top tips for generating and improving your self-pay private practice are these:

1 Understand the needs of your new patient

Imagine that you are one of your patients. Your problem has become all-consuming and you have decided that you need to find a solution.

You have options. You can either visit your GP, Google your problem or ask a friend – or use a combination of all three.

Your aim as a doctor in the self-pay market is to be easily found online with easily accessible information

Your aim as a doctor in the selfpay market is to be easily found online with easily accessible information, so that you can become the beginning of the answer to the problem.

2 Know what you can provide well for your patients

Is there a new procedure that can be advantageous? Is this something that your private hospital advertises? Can you introduce it?

Our experience with niche medical procedures has identified growing local and national markets when potential customers are presented with information that can be easily understood.

People will also travel if they feel that they have confidence in the information that they obtain from you, but this only comes with a positive, appropriate online presence.

3 Web presence

In our experience, most doctors seem to design and write their websites for other doctors and not for patients.

have you stood back and really examined it and felt happy with how it looks?

a good website should be a good reflection of how you are in practice. Website designs should ensure that these key factors are a priority: easily accessible and simply explained.

4 Add value

It may seem that the service you have to offer is provided by many others. s o what can you add to make your service better? What will make your patients happy or happier?

5 make your benefits transparent

This can be provided by information given on your website and from testimonials: the holy grail of any business.

Other people’s positive experiences speak volumes for the benefits to be gained. But a proper testimonial is unsolicited, not part of a patient feedback questionnaire but written from the heart spontaneously, by them to you. They should always be dated,

ACtion List

think local

Have you tried using your private hospital website –can you find yourself easily? Discuss with your secretary how you can have more information available for prospective patients.

Do you have a high-quality website that projects you, your practice or the surgery/procedures you perform? Can it be easily found online?

Enabling search engines to find you, for the terms you want to be found for, consistently takes significant time and effort and is best left to online marketing experts.

think further

Your private practice is a market-driven business. the most successful aspects of any business are the customers, the customer service you provide, feedback and management.

All work together symbiotically to create a very successful whole. successful marketing from experienced professionals can improve your bottom line dramatically.

You invest in your business and the growth with rewards will follow.

kept in whole – without breaking confidentiality – and be kept on record. Finally, they should be highly visible.

This is the ultimate proof that what you say you do actually does happen. Our experience with different medical niches has found that patients often cite these accolades as a reason for visiting a practitioner, so they must never be underestimated.

6

good first impressions

Who is the first contact when people try and contact you?

Is it your lovely secretary who superbly fields all aggravation so you do not have too many things to deal with?

and are they kind and encouraging on the phone, providing information and clarity so that they give you a positive image?

This first contact cannot be underestimated, in that negative experiences will mean that those inquiring will just move on. They have a choice and if they have to make more effort than they think is necessary, they will certainly find another provider.

Your successes and experience need to be published. it helps prospective patients to see the number that you have performed and the outcomes that you have

I have had people say to me that after they waited six weeks for an appointment from a .N. Consultant, they decided to look elsewhere.

This is unforgivable and certainly not what a self-paying patient is willing to put up with.

7 simplify the process

Clear and consistent information about how and when appointments happen, together with a transparent pricing structure, all help to indicate how organised you are as an individual.

You need to have a recognised person or secretary who knows about your private practice – if they are not working with you already – so that simple and easy questions can be answered quickly and happily.

Theatre booking should be the same. Do you really have to control your theatre list? Can your secretary not do this, and do it well and meet the needs of your new private patients as well?

8 make pricing clear

s ome larger healthcare groups now have fixed prices for some or all self-pay procedures.

Do you charge significantly more than this? Is there value in what you provide to warrant any additional cost?

however the prices are agreed, your secretary must know them and have them immediately to hand.

a gain, if someone is turned away because the price has yet to be determined, then they will use their time to find other providers who do have transparency in their prices.

Your pricing should be highly visible on your website along with ways of capturing potential leads so that people can make further inquiries – all parts of a highly successful marketing approach.

9 Audit your results

In the Nhs, audit is a constant factor in professional life and it needs to be like this in the private sector too.

Your successes and experience need to be published. It helps prospective patients to see the number that you have performed and the outcomes that you have.

s uccess breeds success and so the more information that you can provide, the better informed your patients and you will be about your care.

10 guarantee their after-care

It is very helpful if your private hospital can provide a fixed package of care. If it does, then this will be an added value to your procedure, as the self-pay patient does want to have a clear indication of the total costs involved.

If a follow-up is required, is this included in the total price, is it an extra afterwards – if so why – or do you provide it for free? The choice is yours.

Know what your local ‘competitors’ are doing and then match this with what your gut response is.

Ultimately, you want to provide a high-quality service that people will want to talk to others about and, in turn, they will seek you

Catherine Harriss is the founder of MultiWorksMarketing.co.uk specialising in medical private practice

Taxman is ever on the prowl

Tax investigations do not just happen for alleged tax evasion. As Scott Gilbert outlines here, they are also sparked off when the taxman considers there has been tax avoidance

AS SOMe consultants now know to their cost, even following established practice can be considered to be tax avoidance by HM Revenue and Customs (HMRC).

Take the example of car mileage claims, which was subsequently ruled by the courts to be incorrect as a result of the Dr Samadian case – well publicised in Independent Practitioner Today, including a full report in February 2014 on the final court case result

HMRC started a campaign publically targeting medical professionals in 2010 with the Medic’s Tax Health Plan. This was the first of the targeted campaigns looking at professions and generated nearly £83m where people admitted to tax evasion.

As part of these campaigns, HMRC was able to use its information powers to seek out details of payments made to individual medical professionals including information from private medical

insurers, private hospitals, insurance companies and many others.

HMRC will have used its datamining tools to arrive at figures of payments made to individual medical professionals. This information will have been retained and is still available to it.

Tax officials will then use this information to target those whom it believes have committed tax evasion and who did not come forward during the campaign.

other tax campaigns

In other tax campaigns aimed at professionals, such as barristers and plumbers, there have always been high-profile prosecution cases shortly after the campaigns have finished. Yet, with medical professionals, there has not been any such case that I am aware of. So why has this not happened?

It is not that doctors are failing to declare all of their income. Our firm’s client base suggests that

some are not. The difficulty HMRC has is deciding the right cases to select, as it does not wish to launch a tax investigation, whether civil or criminal, without a good chance of success.

Bearing in mind the way medical practices work, then this assurance of success for HMRC is always going to be low.

It is best to explain this by splitting the profession between consultants, who generally have an NHS contract as well as private self-employed work, and then others like GPs who are typically self-employed and in a partnership with other doctors. Locums will generally fall into the same category as consultants.

consultants

HMRC may have some information relating to self-employed fee payments from a particular source, but it will not have it all.

So, if HMRC adds up everything

it has, the total will normally be less than declared by the consultant and so it does not consider it has a good chance of success.

Does this mean that all income is declared by the consultant in all instances? The answer is no, but it does mean that HMRC cannot definitively say that income has not been declared.

Our experience is that the main issue with consultants is not a deliberate decision not to declare all of their income, but a lack of proper record-keeping and controls, coupled with a heavy work load, meaning that it is common to make a best estimate of the income or expenses figures using only partial information.

These estimates are often cautious in relation to income and this often results in insufficient tax being paid.

This lack of proper records can also cost the consultant, as it

The main issue with doctors is not a deliberate decision not to declare all of their income, but a lack of proper recordkeeping and controls, coupled with a heavy workload

means that a significant amount of invoiced work often remains unpaid, since there are no processes to chase the debts.

HMRC often argues that this use of estimates is tax evasion and done deliberately. We have successfully argued that it is actually being careless and not deliberate. This can make a big difference to the amount a consultant has to pay to put their tax affairs in order.

If errors have been made, it is important that this is put right and this can be done by a voluntary disclosure to the taxman.

This reduces the risk of the consultant being named and shamed or prosecuted and can considerably reduce the amount payable compared with what the doctor would be liable to pay if HMRC contacts the consultant first.

We would suggest that consultants employ someone to run the accounting side of things and that

any fees are paid into a specific business account.

Consultants use clinical nurses to help them and secretaries to arrange appointments, so someone who is good with book-keeping and accounts should also be part of the team.

We would also suggest that the consultant engages a hands-on accountant who understands the medical profession and all of its idiosyncrasies with regards to tax and accounting. This may cost more, but will be a worthwhile investment and may pay for itself in many other ways.

motor expense claims

This applies to all medical professionals as it is likely that the Samadian case will have an impact on expense claims and there are already many HMRC investigations with regards to mileage claims of medical professionals.

The problem is that HMRC may

HM Revenue and Customs often argues that this use of estimates is tax evasion and done deliberately

open an inquiry into these errors and take the opportunity to try to investigate further into the consultant’s affairs and to ask about private work. If this happens, then specialist advice should be sought, as HMRC may be acting inappropriately.

The Samadian car mileage court case makes it very important that all medical professionals keep detailed mileage records – including start and end point and reasons for the journey – and give these to their accountant to make sure that the correct business mileage is recorded.

GPs

Although some payments for private work will be made to the individual, these are often included in the partnership income.

Thus, HMRC cannot know which income has been declared and which has not without look-

doctors who are members of the idF become part of an increasingly large and more influential organisation that is better equipped to deal with the many and varied issues facing independent doctors than those acting in isolation.

There are many professional advantages for doctors who are idF members:

 A council that lobbies parliament, government organisations, insurance companies and regulatory authorities on behalf of its members

 An active social and educational programme

 An approved appraisal system by trained appraisers for those seeking separate independent practice appraisal

 A responsible officer to whom members may relate if they qualify to do so under the doh ‘connecting doctors to responsible officers’ flow chart

 An independent complaint resolution procedure for member doctors

 A monthly e-bulletin which keeps members updated on current events of interest and reports on meetings

 personal profile page on the idF website

 mentoring help for those new to independent practice

You can join online via our website www.idf.uk.net, email info@idf.uk.net for a membership application form or call 020 8090 3470

ing at the whole partnership. The private payments are also usually much lower than those paid to consultants.

GPs partnerships also tend to employ more administration staff and so have better records. There is therefore typically less risk of errors attributable to the GPs themselves being overworked, as they have less to do with the dayto-day administration.

There has been a marked increase in GPs using a limited company and having their private income, such as out-of-hours cover, paid to the company. This can be done for many reasons, but generally this is suggested to the GPs as a tax planning opportunity.

The company is usually set up with a number of different classes of shares, with people like mothers, the GP’s partner and children each holding a different class of shares.

While this is considered normal tax planning in the professions, HMRC could consider it to be tax avoidance if not done correctly. HMRC is targeting small limited companies at the moment because it believes they are used mainly as tax-avoidance vehicles. And we expect that as HMRC becomes more aware of the use of companies by GPs, there are a number of ways that it may seek to challenge this.

If a limited company is used, ideally the fees will be invoiced directly by the company to the end user – say, another practice for out-of-hours cover. There will be a contract between the limited company and the end user and no income will pass via the GP’s partnership.

In practice, it is easier to keep to existing arrangements where the partnership deals with all of the contracts and the administration and for the limited company to

bill the partnership a one-off bill at the end of the year for the work done by each individual GP.

If the contract to supply the GP is with the partnership, then HMRC may argue that, in effect, this is just a settlement and the income should be assessed on the GP.

There is also currently consultation about mixed partnerships, where a limited company is a partner in a partnership. We would not be surprised if, when this becomes law, HMRC tries to argue that the medical professional’s limited company is, in effect, a corporate partner and that the income should be assessed on the medical professional.

What next

The most important thing anyone can do to avoid a tax investigation is to make sure that all of their records are kept in order. This should include recording

income properly and making sure proper mileage logs are maintained.

We would also suggest that it is a help to have an accountant who has experience in the area of medical practices and one who has regular meetings with the medical professional to make sure things are all going well.

If a medical professional has made significant errors, we would suggest they speak to someone who specialises in dealing with HMRC. 

Scott Gilbert (below) is the managing partner at Gilbert Tax Consultants LLP and has been dealing with tax investigation issues for nearly 30 years –11 of them with HMRC and the remainder in private practice

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Catching a code

The independent sector needs to embrace clinical coding to secure its future and look at the most cost-effective and efficient way to achieve this. Peter Connor explains why

It’s currently very difficult to demonstrate the excellent care available in the independent health sector or effectively address areas of concern, because we do not have reliable and comprehensive data.

If this is to change, then clinical coding must become a priority. Quite simply, clinical coding is key to the collation and analysis of masses of patient information. A consultant’s medical notes are an important record of an individual patient’s presentation, examination, diagnosis and treatment, but the ‘long-form’ information must then be converted into short alphanumeric codes to make it suitable for computer processing and analysis.

c oding each hospital episode

enables the activity of each provider to be recorded and classified, ensuring that they are appropriately re-imbursed and their results can be benchmarked. Moreover, the use of diagnosis codes allows data to be ‘riskadjusted’ to take account of each provider’s patient mix, so the resultant Quality and Outcomes data is more meaningful.

clinical coding is not yet a consistent feature of independent health provision and there are a number of challenges to be addressed before this can happen. to understand these, it is helpful to know a little more about the different purposes of clinical coding in the private and public sectors and how that has influenced its development.

it’s currently very difficult to demonstrate the excellent care available in the independent health sector because we do not have reliable and comprehensive data

Speaking different languages until now, the adoption of clinical codes by the independent sector has been sporadic and inconsistent because they have been seen as little more than a means of getting a bill settled rather than an information resource. As a result, the private sector has evolved different systems of coding to its n H s counterpart, as set out below.

procedure codes

t he n H s uses a coding system from the Office of Population c ensuses and s urveys (OP cs –4.6) to record procedures carried out on patients. under Payment by results, OPcs codes are used to determine the appropriate Healthcare resource Group – and therefore tariff – for an episode of care, but they have other important purposes, including operational planning.

codes cover interventions, surgical procedures, diagnostic imaging, testing, rehabilitation, high-cost drugs and methods of carrying out procedures. several codes may therefore be assigned to a procedure – for example, to show the type of stent used for endovascular surgery.

While OP cs is designed and optimised for clinical coding, the independent sector uses a system of procedure codes which is designed and optimised for reimbursement. Developed by the c linical c oding and s chedule Development Group (ccsD), the schedule was originally based on the OPcs code format, but it has been simplified so it can be used by clinicians and other untrained coders when submitting bills.

For example, there are just over

2,000 ccsD codes compared to over 6,000 OPcs codes and fewer rules and conventions.

u ntil recently, ccs D only addressed surgical interventions, while non-procedural services such as pathology, pharmacology and radiology were not covered. Independent practitioners generally use the Industry standard charge codes developed by Healthcode.

n or is there any mechanism through which an unlisted procedure can be coded and understood by remote users of the data. In these situations, providers might use a code assigned to a ‘similar’ procedure or select more than one code to reflect the complexity of the procedure.

diagnosis codes

Within the nHs, patient diagnoses and co-morbidities must be coded using the International statistical c lassification of Diseases (IcD-10) which was developed by the World Health Organisation (WHO).

IcD-10 consists of 17,872 codes and users can ‘drill down’ to a very detailed information about each disease or condition, such as its cause and the affected part of the body.

n H s coders are expected to record ‘as many diagnoses as required’ against a patient episode. t he primary diagnosis is listed first – or the main symptom/ abnormal finding where there is no diagnosis – and then secondary conditions or comorbidities.

codes with dagger and asterisk symbols can be used to show where the disease has been caused by an underlying condition – for example, neuropathy in a type 2 diabetic. the ‘dagger’ code would be diabetes, while the neuropathy would have an ‘asterisk’ code.

Diagnosis coding has not been widely adopted within the independent sector. But where diagnosis codes are used, providers and insurers have tended to use a rather antiquated version of IcD-9, which was first introduced in 1975 and contains only around 7,000 codes. t his restricts the amount of information that can be encoded.

As with ccs D codes, the purpose of IcD-9 has been for invoicing, rather than creating a rich resource of clinical information.

coding on the agenda

A number of factors have been driving the adoption of clinical coding, including:

 The convergence of private and public healthcare – private hospitals that treat nHs-funded patients must work to nHs coding systems, while healthcare commissioners will want to base their decisions on credible performance data.

 Private medical insurers –PMIs increasingly expect invoices to be submitted electronically with appropriate ccsD codes.

However, the industry reached a watershed moment with the competition and Markets Authority’s ( c MA’s) final report into the private healthcare market1 in April 2014 which included the following remedy:

‘In order to facilitate the analysis and publication of meaningful performance statistics, we would expect the data provided by the private hospital operators to: …

(c) contain diagnostic and procedure coding for each episode in order to allow for risk-adjustment where appropriate – diagnostic coding should include full details of patient co-morbidities;

(d) be fully comparable with that collected by the nHs to allow the information organisation to report performance measures for the whole of consultants’ practices, both nHs and private, since this is the relevant basis on which to judge performance;

(e) be published in stages over the three years following the publication of our final report, with all data made available to the public from April 2017 onwards.’

t he c MA stopped short of imposing IcD-10 but it did make clear that ‘an appropriate diagnostic coding system should be an internationally recognised standard such as IcD-10 coding’.

It will now be for the Information Organisation (IO) charged with processing and publishing the performance information to agree the appropriate system to use with its members.

implementation challenges t he adoption of coding will require an effort of will from the industry, as there will be significant technical and practical hurdles to overcome, including:

1. dual-coding

the cMA concluded it wasn’t necessary for insurers to change their billing system to OP cs , which would be ‘costly and disruptive’, but only that hospitals should provide procedure coding on the same basis as the nHs providers.

t his means independent providers face the technical challenge of recording all activity using multiple systems of clinical coding: ccs D codes for billing insurers, and OP cs procedure codes for submission to the new Information Organisation (IO), as well as IcD-10 diagnosis codes.

2. Technology

As described above, the clinical coding systems used in the nHs are significantly more complex than those of the independent sector and it is open to question whether or not the systems currently used to record and process diagnosis codes can support this.

For example, when it comes to diagnosis coding, we believe there are a number of system parameters required to correctly record an IcD-10 code:

 A primary indicator to allow the identification of the primary diagnosis code;

 t he ability to accommodate sufficient characters available to record any single code, including dagger or asterisk indicators;

 the capacity to record a theoretically infinite number of diagnosis codes.

A more detailed technical description is set out in Healthcode’s White Paper on this issue.2

3. Training needs

n H s hospitals can call upon a team of trained clinical coders to convert medical records into coded form and some private hospital groups already have this facility, but it is not commonplace.

While each organisation will have their own approach to recruiting or contracting qualified personnel and associated support systems, the key will be to resource and organise coding departments so their work does not hinder invoice processing.

t he private sector typically invoices a few days after a patient has been discharged and providers will understandably want to avoid possible delays.

One more aspect of training and support which should not be overlooked is ensuring that doctors understand their role in the process as the responsible clinician. Although they are unlikely to have any direct involvement in coding within a hospital, consultants’ notes form the source reference for the clinical coding teams and they should expect to be questioned when their records do not offer sufficient information for accurate coding.

implementation shortcuts t hese challenges may seem daunting, but providers will be able to take advantage of existing coding technology, such as:

A. Mapping

code mapping is the technology which enables codes from one classification system to be ‘converted’ into another, such as OPcs to ccsD or vice versa. Healthcode’s code mapping software is already being used by the Private Hospital Information network (PHIn) to transpose hospital episodes recorded using the ccsD codes into OPcs

And for some years, Healthcode has been able to map I c D-10 codes down to IcD-9 so that providers who use the international standard can reference the appropriate coding system on their invoices.

realistically, mapping between disparate code sets involves some level of compromise. Our white paper3 sets out the mapping issues between ccsD and OPcs in more detail, but, in summary, Healthcode is confident that precise oneto-one mapping is possible for 46% of ccs D codes. In around 10% there is no equivalent map because the code description is too broad or the ccsD code does not describe a procedure – for instance, t 3930 retroperitoneal abscess – and the remaining ccsD codes offer multiple mapping possibilities.

In the latter category, it will be necessary for the responsible clinician and coder to work collaboratively to determine the appropriate code (see box opposite).

Mapping technology will never completely replace a trained coder’s considered evaluation, but it could eliminate the need for pro-

viders to maintain parallel coding systems for different purposes, making the process more efficient. Meanwhile, clinicians in independent practice who need to provide coding information would only need to hold a list of the appropriate ‘maps’ to cover their most common procedures.

b code search tools

For those with limited in-house resources, the latest search software should make the process of finding the appropriate code much quicker and more intuitive, even for users untrained in coding. Healthcode’s latest coding toolkit allows providers to look up the different diagnosis and procedure codes used in the nHs and independent sector using an intuitive plain language terminology search, a body map or clinical description. this means there is no need to send records to central coding teams, which can delay

CCSd Code: b3594 ‘PlaSTiC ProCedureS on niPPle’

There are eight possible codes in oPCS 4.6 (in blue). The responsible clinician would need to confirm which is the most appropriate.

b35 oPeraTionS on niPPle (CaTegory heading)

➱ b35.1 Transposition of nipple

➱ b35.2 excision of nipple

➱ b35.3 extirpation of lesion of nipple

➱ b35.4 Plastic operations on nipple

➱ b35.6 eversion of nipple

➱ b35.8 other specified operation on nipple

➱ b35.9 unspecified operation on nipple

➱ b36 reconstruction of nipple and areola

➱ b36.1 reconstruction of nipple

➱ b36.2 nipple sharing using other tissue

➱ b36.3 nipple sharing neC

➱ b36.4 Tattooing of nipple

➱ b36.8 other specified reconstruction of nipple and areola

➱ b36.9 unspecified reconstruction of nipple and areola

the billing process for privately insured patients.

It will be no surprise to readers that Healthcode sees clinical coding as the language of healthcare

A dedicated service for GPs, 24 hours a day, 7 days a week admissions appointments diagnostic tests adult and paediatric referrals bupacromwellhospital.com/cromwell-direct examPle of maPPing from CCSd To oPCS

the need for meaningful Quality and Outcomes information to compete in today’s healthcare market.

What’s more, they recognise that to achieve this, their organisations will need to embrace clinical coding. Healthcode is ready to work with these providers to ensure the transition to coding is as efficient and cost-effective as possible. 

Peter Connor is managing director of Healthcode

References

1. Paragraph 11.571, Private Healthcare Market investigation, Competition and Markets Authority, April 2014.

provision: our company name says it all. But we are not alone. the independent sector is fortunate to have dynamic and forwardthinking leaders who appreciate

2. The path to the adoption of ICD-10 diagnosis coding for the independent sector, Healthcode, May 2014.

3. A comparison of CCSD and OPCS procedure classifications and an assessment of mapping challenges, Healthcode, April 2014.

You must shout to

get to the top

If you are in a hurry to get to the top of the pile in private practice, then be sure your innate conservatism doesn’t get in your own way, says surgeon Mr Dev Lall (left)

There is an amusing sign i saw in a shop window the other day:

TEEnAgERS

TiRED oF BEing hARASSED BY YoUR pAREnTS?

AcT noW! moVE oUT, gET A JoB, pAY YoUR oWn WAY. WhiLE YoU STiLL knoW EVERYThing!!!

You see the problem with being smart and in a hurry is that sometimes we think we can do it all unaided. That it is easy.

The really smart ones among us know that it simply is not possible to do – and know – everything.

They frequently do well because they are not afraid to ask for help. They seek out experts in other fields to help them do what they need to get done.

And private practice is no different. Because, as doctors, we have two problems, i think.

Firstly, like the teenagers

referred to in the poster, we are both smart enough to think we can do it all and often we are also in a hurry. having fought our way to the top of the greasy pole, we now want the rewards that we have seen from afar. Not least of which is the income that comes from a busy private practice. The trouble is that, as a newly appointed consultant, it is easy to be a fraction naïve, perhaps, about just what is required to create that thriving private practice. There are hurdles other than the ‘meat and potatoes’ ones of finding rooms, a good secretary and so on.

Recognising that you need to learn new skills

When it comes to the practice of medicine, few – if any – of us are foolish or arrogant enough to think we can carry out a new procedure within our own specialty and get great results without some sort of learning curve.

Yet how many of us approach our private practices this way when starting out? After all, private practice is a business and, as such, is something beyond the experience and training of most of us in hospital medicine.

The real problem you face in your private practice

One thing i have learned from other business ventures i have been involved in is that the real problem is usually not ‘doing the thing’ that the business requires. i t is not making the product or the delivery of diagnostic services or the treatment of patients.

The real hurdle that every business faces – and the reason it will struggle until it overcomes that hurdle –is the marketing of that business

No, the real hurdle that every business faces – and the reason it will struggle until it overcomes that hurdle – is the marketing of that business.

i n fact, it is even more fundamental than that: it is recognising that marketing is the most important thing. Because what effective marketing does is to deliver a steady stream of new patients to your practice and, in doing so, generate income.

Of course, the obvious and sensible thing to do would be to ask clinician colleagues who have ‘been there, done that’ how to get started. i t sounds simple and straightforward enough. But there are problems with this obvious approach.

Secrecy

The first problem is that doctors are astonishingly close-mouthed about their private practices; almost pathologically so. We do

not like to talk about how we are really doing and what we did to get us where we are.

And no matter how well or other wise things are going in terms of private work, we always tend to say things are ‘great!’ and ‘couldn’t be better!’

Jealousy

We also tend to have an irrational jealousy of how others are doing – even in unrelated specialties. so the general surgeon will be keeping a watchful eye on his general surgical colleagues, for fear their activities encroach on his own bottom line.

Yet, bizarrely, he will also be discomfited at the thought of colleagues in totally unrelated specialties who might be doing better than he is, despite the fact that there might be no overlap or competition between the two specialties whatsoever.

The part played by luck

Finally, those practices that do succeed are not necessarily those that have promoted themselves well – especially since it is only in recent years that doctors have been allowed to promote themselves and their practices.

They may have just survived the longest and simply stepped into ‘dead men’s boots’ as previous senior colleagues retired. From my experience, this certainly appears to be the case. in which case, they would not be able to offer much useful advice for a newbie, even if they were willing to do so. so, where else can we go to learn the skills we need to grow our practices?

Experts in business growth and marketing

There are companies out there which specialise in helping doctors to grow their private practices – indeed, this is the nature of my own business. But before approaching any of these, i would always recommend learning at least the basics of marketing for yourself first. And the best way to do that, of course, is to spend time on Amazon and buy some books on the subject.

The reason this is so important is because, until you have some background information, you have no idea what questions to ask or whether the person you are talking to is giving you sensible answers.

And until you know that, you do not know if the service you are being offered is genuinely valuable or not.

Take search engine optimisation ( se O) for example. This is the means whereby you engineer certain aspects of your website, among other things, to make it more likely for pages on your site to come up high on the natural search engine listings when people search for a service you provide.

in this way, you get more visitors to your website and, so the theory goes, more patients.

Personally, i think se O is a pointless and expensive exercise with very hit-and-miss results, which, for various reasons, is only going to get worse.

But many people disagree with me and will try and sell you seO services as part of your website management/marketing strategy. so you have to judge for yourself if you think seO is likely to be worth it, and the only way to do that is by learning something about it before asking the person selling you the service some pointed questions.

The same is true of other marketing strategies, of course, although seO is certainly one of the more controversial. You do not necessarily need to learn how to carry out pay-per-click marketing, forum marketing and the rest – although i contend time spent learning how to market yourself is time very well spent – but at the least you need to understand how and why certain strategies work. in this way, you can decide how you might like to market your own practice and also evaluate services you might be offered by others.

A willingness to market your practice

While a knowledge of marketing is important to growing your practice, perhaps more important still is an actual willingness to do so, and this is where so many fall down. They want the public awareness without actually going out there to make the public aware of them.

The trouble is that, as doctors, we are all naturally rather conservative in our approach to our skills and abilities. Yes, even us surgeons. We are, when it comes down to it, reluctant to stand up and announce our presence to the

world at large, to speak up about how we can help patients. i n a very real-world, practical sense, we are shy. We want the patients, but we don’t want to stand up and invite them to come and see us.

As any angst-ridden teenager at a school disco will tell you, that is not a strategy known for its success rate.

Personally, I think search engine optimisation is a pointless and expensive exercise with very hit-andmiss results

And there’s another lesson from the dance floor too: not every marketing strategy you try is going to work.

Very few of your marketing efforts work very well first time. Progress comes in fits and starts, with many of your practice marketing efforts yielding so-so results the first time around. in fact, a few will fail miserably. Many will do OK, needing tweaking and tuning to give modest results for your efforts. But the odd one will do spectacularly well, generating a raft of patients which blow all your previous results out of the water.

The trouble is, before you implement the campaign, you have no idea which is a winner or not. But the thing is that it is impossible to predict your results in advance. The only way to find out is to try it out; to implement things and see what kind of results you get.

The difficulty is that often our expectations are too high and we expect a torrent of new patients with our first – and indeed every – campaign. Yet while we recognise that this is perhaps unrealistic, it is hard to accept the defeat and return to the drawing board afterwards and try again.

But the important thing is this: effective marketing requires practice and persistence. And no effort is ever a complete loss, because every marketing campaign you run adds awareness of you and your practice both among patients and GPs, even if there is not an immediate influx of new patients.

Just like the teenager at the school disco, if you keep ‘putting yourself out there’, you WiLL get the girl. 

Mr Dev Lall is an upper-GI surgeon and runs a specialist private practice consultancy www.PrivatePractice Expert.co.uk

A company is most tax-efficient at its

The tax considerations of operating a private practice through a limited company have been well reported in Independent Practitioner Today, but the most tax-efficient era of a company’s existence can be at termination. James Gransby (right) analyses end-of-life care for your firm

JusT BY operating a private practice through a limited company, in itself, does not ensure tax efficiency.

i t is only by careful planning that any potential tax savings will be achieved.

r etaining profits within the company throughout its life can enable advantage to be taken of the lowest tax rates of all.

Background and introducing capital gains tax

While a company is trading, profits are extracted by declaring a combination of salary and dividends, possibly involving a spouse and perhaps other family members.

Other methods – such as making pension contributions, company car, charging director’s loan interest or renting personal assets to the company, to name but a

few – may have been used in combination.

until this point, the favourably low capital gains tax rates have not been used, but now that the company has come to an end, there is the opportunity to do so.

At the end of the company’s life a different approach should be taken to ensure tax efficiency.

Two very important principles are relevant:

1Dividends paid to a basic-rate taxpayer do not incur an income tax liability.

2Balances over £25,000 require a formal liquidation to benefit from capital gains tax rates.

Both of these factors are extremely important when looking at final profit extraction.

For example, if the shareholder(s) are basic-rate taxpayers, and assuming that the money is not needed immediately, then

At the end of the company’s life, a different approach should be taken to ensure tax efficiency

dividends can be drip-fed out of the company to top up personal taxable income to just below the higher-rate threshold – £41,865 in the 2014-15 tax year.

This will have the effect of draining the remaining cash resource from the company out into the taxpayer’s hands without any further tax liability. A perfect solution. No further tax is payable.

But if one of the shareholders is a higher-rate taxpayer or if the cash needs to be extracted in a short time-scale then things become more complex, but still very tax-efficient.

scenario 1

Joint share ownership with spouse

One spouse is a higher-rate taxpayer (income over £41,865) in ➱ p30

retirement while the other is a basic-rate taxpayer.

i n this scenario, up to half of the retained profits of the company could be extracted to the basic-rate tax shareholder, the higher-rate taxpayer waiving their entitlement to the dividend.

There are particular rules regarding dividend waivers, so care should be taken.

For example, a succession of waivers would be caught by antiavoidance legislation and, indeed, a waiver may not be valid at all, so approach with caution. if the retained profit remaining in the company is then less than £25,000, then it can be extracted at capital gains tax rates, although there is anti-avoidance legislation to ensure that final dividend and

capital extractions do not happen as linked events. early planning is essential. if the remaining retained profits are greater than £25,000, then another course of action will be required in addition of the above. A solvent liquidation could be performed if the numbers stack up and i will explore this later in this article.

WILL A LIquIDATIon sAvE you MonEy? – £80k ExAMPLE

AssuMPTIons:

Remaining retained profits in company of £80,000

Two shareholders, both higher-rate taxpayers in 2014-15 tax year

Gain qualifies for Entrepreneurs Relief

Capital gains tax (CGT) annual exemption intact, no CGT losses brought forward

TAx PAyAbLE WITHouT A LIquIDATIon shareholder 1 shareholder 2

Retained profits: max. £25k at CGT rates

£12,500 £12,500 Less – annual exemption (£11,000) (£11,000)

Taxable gain

CGT at 10% (Entrepreneurs Relief

Total

£55,000

Total

£1,500 £1,500

TAx PAyAbLE WITH A LIquIDATIon shareholder 1 shareholder 2

Retained profits – full £80k at CGT rates

£40,000 £40,000 Less – annual exemption (£11,000) (£11,000)

Taxable gain

£29,000 £29,000

CGT at 10% (Entrepreneurs Relief rate) £2,900 £2,900

Total capital gains tax payable

Approx. cost of liquidation

Total

£5,800

£4,800

scenario 2

Shareholder(s) all higher-rate taxpayers extraction of remaining profits as dividends will incur an effective tax rate of at least 25%.

Methods such as paying a salary or making pension contributions will likely be ineffective if there is no trade taking place, as they would not stand up to the test of commerciality.

If in doubt, HM Revenue and Customs can give an opinion on a company’s trading status for the purpose of a shareholder’s Entrepreneurs Relief claim

As above, if retained profits are less than £25,000, then capital treatment can be, and probably should be, taken advantage of.

Example extraction of £25,000 – Joint shareholders Tax legislation allows up to £25,000 of final retained profits to be extracted on termination at potentially favourable capital gains tax rates.

e very u K domiciled taxpayer currently has an annual exempt amount of £11,000 on capital gains each tax year, with any excess being taxed at capital gains tax rates (10% if e ntrepreneurs relief applies, 18% for a basic-rate taxpayer or 28% for a higher-rate taxpayer).

Assuming entrepreneurs relief applies and that the annual exemption has not been used on other capital gains in that tax year, then joint shareholders can extract the final £25,000 suffering only £300 tax as demonstrated within the example calculation (see box to the left).

As soon as the balance exceeds £25,000, extraction using capital gains tax rates is only possible by liquidating the company. This action must be performed by a licensed insolvency practitioner.

As the company is solvent and is able to meet all of its liabilities, then a solvent liquidation, known as a ‘Member’s Voluntary Liquidation’ would be performed. While it involves the word liquidation, it will not tarnish the directors’ or shareholders’ names in any way.

Extraction as capital using a member’s Voluntary Liquidation (mVL)

Assuming that all available cash has been extracted via other methods – i.e. paying down directors loan account balances fully, tax-efficient dividends paid, justifiable salaries exhausted, any final

pension contributions made –then an MVL may be worthwhile.

Any proceeds distributed during such a liquidation have capital treatment for tax purposes, so where e ntrepreneurs’ r elief is available, the tax rate on the taxable gain is 10%.

Entrepreneurs’ Relief (ER)

The conditions which must exist for e ntrepreneurs r elief to be available to an individual can be summarised as follows:

 The company must be a trading company;

 The individual must be an officer or employee of the company;

 The individual must own at least 5% of the company’s ordinary share capital and be able to exercise 5% of the voting rights within the company;

 All of the above conditions must be met throughout the 12-month period leading up to the date of disposal where the company continues to trade to that time;

 Where the company ceases to trade, the conditions must be met throughout the 12-month period immediately prior to the date of cessation, provided the shares are sold within three years of the date of cessation.

One uncertainty is whether the trading status of a company will be challenged if excessive cash balances are held.

h olding an investment property in the company would certainly block the availability of er, but inactive management of cash balances may not. Advice will need to be taken on this point before reliance is placed on er being available.

i f in doubt, h M r evenue and Customs can give an opinion on a company’s trading status for the purpose of a shareholder’s entrepreneurs relief claim.

The cost of liquidation and overall tax efficiency –£80,000 example

At a retained profit level of £80,000 or above, the cost savings start to stack up.

With £80,000 of retained profits, a liquidation gives an overall saving of £3,450, as demonstrated in the example calculation (see box on the left).

This is after absorbing the liquidator’s costs based on benchmark prices for a well structured and efficient MVL, approximately £4,000 + VAT.

For other retained profit levels entered into the same example, the figures are:



£57,000 = £Nil

this is the break-even point



£80,000 = £3,450

overall saving as per example







£125,000 = £12,200

overall saving

£250,000 = £28,950

overall saving

£500,000 = £66,450

overall saving

For those who had operated their limited company as an ancillary pension pot or piggy bank for their retirement and particularly if they find themselves higherrate taxpayers on which any dividends will be extracted at 25%, then the allure of benefiting from 10% capital gains tax rates, where possible, is very appealing.

in addition to the overall savings, there is also the advantage that the cash has been fully placed into the shareholder’s hands in a short space of time without having to drip-feed it out over a number of tax years.

it must be considered whether the extraction of the profits would expose the cash to inheritance tax ( ih T). But if the trade had ceased and the money had been dormant in the company account, then it is unlikely that the necessary ihT relief would be granted in any event and so there may be no increased exposure from having the cash in the individual’s hands.

i n fact, this could present the opportunity to perform inheritance tax planning – for instance, gifts into trust or gifts out of surplus income.

Whether you have a company which has stopped trading, is near to the end of its life or has just come into existence, the message is this: retain as much within it as possible and if the final balance is sufficient, then a liquidation could secure an even more favourable outcome. 

James Gransby is a partner and Association of Independent Specialist Medical Accountants’ nominated specialist at MHA MacIntyre Hudson

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MDU medico-legal adviser Dr Rhona Siegmeth (below) advises doctors practising in her former specialty of anaesthetics

Dilemma 1 Patient says he was awake in op

QI am an anaesthetist working with the cardiac surgery team at a private hospital. This morning, we carried out a heart bypass on a patient in his 70s with coronary heart disease and poor left ventricular function.

When the surgeon split the patient’s sternum, I noticed he had a raised heart rate and blood pressure which prompted me to adjust the level of anaesthetic, but otherwise the operation went well.

Now the intensive care nurse has told me that, since regaining consciousness, the patient claims to have heard sounds and felt pain during the procedure. How should I manage this situation?

AAnaesthetic awareness is highly unusual and, in many cases, it turns out that the patient had been confused by dreams they had at the time of the

Ethical help

operation or recall something that happened in the recovery room.

However, the indications you noticed during the procedure mean it is possible that he has experienced some level of awareness and to avoid making the situation worse for him – and for you – it is therefore important to act promptly.

Go and see the patient as soon as possible, if necessary arranging for a member of their family to be with them for support.

It is essential that the patient feels they are being listened to and taken seriously by all the healthcare staff treating him, so be careful not to contradict him or imply he is imagining things.

Instead, ask him to tell you what they remember, such as the conversations taking place or whether there was music playing. That way, you are better placed to determine the extent of his awareness and the possible implications.

It may take several conversations with the patient to get the full picture. It is especially important to confirm and acknowledge the pain that the patient felt and

you may wish to refer him for further counselling if you feel it would be beneficial.

In line with GMC guidance, you should apologise to the patient for the traumatic experience they have had and account for what has happened.

For example, this may involve an explanation of the factors which influenced your decision to use a lighter dose of general anaesthetic, including his health.

Offer counselling

It’s also incumbent on you to talk with the patient about what happens next. The Royal College of Anaesthetists, which has produced a patient leaflet about anaesthetic awareness,1 advises that patients should be offered counselling following incidents, as they may go on to experience post-traumatic stress disorder (PTSD).

As with any treatment, you will also need to write to the patient’s GP, copying the patient, and explain what has happened in case he shows symptoms of PTSD at a later date.

Finally, you should document what has happened and your

actions and you should ensure that any adverse incident reporting procedures are followed. This will be an important reference for any hospital investigation or in the event of a complaint. You are ethically obliged to contribute to any inquiry into an adverse incident, but it is also important for you to reflect on what may have gone wrong on this occasion and what you might do differently next time.

Dilemma 2

I have little faith in my appraiser

Q

I am approaching my annual appraisal and, this year, I’ve been asked to take part in an audit of clinical outcomes which will then be discussed with my appraiser.

Unfortunately, he has little experience of my specialty and I am concerned he will simplistically benchmark my results against colleagues with a different case mix. Can I refuse to cooperate?

for anaesthetists

AIt’s natural to be concerned about the way that the audit results will be adjusted to account for your complex and high-risk patients.

However, there is a risk that your appraiser could consider an outright refusal to co-operate as a sign that you are not prepared to engage with the revalidation process. This could have serious consequences for your ability to revalidate and remain on the medical register.

Participating in quality improvement activity, such as clinical audits or a case review, is one of six types of supporting evidence that doctors need to provide for

revalidation. Most importantly, during your appraisal discussion, you will be expected to show that you have reflected on the results and taken appropriate action, if necessary.2

Your appraiser is more likely to be sympathetic to your concerns about the audit methodology if you have participated constructively in the process.

On the other hand, if your appraiser and Responsible Officer (RO) see your refusal to co-operate as evidence you have not engaged with the revalidation process, he or she could notify the GMC. This could result in a warning letter from the GMC.

Continued refusal to co-operate could mean that the date of your revalidation is brought forward, so your RO could formally notify the GMC of your non-engagement. The GMC would then begin the process of withdrawing your licence to practise, although there is a 28-day appeal period.

In general, the MDU recommends that doctors take a proactive approach to quality improvement. This may include carefully recording your own outcomes data –seeking colleagues’ input and opinion when appropriate – and reporting any systems, management or resource failures that have implications for patient safety. If

you are able to provide evidence of this reflective approach in your appraisal, it should help ensure the audit results are seen with the appropriate perspective. 

References

1. Awareness during general anaesthesia, RCOA, 21/5/2013 www.rcoa.ac.uk/document-store/awareness-during-general-anaesthesia.

2. Supporting information for appraisal and revalidation, GMC, March 2012. www. gmc-uk.org/RT___Supporting_information_for_appraisal_and_revalidation___ DC5485.pdf_55024594.pdf.

Dr Rhona Siegmeth is a MDU medicolegal adviser

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Assess the heAlth of your billing system

Are you a better ?

So how is the business side of your private practice performing? Really. Use Garry Chapman’s ‘better biller quiz’ to find out

3

WhAt system Do you use to store the inVoiCes sent?

1

hoW frequently Do you rAise inVoiCes?

a) Daily

b) Weekly

c) Monthly

d) Whenever time permits

2

WhAt system Do you use to rAise inVoiCes?

a) A practice management system

b) Word software

c) Excel software

d) Any other method

The Association of Independent Specialist Medical Accountants is a national network of firms advising over 3,000 medical practices across the UK. For some of the best advice available on accounting, taxation and pensions, visit our website and find your nearest AISMA accountant.

a) A practice management system

b) Word

c) Excel

d) Manual folders

4

Do you hAVe the Ability to senD inVoiCes eleCtroniCAlly to the PriVAte meDiCAl insurers?

a) Yes, to all of the private medical insurers (PMIs) that accept invoices electronically

b) Yes, but not to all of them

c) Yes, but only to one of them

d) No

5

hoW frequently Do you CheCK for ChAnges to the CCsD CoDing struCture?

a) Once a month

b) Once a quarter

c) Whenever time permits

d) Never

6

hoW frequently Do you CheCK the fee sCheDule of eACh Pmi?

a) Once a month

b) Once a quarter

c) Whenever time permits

d) Never

7

When you reCeiVe the remittAnCe from the Pmi, hoW quiCKly Do you reConCile the PAyment?

a) Same day

b) Within a week

c) Within a month

d) Whenever time permits

8

hoW frequently Do you ChAse the Pmis if they hAVe not PAiD An inVoiCe?

a) Same day

b) Within a week

c) Within a month

d) Whenever time permits

9

hoW Do you ChAse self-PAy PAtients for outstAnDing inVoiCes?

a) Phone several times and then send up to three chase letters

b) Phone once and send three chase letters

c) Phone several times

d) Phone once

10

hoW often Do you ChAse self-PAy PAtients for outstAnDing inVoiCes?

a) Daily

b) Weekly

c) Monthly

d) Whenever time permits

How did you score?

now go through your answers giving yourself the following points:

A: 3pts

b: 2pts

C: 1pt

D: 0pt

if your total score is:

30 points

Perfect, you have everything under control and must have no bad debt.

20-29 points

Very good, but there is still room for improvement, particularly in certain areas. I would strongly suggest that you focus on those areas where you scored poorly in order to identify how you can improve the billing side of the practice.

5-19 points

Very poor. I would suggest that you review the billing side of your practice quickly, as it is likely that you are losing money on a regular basis.

0-5 points

Retire from private practice now! It is likely that it is costing you money to practise rather than earning you an income.

Garry Chapman is managing director at Medical Billing and Collection

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whAT

A SUccESSFUl

No great secret to good management

Good practice management has been described as the key to your commercial success. So we asked Maitland Cook (right) to spell out what this means in practice

Last month, he showed the importance of making things appear inviting, overseeing every aspect of the business operation as though it is your own home. This month, he looks at what to do when the patient leaves you and – controversially for some – suggests you bill them there and then

When the patient leaves you, send them away with clear, concise instructions and a fully completed charge sheet, because the next process is paramount in pursuing a commercially successful practice. It is the billing!

If possible, all billing and payments should be done at the time of the patient visit. Patients no longer expect to be invoiced in arrears.

I believe if the system is simple and speedy from the patient’s perspective, they will settle at the time of their visit.

therefore, all invoicing should be done at time of appointment or within 24 hours maximum of each working day.

All follow-up letters and any ongoing referral arrangements should be made within 24 hours, and each day’s work should be rec-

onciled and signed off as complete by the practice manager within 24 hours at the latest for every working day.

Any follow-up appointments should be made before the patient leaves the premises and all offsite investigations also confirmed at the same time to the patient, always in writing.

Satisfied customers

these basic systems ensure a high degree of client satisfaction, and just as importantly, the commercial success of the practice.

General administration has to be fitted in around patient demands, but it is extremely important to give this equal priority within the personal responsibility attitude that is vital.

Attention to detail is paramount:

 Is the clinic clean at all times?

 Are the lavatories fully stocked, and checked hourly?

 Is the maintenance up to date?

 Are the medical trolleys restocked through the day?

 Are the magazines all current?

 Are the walls scuffed?

 Is the carpet and flooring presentable?

 Are all staff in their uniforms?

 Are they wearing their badges?

 h as the front entrance been swept?

 Is the car park tidy?

t hese items, however minor they may seem, all help create the

environment of personal, caring involvement and reflect considerable attention to detail.

t he patients pick up on this, and feel comfortable and content in such an atmosphere. every issue we have mentioned or considered to this point is the daily management of the practice, but what we have set up by doing this is a platform for commercial success.

We will have achieved a high level of patient satisfaction, allied to our efficiency in linking bookings, administration and financial efficiency. We are assuming throughout that the clinical standards are without question. It is only at this point that the practice management can, and must, consider moving the daily operation forward from days to weeks and beyond.

Analyse performance

e very week, the daily performance needs to be analysed, and compared to pre-planned costs, to same period in previous year, to year-to-date performance.

Debt must be monitored at all times and particularly in relation to the private medical insurance companies.

In principle, the target for debt should be 60 days only; that is to say, current month plus 30 days. the principle of no credit being given, with the obvious exception

The key members of the team are the receptionists and the finance staff. It is they who will deal with every patient; they will be the people who will ‘make or break’ the patient journey of the insurance companies, should be the overall aim, however difficult to achieve.

Stock control

Purchasing and stock control is a further area that is very important to the commercial success of the practice.

All purchasing should be carried out on a weekly basis wherever possible; this will ensure stock levels are kept at a minimum, thereby not using vital liquidity.

All prices should be checked regularly and at least twice yearly with competitive suppliers.

As a matter of principle, all regular suppliers should be asked for discounts or reduced prices, and regulars should not charge for carriage and delivery.

Any supplier who refuses to negotiate should be made aware that he risks losing the business. A 10% saving on all supplies makes a significant difference to the bottom line of any business, but it has to be fought for.

So, to ensure the commercial success of the practice, what do we need in terms of management leadership?

The good practice manager the practice manager and management team are crucial to the overall success of any practice, including the commercial success. So what type of person should fulfil this role?

Firstly, it must be someone who will take personal responsibility for the practice, and will treat it like home.

Secondly, the manager must be a team player who will be able to motivate and lead the team from the doctors down to the cleaning staff – they all have to contribute to the team ethic to make the practice really effective.

In many ways, the key members of the team are the receptionists and the finance staff. It is they who will deal with every patient; they will be the people who will ‘make or break’ the patient journey.

If they ‘make’ it, the practice will have clients who want to be, and enjoy being, patients and who will wish to return on a regular basis confident in the care and consideration on offer.

the practice manager is, ideally, a friendly and avuncular personality who makes both patients and staff feel welcome, and who can and will lead by example.

By caring for the job, the doctors, the clinic and the success of the practice, the patient satisfaction and the commercial success of the practice will be ensured by this key attention to detail. 

Maitland Cook is a director of The Cadogan Clinic and also founder/ director of Maitland Cook Medical Management Services Ltd

A testament to good

Private doctors are sitting targets when it comes to inheritance tax. So don’t leave succession planning too late, warns Julia Rosenbloom (below)

It represents the final kick in the teeth for many as far as the tax system is concerned: inheritance tax (IHt).

t he wealth an individual has accumulated throughout their lifetime and in relation to which various taxes have been paid along the way is then charged to a further 40% tax on their death.

And only the first £325,000 or £650,000 for married couples/ civil partners (I will refer to them simply as ‘spouse’ for ease) is automatically exempt. so doctors tend to be sitting targets.

thankfully, there are ways independent practitioners can manage such liabilities, but it does require advance consideration.

Many IHt management strategies require a certain survival period, so it is ironic that one thing I, as a tax adviser, have in common with the medical profession is my ‘professional’ interest in people’s general health.

However, with IH t and death going hand in hand, it is easy to see why it might be something people would rather put off thinking about.

make a will

While the prospect of deciding who gets your worldly goods after your demise might not be the cheeriest of exercises, it is an important process. there are two main reasons for this.

Firstly, it means you can ensure that the people you want to inherit do actually inherit – or, perhaps just as importantly, anyone who you don’t want to inherit does not.

If you don’t make a will, the intestacy rules apply and these determine your beneficiaries for you. no doubt, many a grave has been turned in for this very reason, as the dead person’s legacy has ended up ‘in the wrong person’s hands’.

s econdly, from a tax point of view, the application of the intestacy rules could have unexpected consequences. For example, the intestacy rules provide a statutory legacy of £250,000 to the surviving spouse and then the balance is split 50/50 between spouse and children.

For these purposes, step children are excluded unless they have been adopted by the deceased. Legacies to spouses are, in most cases, exempt.

However, legacies to children are taxable. Dying intestate can, therefore, have significant IH t consequences.

management of ihT liabilities

Making a will has ‘defensive’ benefits as far as IH t is concerned, but they provide only limited opportunities for the actual management of tax liabilities, which generally require robust advance planning.

good planning

One way of mitigating future IHt liabilities is to consider a suitable investment strategy.

Most investments are fully chargeable to IHt, but certain types of investment qualify for IH t relief; for instance, investments in certain business assets – including certain shares listed on the Alternative Investment Market –agricultural assets and woodlands. provided qualifying assets have been held for at least two years as at the date of death, they should be exempt from IHt

Another way of managing IHt liabilities is to make lifetime gifts. such gifts can be made directly to the intended beneficiary or, where the donor wishes to maintain some element of control, they may wish to make the gift into a trust or a ‘family investment company’. Whether a trust or a company is used for these purposes depends on a variety of factors, including the asset type and values.

except in fairly limited circumstances, such gifts require the donor to survive for at least seven years following the date of the gift to get the full IH t benefits –though benefits can start to accrue after three years.

Consequently, while there are still options where seven year survival is not expected, considering the issues sooner rather than later gives everyone the most options.

non-UK domiciled individuals

A detailed analysis of the IHt and other tax rules applying to nonUK domiciled individuals is outside of the scope of this article, but it is worth a mention, as such individuals can, in some circumstances, enjoy a highly beneficial tax regime. Conversely, there are situations where having such status is disadvantageous.

Identifying ‘non-doms’ is not always easy, but, even if you were born in the UK and have lived

here all your life, you might still be a non-dom if you were born to a non-UK father and have some intention to leave the UK at some point.

note that, generally, individuals who have been long-term resident in the UK – specifically, in 17 out of the last 20 tax years – are deemed to be domiciled in the UK for IH t purposes, thus negating some of the advantages.

However, due to the terms of certain double tax treaties, these deeming provisions do not apply to individuals of certain origins, most notably those domiciled in India and pakistan.

Individuals domiciled in such countries retain significant IH t benefits, irrespective of the length of time they have been resident in the UK.

the rules for non-doms are complex and anyone who thinks they or their spouse might be non-dom should take specialist advice.

IHt is an unpopular and penal tax. But the good news is that, with careful management, the situation might not be as bad as expected. It is important that matters are considered in a timely fashion.

Anyone with concerns about IH t should take appropriate advice and ideally before old age and/or health limit the options.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article.

 No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Julia Rosenbloom is associate director at Smith & Williamson, the accountancy and investment management group. The firm is official sponsor for the National Business Awards’ search for the Entrepreneur of the Year in both 2013 and 2014

Is the commission

worth the c in?

Is the Government set to join the exodus from active investments? Simon Bruce (left) explains why it can pay doctor investors to be passive

In A fURTHER blow to supporters of active management, the Government has proposed moving £85bn of local authority pension funds into low-cost passive investments in a bid to save £660m a year.

Independent actuarial consultants Hymans Robertson were charged with establishing how local government schemes could create cost savings and realise economies of scale.

Their proposals, which will be welcomed by cash-strapped councils and council taxpayers alike, will further intensify the ongoing debate about the value of fund managers and the fees they charge.

With active funds, a professional fund manager uses his judgement to guess which assets will perform better than average. Paying for this decision-making can involve high costs and high turnover, which eat into your returns.

Tracker or passive funds, on the other hand, are designed to track an index, market or asset class with significantly lower costs and turnover.

Hymans recommended that the 89 actively-managed pension

funds should be moved into a single passive investment vehicle following their report that found ‘active managers are no better at delivering value for taxpayers than low-cost options such as tracker funds’.

This bold move would save the pension scheme £420m a year in investment fees and transaction charges.

Removing high fees

The actuarial consultants claimed funds would not have seen lower returns had assets been managed passively over the previous ten years.

Without taking into account any impact on returns, they also claimed asset turnover fees, from the buying and selling of assets, would have been £190m lower in 2012-13 under passive investments.

A second proposal is to move the pension schemes’ 10% of assets held in ‘fund of funds’ –which incur higher fees than other actively managed accounts – into one common investment vehicle. It is estimated this would save the pension schemes a further £240m a year.

Reacting to the news, Michael

Decades of academic evidence suggests that active managers have been unable to demonstrate consistent enough outperformance to justify higher fees

Johnson of think-tank The Centre for Policy Studies, said: ‘This shows that the additional costs associated with active fund management, relative to passive management, are unjustified.’

However, the conclusion that it is not worth paying higher fees for active management is highly contentious. Many investment management firms claim to offer superior performance by adding manager expertise to outperform indices.

Yet decades of academic evidence suggests that while there may be some outperformance over time, active managers have been unable to demonstrate consistent enough outperformance to justify higher fees. f ees linked solely to performance are rare.

American economist and former winner of the n obel Prize for Economics, William Sharpe, tells us that fund managers, on average, cannot be expected to outperform the market since, in aggregate, they essentially are the market.

Before fees, the average manager will broadly match the market’s return – and, after fees, inevitably lag this return.

growth in passive funds

It is this cost advantage which is fuelling the growing movement away from the active camp. While the hedge fund managers have become billionaires, living off the fees from their funds’ return, credible studies continue to show that the clients’ pot of money would have fared equally in a low-cost tracker or passive fund.

In the hedge fund world, as with the investment fund industry more generally, you hear much less about the multiple fund closures and mergers than the occasional burst of super-performance that is reported loudly.

In the US, assets held in passive investment funds have more than doubled in the past four years, with the sector now accounting for $1.3trillion of assets – just under one-tenth of the country’s GDP.

In the five years running to June 2013, the ten state pension funds in America that paid the highest fees registered annual net returns of 1.3% while the ten that paid the least returned 2.4%.

Practise what they preach

Even the billionaire fund managers are waking up to the facts. A recent poll of 1,001 fund managers – those that make their living promoting active products – showed two-thirds have invested a sizeable amount of their personal savings in passive products. And 45% admitted they have invested a ‘significant portion’ of their own wealth in such funds.

Of course, the ubiquitous Warren Buffett – nicknamed ‘The Sage of Omaha’ – has an opinion on this. Describing what should happen to his personal portfolio after his death, he said: ‘My advice to the trustee could not be more simple: put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.’

In the UK, the introduction of the Retail Distribution Review (RDR) in 2013 has helped to drive the popularity of low-cost funds.

Historically, some financial advisers earned commissions paid by the fund-management company whose products they sold. Low-cost trackers did not pay any commission, so tended only to be recommended by those working for their clients rather than themselves. The RDR removed this conflict of interest by abolishing commission payments from investments entirely.

Financial crisis

On-the-ball active managers are also meant to ‘come into their own’ in times of challenging markets, steering funds to calmer waters while limiting investor casualties.

Yet, during the 2008-09 crash, it was apparent they had no more clue than anyone else how to avoid losses.

As a result, the £10.5bn UK pension scheme from Royal Dutch Shell announced in 2010 that it had placed an upper limit of 40% on the amount of its equity portfolio that it would entrust to ‘stock pickers’.

The official statement noted:

‘Active management . . . has not been very successful for many investors during this period of market turmoil, and the trustees have decided that they want to track the market indices more closely.’

Why is active management still the norm?

Despite the hard empirical evidence that active management cannot be relied on to deliver the outperformance it promises, it still accounts for the lion’s share of the market.

Some investors continue to believe that past fund performance is a guide to future activity, despite the clear warnings in place.

And the active camp has a strong marketing advantage to appeal to our egos – they can sell the idea of investing in a ‘best’ fund, rather than an ‘average’ one. It fosters a view of investment that then becomes deeply ingrained.

Yet anyone feeling confident in the ability of active managers should study the respected ‘scorecards’ for active versus passive returns produced by financial ratings agency Standard & Poor’s.

The latest report, to mid-2013, shows just over half (54%) of US equity funds were beaten by their benchmark over one year. The proportion increases to 79% over three years and 72% over five years.

In light of the facts, you should ensure you truly understand your own investments; how are your funds performing and how much are you paying for the privilege? 

Simon Bruce is managing director of Cavendish Medical, specialist financial planners helping senior consultants in private practice and the NHS

 The content of this article is for information only and must not be considered as financial advice. Cavendish Medical always recommends that you seek independent financial advice before making any financial decisions. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

The value of investments and the income from them can fluctuate and investors may get back less than the amount invested.

Avoid a falling out with your partners

In partnership law, there is an implied duty of good faith and honesty between partners. But is it enough for you and your private practice partners to rely on such a provision? Robert Capper (right) reports

If your practice is an unincorporated partnership, there will always be an implied duty of good faith and honesty – a ‘fiduciary duty’ – owed between you and your partners.

This duty is placed within a partnership by the Partnership

Act 1890 and it applies whether or not you have a written partnership agreement.

Section 30 of the Act, for example, places a duty on you and your partners not to compete with the business of the partnership.

In the event that a partner

makes a profit from a competing business, section 30 states that such profits are to be paid to the partnership.

In the current market, this is often a big protection for practices where partners could leave to compete elsewhere and has

been more used in recent times. However, the status of the duty of good faith being owed to each and every partner is subject to much legal discussion if the partnership is incorporated as a limited liability partnership (LLP). As solicitors in the sector, we observe that while LLPs are becoming more commonplace, the provisions around them are less certain.

We will look at the three main types of partnership in turn and discuss how important it is to specify such ‘good faith’ provisions:

1 Unincorporated

partnership without a partnership agreement

The standard unincorporated partnership without a written agreement is governed solely by the Act and any specific oral terms agreed between you and your partners. This is known as a ‘partnership at will’. While there will be a fiduciary duty implied into this agreement between you and your partners, the default provision of the Act is one of uncertainty, if a partner were to breach the terms of the agreement.

our advice is that this needs to be avoided at all costs otherwise it causes real difficulties, making problems almost impossible to resolve and taking considerable time and money.

There is no provision to work a minimum number of hours under

the Act; section 24(5) merely states that a partner may take part in the management.

As there is no written agreement to cover working hours in this instance, there is nothing to stop a partner – other than pure conscience – from working only a few hours and working for a competing business in their spare time. o ur client work demonstrates that this is often the source of partnership disputes.

o bviously, in these circumstances, section 30 of the Act would help the partnership in that it provides that the partner must account for any profits made outside of the partnership. We often see this provision being regularly relied upon in such circumstances, even more so in recent times.

However, there is no provision under the Act to expel a partner that has breached their duty in a way in which the other parties are willing to forgive.

The only way such an agreement can be achieved is if the partner retires. This would, however, cause dissolution of the partnership if the partner was unwilling to enter into a formal partnership agreement, to which they would then be expelled from – and this is highly unlikely. It is an unfortunate side-effect of an antiquated piece of legislation. yet, expulsions are commonplace and a regular part of partnership life and, perhaps not unsurprisingly, increasingly so in recent times.

The best way that such problems can be avoided is with a formal partnership agreement. This would override the default provision of the Act. Indeed, many are put in place to tackle this issue alone.

2Unincorporated partnership with a partnership agreement

Much like the unincorporated partnership without an agreement, the standard unincorporated partnership with an agreement implies a duty of good faith under the Act.

The most important feature of a written partnership agreement is its ability to govern the relationship between each of the partners. In essence, the partnership agree-

The best way that such problems can be avoided is with a formal partnership agreement

ment is a contract to which each of the partners are bound.

However, the partnership agreement should not be silent about the rights of recourse for the other partners against a partner who acts in bad faith just because the basic duties of good faith are already implied.

r ights of recourse cannot be implied into a partnership agreement. In our experience, this will be a problem in the event of an issue arising and can make them impossible to resolve.

Partners can govern minimum working hours, pay conditions, retirement provisions, disciplinary procedures and expulsion procedures in a sound and legally certain fashion and should therefore take the opportunity to do so when a formal agreement is put in place.

Coupled with the standard duty of good faith a partner owes to his fellow partners, this becomes a robust way of governing a business and ensures that disputes and unforeseen events are catered for.

3

limited liability partnership

The LLP is completely separate from a ‘typical’ unincorporated partnership and is governed by the Limited Liability Partnership Act 2000 (LLPA) as well as any agreement made between the partners and detailed in a formal LLP agreement.

We are certainly noticing that it is now commonplace to see more and more LLPs for professional partnerships, especially in the private medical sector.

Whereas over 100 years of the Act and case law has enshrined the idea of acting in good faith and honesty to fellow partners, this is not so well established under an LLP. Accordingly, we must question whether a duty of good faith is still implied.

The LLPA itself does not indicate whether the members’ relationships with each other and the LLP are one of a fiduciary nature. The members may decide to provide for fiduciary duties in the LLP agreement itself.

However, this does not mean that a duty is not owed automatically; it just means that it is not an express provision within the LLP.

We are noticing that it is now commonplace to see more and more LLPs for professional partnerships, especially in the private medical sector

In most cases, however, members will specifically explain what duties are expected.

The very nature of a partnership requires the partners to work together with a view to obtaining a profit – in fact, the definition of a partnership in law is ‘persons carrying on a business in common with a view of profit’.

How this could be achieved without a fiduciary duty being owed remains to be seen and it is more likely than not that a fiduciary duty is still owed between the partners.

That said, it is important for any LLP agreement to include an express provision governing how the relationship between partners and to the LLP itself will work.

Without this legal certainty, a LLP is more susceptible to disputes having a much larger detrimental effect on the partnership.

Conclusions

Across all three types of partnership it can be assumed that there is an implied fiduciary duty owed between the partners. under the unincorporated partnership, with or without a written agreement, there is a fiduciary duty owed under the Partnership Act 1890.

Indeed, under an LLP agreement, where there is not an express provision in the LLPA to other partners, it would seem that the very nature of a partnership would imply a fiduciary duty on one another.

However, despite these implied duties of honesty and good faith, it is important to make sure there is scope to deal with scenarios where these duties are breached by a partner.

Disputes will always arise in a partnership and, in our experience, they are increasingly commonplace.

The easier they are to deal with, the less likely the dispute will be detrimental to the business in the long term and can be resolved quickly and relatively cheaply. It is important to make sure that as many eventualities are provided for as possible. 

Robert Capper is a partner in the Health and Social Care Team at Harrison Clark Rickerbys and heads the team acting for doctors and practice managers

STARTINg A pRIVATE pRAcTIcE:

Open your eyes to legal work

Medico-legal work can be a lucrative source of income and many find

this

a good way of supplementing their private practice income, particularly as your business gets off the ground.

It can also cushion the

income

reduction as you approach retirement and wind down your private practice. Ian Tongue explores some of the key points to consider from an accounting and tax perspective

How does medico-legal differ from other work?

Income from medico-legal work is different to your private practice income, as it is not regarded as a ‘medical’ service.

The payment terms are usually much longer than performing private work and, generally speaking, you are more exposed to risk of non-payment and cash flow pressures.

Why is it not medical?

From 1 May 2007, medico-legal work has been segregated from

other work for the purposes of Value Added Tax (VAT).

The reason for this is that the primary purpose of the service is not the protection, maintenance or restoration of the health of the person concerned. The purpose of the report is for a third party to make a decision and therefore you will potentially have to charge VAT.

VAT

We all pay VAT on various goods and services, although for most retail purchases the VAT is

included in the price, so we probably don’t notice it too much.

Medico-legal work is regarded as a ‘standard-rated’ supply of services rather than your medical work, which is usually an ‘exempt’ supply of services, although there are some exceptions to this; for example, purely cosmetic work.

Supplying standard-rated services leads to a requirement to consider whether VAT registration is required and, if so, you are legally bound to register for VAT. Significant penalties exist for non-compliance and ignorance of the rules is not a defence.

Currently, you must register for VAT if your standard-rated supplies on a 12-month rolling basis exceed £81,000. Therefore, you need to be completing a reasonable amount of medico-legal work before VAT registration becomes compulsory.

What does it mean if I have to register for VAT?

One of the key things to understand is that having to register for VAT does not mean that you are paying more tax on your income. The reason for this is that you are acting as a collector of VAT for

HM Revenue and Customs (HMRC) by charging more for your service and then paying over the extra to HMRC.

As medico-legal work is standard-rated, you charge VAT at the standard rate, currently 20%. When the new rules came into force, there were concerns that solicitors would pass work to those who were not registered for VAT in preference to those who were, but there is little evidence of this and the cost is passed on through the ultimate settlement of the case.

Are there any benefits for registration?

This will largely depend on how much expenditure that you suffer which has been subject to VAT. The reason for this is that a VATregistered business is allowed to deduct VAT suffered on expenditure from the amount paid over to HMRC.

There are potential restrictions to this, particularly for those performing private work and medico-legal work, as you are making what is referred to as ‘mixed supplies’.

On the whole, the combination of relatively limited cost recovery

and the burden of administration make voluntary VAT registration rare for most medics.

do my records need to change?

In the absence of being VATregistered, you should not need to make too many changes to your current systems for record-keeping. It is, however, best practice to record the work separately to keep close control.

If you are VAT-registered, your records will need to change to accommodate recording of VAT on both income and expenditure. There are a number of schemes available to reduce the burden of VAT compliance, which include accounting on a cash basis (on a receipts and payments basis), annual accounting and a scheme to pay over a fixed percentage of income (flat-rate scheme). There are certain criteria to meet for these and your accountant will advise you further in this area.

payment terms

One of the key differences with medico-legal work is the length of time that it can take to be paid. It is not uncommon for debts to remain outstanding for many

months and this can extend into years if you are paid based on settlement of the case.

As a result of this, most medics undertaking medico-legal work try to agree payment terms upfront with the solicitor or agency they are working for. If the terms are long or uncertain, make sure you factor that into the rate you charge for the work.

Unlike VAT, the use of cash accounting for income tax is limited. Therefore, for a report that has long payment terms, you could actually pay over to HMRC the income tax on the work before you have been paid.

Many consultants find that using an agency to obtain work provides a more regular and consistent flow of work and this tends to work well.

But be careful not to expose yourself too much to any one source of supply, as – historically – there have been instances of agencies going out of business with many consultants experiencing financial loss as a result.

Indemnity insurance

As with private practice, you will need to have adequate indemnity insurance cover for the medicolegal work undertaken.

Medico-legal work is normally regarding as much lower risk than your clinical private practice and therefore don’t make the mistake of simply adding the income sources together when telling your provider your earnings.

Ask your accountant to provide you with a breakdown of your private practice income to assist you with this and ensure you are paying the correct premium.

Medico-legal work can be a good source of income for many doctors. If you are considering performing work of this nature, speak with your accountant to ensure that your records are sufficient and you do not fall foul of the VAT regulations.



Next month: The successful private practice ‘Top 10’

Ian

Tongue (right) is a partner with Sandison Easson & Co, specialist medical accountants

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Mini only in name

Independent Practitioner

Today’s motoring

correspondent

Dr Tony Rimmer is all big smiles after his test drive in the latest Mini Cooper S

If We step back and ask ourselves why we enjoy buying, owning and driving cars that are a bit special and perhaps a bit compromised, the answer is surprisingly simple. They deliver a certain feelgood factor.

We work long and hard days and sliding into a stylish, comfortable vehicle to get us home is a deserved reward. It is even better if the drive home is fun too.

for those of us who grew up in the 1960s and ’70s, we remember small, affordable and cheap-torun cars that were the staple drives of teenagers and students.

If you enjoyed driving, there was one car that would put a smile on your face even on the way to the exam hall: the Mini.

Alec Issigonis’s groundbreaking design was in production for 40 years, but inevitably had to give way to more modern and safer designs.

In 2001, the Mini brand was

relaunched by BMW as an updated, larger, safer vehicle: the MINI.

The German company took a big risk with this strategy but, like most business risks that we can identify with in our own medical practice, if it succeeds, it can pay off handsomely.

Now, the plan would have fallen flat if the new MINI had lost the cheekiness and fun factor of the original, but, through clever engineering, it has retained all the positive features of the old car.

What’s changed?

Now, 13 years after its relaunch, we have a third-generation BMW MINI. So what has changed?

The latest car has an all-new modular platform that will form the base for all new versions of the MINI and also some future front-wheel-drive BMWs.

There are all-new frugal engines and a new six-speed gearbox in all

models. The MINI One and Cooper get 1.2litre and 1.5litre three-cylinder turbo units that are very economical and the Cooper S that I have been testing has a larger 2.0litre four-cylinder turbo that produces 192BHP.

The three-door hatchback is the centre of the MINI range and the purest and most reflective of its iconic predecessor. The instantly recognisable shape is actually bigger than the outgoing ‘generation two’ model and hugely bigger than the classic 1960s’ BMC Mini. Its styling is evolutionary, but I think that the rear light clusters have become too large and the additional styling fripperies of this Cooper S model are unnecessary. Although 16inch wheels are standard, they look too small and most of us will opt for the bigger 17inch wheels, pay the extra price and put up with the slightly firmer ride.

Inside, it is roomier and com -

fortable, supportive sports seats are standard. The wonderful dash is now more logically laid out and higher-quality plastics are used.

The speedometer has left the central dial and is replaced by a large touchscreen that can house a version of BMW’s excellent iDrive satnav and media system.

Rear-seat passengers get more legroom, but it is still not a place for adults on long journeys.

The boot, tiny in the previous model, is now just small and has some neat under-floor storage facilities.

If you want more space but want to retain the smart looks of the hatch, MINI have also released a five-door version for the first time. Definitely worth a £600 premium and avoids the awkward looks of the Countryman model.

Nippy runner

The compromises on space melt into insignificance when you turn the key and head onto the road.

You don’t have to be on open ‘A’ roads to enjoy the driving; the car’s compact size makes it ideal for nipping in and out of city traffic too.

The steering remains sharp and the new gearbox is a great improvement. The ride, a real bugbear of the previous models, is hugely improved by the now available optional Active Damper control.

Dial in the comfort mode and you could be in a much bigger car. The steering and handling retain enough of the trademark go-kart qualities to entertain and please in equal amounts.

Power is smooth and plentiful and delivered without the frantic urgency that could be tiring in previous models.

Overall, driving the new Cooper S feels more like driving a current VW Golf GTI than anything else: swift and sophisticated.

I see this latest incarnation of the MINI appealing to many of us medical practitioners. It is bigger, cleverer, better mannered and more frugal – expect to achieve up to 50 miles per gallon (mpg) in the real world.

It retains its classless status and appeals to young and old alike. The personalisation potential remains huge, but if you get carried away with the long options list, you can spend half as much again without even trying – so beware.

Don’t dismiss the new Cooper either. Its three-cylinder engine is a gem and you get much the same driving experience and 60 mpg. 

Dr Tony Rimmer is a GP practising in Guildford, Surrey

mini coopeR s

Body: Four-seat hatchback. Three doors engine: 2.0 litre turbo petrol power: 192bhp

Torque: 280nm

Top speed: 146mph

Acceleration: 0-60mph in 6.8 secs claimed economy: (combined) 49.6mpg on the road price: £18,655

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The dashboard is now more logically laid out and has a large touchscreen

ProfITs focus: gEnEral surgEons

Rooms for improvement

Latest figures for Independent Practitioner Today’s unique income and expenses benchmarking series sees a drop in profits for surgeons. Ray Stanbridge examines the reasons, with additional material by Martin Murray

General sur G eons’ private practice incomes fell by 1% between 2011 and 2012, going down from £136,000 to £135,000.

Costs have risen by 5.5% from, on average, £54,000 to £57,000. as a result, taxable incomes have dropped by 4.9% from £82,000 to £78,000.

General surgeons do not seem to have encompassed the concept of group practice as much as doctors in other specialties.

They have, however, taken to

incorporating their businesses. as a result of this, though, there are difficulties for us accountants in reviewing trends and year-on-year figures.

Increasing subspecialisation

In addition, we reported in the July/august 2013 edition of Independent Practitioner Today the fact that an increasing number of general surgeons were now subspecialising. a s a result, it is increasingly difficult to comment

aveRage InCoMe anD eXPenDITuRe oF a ConSulTanT geneRal SuRgeon WITh an eSTaBlISheD PRIvaTe PRaCTICe

on the real reasons for any trends that are observed.

But notwithstanding the increased number of data problems, we believe that the slight fall in income has come about primarily as a result of the increasing n H s work in many general surgeons’ portfolios.

This is conducted, often – but not always – at a lower rate than insured work.

In addition, we are observing the very first effects of insurers’ ‘open referral’ systems introduced in about January 2012. However, our figures suggest that the impact on incomes was not as great initially as many had predicted.

There have also been a number of changes in costs.

Firstly, staff expenses have

risen. Where family members are employed, there is a trend to increase pay in line with the increase in personal allowances over the past few years.

The figures represent a ‘mix’ of family and professional secretarial costs, and do not truly reflect the costs of employing, for example, external administrators on Pay as Your earn.

competition inquiry

There has been a small growth in consulting room hire. This, we believe, is the result of some hospitals adjusting their room hire costs in early anticipation of the findings of the Competition and Markets authority.

also, we have found that ‘new’ consultants generally obtained a

Who ouR geneRal SuRgeonS aRe

Expenditure

Year ending 5 April. Figures rounded to nearest £1,000 (percentage is also rounded up)

Source: Stanbridge Associates Ltd. Additional information: Sandison Easson and Co

as with other specialties in this series, our income survey is not statistically significant and is restricted to those consultant general surgeons who are not full-time in private practice. They:

hold either an old or a new-style nhS contract

May or may not have incorporated their businesses

have a keen interest in private practice

have been involved in the private sector for at least five years

enjoy a private practice gross income in excess of £5,000

An independent firm offering one to one meetings anywhere in the UK giving advice and help with:

• how to start in private practice

• how to maximise private practice income

• ways to reduce tax payments

• setting up in Chambers/Groups

• limited companies and LLP’s

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• computer software

• tax and financial advice re: car purchases

• pensions: NHS, personal and employee schemes

• purchase of consulting rooms and surgeries

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less attractive deal with the hospitals than older consultants who generate significant volumes of business.

The other cost headings seem to have been a very modest decrease in indemnity insurance costs. We have observed that some consultants have been able to negotiate significantly reduced insurance costs from some of the new indemnity providers.

other costs seems to have been similar over the two years, with

PRoFITS FoCuS IS The InDuSTRy BenChMaRK

Doctors and their specialist medical accountants use the statistics published in our ‘Profits Focus’ series to look at how their earnings compare with others and see where they can cut costs and boost their income.

now all this information is available on our website and is free when you take out a subscription. either fill in the subscription form on page 22 or phone 01752 312140 or email lisa@marketingcentre.co.uk. get a discount by paying by direct debit. www.independent-

the exception of growth of ‘other’ costs.

Primarily, this represents costs paid for marketing and/or website services. o ver the years, general surgeons have, as a whole, been quick to respond to the opportunities created by better marketing of their services.

This may be one reason why incomes have been holding up, though we have yet to try to measure the response, in terms of additional fees, to targeted marketing.

We suggested in 2012, that the future was for specialists rather than generalists. The evidence continues to support this trend, but perhaps not acutely as we originally anticipated.

 next edition: EnT surgeons

Ray Stanbridge runs an accountancy, finance and tax advisory service specialising in the medical profession. Martin Murray is a partner at Sandison Easson & Co, specialist medical accountants

How arE You doIng?

surgeons

ending 5 april Source: Stanbridge Associates Ltd

what’s coMing in our septeMBer edition

Make sure you don’t miss our next issue, published on 18 September. only subscribers to the magazine are guaranteed to receive every copy and we don’t think anybody who is serious about continuing private practice in the future, when there is so much happening that will affect them, can afford to miss any issue.

Coming up next month:

 Breast entrepreneur! Mr atul Khanna, consultant plastic and reconstructive surgeon, shares how he got into the lingerie industry after finding women’s health problems were not due to having large breasts but resulted from wearing ill-fitting bras

 go on, admit it: you’re in private practice for the money! Surgeon Dev lall is expecting a full postbag in the wake of his next provocative piece

 The Children and Families act 2014 has introduced key new employment rights affecting doctors who employ staff, including the right to request flexible working. Don’t miss our vital briefing

 a great image has to be earned. So what’s our motoring correspondent Dr Tony Rimmer’s verdict on the Road Range Rover Sport?

Published by The Independent Practitioner Ltd. Independent Practitioner

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Printed by Williams Press Material is governed by copyright. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form without permission, unless for the purposes of reference and comment. Editorial layout is the copyright of the publishers. If you wish to use it for promotional purposes on websites or for reprints, we would be happy to discuss licensing the copyright to you.

© The Independent Practitioner Ltd 2014

Registered office: 7 Lindum Terrace, Lincoln LN2 5RP

Write to Independent Practitioner Today PO Box 198, Cranleigh GU6 9BB

 get positive! how to be a magnet to patients

 Don’t be late again with your tax. This year, get it sorted. accountant’s Clinic shows what you need to do.

 Mr Jerard Ross answers neurosurgical business dilemmas

 Put away the boxing gloves! lawyer Robert Capper gives his top tips for partners in dispute

 More and more independent practitioners are using video to promote themselves. We put you in the picture with some useful advice from film-makers

 oh no! My secretary is leaving...

 our ‘Starting a Private Practice’ series looks at what a successful private practice really is

 Profits Focus examines the latest earnings of enT surgeons

aDveRTISeRS: The deadline for booking advertising for our September issue is 22 august

eDIToRIal InquIRIeS

Robin Stride, editorial director

Email: robin@ip-today.co.uk

Tel: 07909 997340

aDveRTISIng InquIRIeS

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Email: margifloate@btinternet.com Tel: 01483 824094

Publisher Gillian Nineham Tel: 07767 353897.

Email: gill@ip-today.co.uk

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