To boldly go … Some thoughts on buying a general practice December 2012

KIM CARTER two years ago boldly went where few nurses have gone before. She shares tips and encouragement for nurses considering following in her pioneer footsteps and buying a general practice.

It was my partner who suggested I buy a practice.

Probably because she was tired of hearing about the frustrations of my professional life. Frustration at the lack of influence over my practice and that funding streams and employers had more determination over my clinical work than I did. Sitting on the deck looking at rural New Zealand, we agreed to mortgage the property and change my professional fortune.

A series of events led me to rural general practice. Working with a GP colleague,

Kirsty Russell, was exceptional. She had a real commitment to collaboration, interdisciplinary respect, and high standards of care. It was a satisfying experience. Also, a local GP was trying to retire.

Kirsty, who had previously locumed in a sole practice, had been reluctant to “go it alone” and was keen to explore a new model of business. The light bulb went off and we decided “to boldly go” forward.

Like Star Trek, it did feel like exploring new frontiers. Kirsty and I spent time developing our ideas and forming our business partnership. We had goals for the working environment we wanted to create for staff and ourselves, and the type, range, and quality of the services we wanted to provide.

We decided on a model that split the governance and clinical roles. Kirsty and I are equal business directors and make decisions by consensus. Both of us sign off on financial transactions and business decisions to ensure transparency and safeguard our respective interests. We are both employed by the business clinically and our remuneration for our clinical work is separate from any dividends or director’s payments we receive.

We have worked hard to minimise barriers to interdisciplinary practice and team work, through a strong values-based approach. We also realise the importance of work-life balance. We employ a practice adminstrator, receptionist, clinical assistant, two other registered nurses, locum GPs, and have two permanent GPs joining us next year.

We have now been operating for two years. In this time, we have formed a property company, purchased and renovated a sprawling villa, plus built on a new extension from which we work. The general practice business leases the building from the property company, which provides us with security for the practice location. If the practice business should cease, or we exit the current arrangement, we still have an asset in the building that can continue to provide a return in the future.

Tips for others seeking to go boldly…

The experience of the past two years has led me to some conclusions and advice that may be useful:

Deal with your own internal resistance and reluctance

Nurses are hugely resourceful, smart, and essential to the health service. We undervalue ourselves and often expect negative reactions. Nurses are uniquely placed to capitalise on our knowledge of the health system and the communities we serve to identify and fill gaps and meet needs. It is our greatest strength.

Establishing a business is not that difficult

There are many places to look to for support and advice. Health businesses are catered for by specialised teams within all the major banking institutions. Accountants and solicitors have often developed expertise, especially in communities with other general practices for whom they may be working. The Inland Revenue Department runs free courses and workshops for people entering business or keen to understand more, and education providers offer business management and accounting papers.

There are opportunities everywhere

Some GPs may not want to carry the burden of sole ownership, and other models have emerged that provide opportunities for nurses to invest. Community trusts, pharmacists, independent midwives, physiotherapists, and others want to be more involved and are interested in forming business partnerships with other health professionals.

Be brave, ask questions, throw in a bluff or two and push to make a pathway through

If you are working in general practice, start by asking your employers or business owners if they are interested in your investment, and if not, why not. Be prepared to tell anyone who will listen what you can offer and don’t downplay your earning potential. GPs and nurses bring in revenue in different ways. Sell the idea of your contribution as a strength to the business. Capitation alone does not provide financial viability for a general practice. Only 40–50 per cent of a practice’s income comes from capitation. The remaining income comes from (often) nurse-led or provided services like ACC, primary health organisation (PHO), and district health board (DHB) clinical programmes (Care Plus etc.) and fee-for-service payments made by patients to the practice. This is why development of non-capitation services is vital to the financial success of any general practice. Focus on fee-for-service ideas and opportunities.

Get to know the various general practice-related contract documents

Plus the service schedules for both DHB andPHO contracts and those with other agencies i.e. ACC. Consider the implications and requirements, what needs to be in place to meet those provisions, and how you might go about organising these. (See box for the fact and fiction about capitation funding contracts.)

Line up your finance in advance

As well as major banks, there are specialist organisations that loan to general practice owners, like the Medical Assurance Society. You should be able to secure a loan to purchase the business or finance your buying into a partnership without too much difficulty. General practices are considered ‘safe’ businesses to lend to, especially if you have equity in a home/property to use as security. If you want to buy into an existing practice, review and seek advice about the partnership agreement. Consider the buy-in and buy/sell-out implications. If you are establishing a new practice or taking over an existing practice, factor in cash flow, payroll and capital expenditure and allow for at least six months operating costs being available – remember capitation is paid monthly but only after the quarterly enrolment register is submitted. Payment doesn’t always start immediately depending on where in the payment cycle you are and can lag months behind.

Spend time on preparing

Be clear about your ideas, goals, model, and finances. Benchmark your salary, as you will want to be remunerated at a higher level because of the additional amount of your time that will be required, and the additional expertise you will bring to the role of owner and clinician. Don’t underestimate the time commitment. The demands of clinical practice, business and staff management are quite formidable. To be a good employer you often need to be first at work and last home, and ensure staff are supported and provided with an environment to thrive in.

Be good to yourself

You aren’t always going to get things right or know all the answers. Don’t let yourself get knocked around when you get knocked back – there is a difference. Not everyone will share your vision and some will be outrightly opposed. Pick your battles – I let some go and am careful about which ones I choose to fight.

I have no regrets. I have been able to test myself and try ideas in both clinical practice and as an employer. I have control over my work and can implement new services or improve what we already do. I can support nursing colleagues to flourish and follow their passions and interests. I have less fear of failure, less difficulty articulating my point of view, and I am definitely thicker skinned.

My patients are enthusiastic and supportive. Anyone who has been well nursed knows the value of good care. It makes sense to patients that I can influence and define the context of our work together.

Looking back, the Primary Health Care Strategy never mentioned nurses changing service provision by seeking contracts themselves. Nurses were never encouraged to purchase or start up a health business. It is still not part of the discussion for nursing graduates or colleagues thinking about their career pathway.

Nursing role models in business are not well known. Those who have followed this path have usually gone about it quietly. We now see nurse specialist and nurse practitioner role models for advanced practice and those looking to take this path have a clear map for how this can be achieved. However, I think we need now to also focus and support those who don’t wish to be clinical specialists or NPs, but wish to push the boundaries and advance practice in other ways.

We need to develop the next generation of nurse leaders. We need to build financial and political understanding in all our young colleagues. Exposing them to the wide range of opportunities for their careers and capitalising on the experience we are building up within the profession in business ownership, management, and development.

For those who have a spark of interest, I encourage you to boldly go on your own journey, and I look forward to the day when it is commonplace to see nurses involved in primary care in this way.

*This article was supplied by the College of Nurses

Capitation funding: know what is fact vs fiction

FACT: There is no barrier to anyone holding a provider or ‘capitation’ contract. The contract actually states that a “practitioner, general practitioner, or medical practitioner” can be contracted by a PHO, and goes further to define GPs and RNs, as ‘practitioners’ eligible to be contracted with if they hold appropriate registration and a current APC. Some PHOs and DHBs may have placed various restrictions around who they will allow to hold a contract. However, the contract holder can make their own arrangements about how the specifications are met and there is leeway for how this can be done. This means a non-GP can hold a contract, and “buy-in” or partner with a GP for the medical and other services that are required by patients, and to meet the contract specifications.

If a DHB or PHO are unreasonable in their approach to contracting with a non-GP, this should be challenged, especially if the assumption is that a nurse cannot do this. When we wrote to request a contract it arrived for signing with both our names on the cover. I hadn’t expected it wouldn’t but find out what your DHB/PHO’s position is and work through the issues if they are unreasonably restrictive.

FACT: While capitation funding is paid to subsidise the cost of general practitioner consultations, it is not paid for each consultation with a GP. Rather it is paid as a lump sum every month based on the number of enrolled patients at the practice. For example, our patients are enrolled with the practice, not to a specific provider. This means that our model of care, i.e. the capacity and capability of the team to manage the workload and provide services, determines how many enrolled patients we can accommodate. Effectively, nurses through their work and contribution do enable a practice to enrol more patients. Therefore, you can say nurses currently ‘attract’ capitation to a practice.

FACT: The capitation contract is not just about capitation. It also covers services like clinical programmes, services to improve access and health promotion. The bulk of a practice’s income is not via capitation, so this allows for great scope in non-capitated services to generate income. These are not just reliant on GP providers and allow opportunities for non-GP practitioners to provide and invoice for services.

Useful Links and Contacts

• Inland Revenue Department

• PHO Provider Agreement, Version 18 (soon to be replaced with Version 19)

• Westpac Bank – Business Division (Health)

• ANZ Bank - Business Division

• Medical Assurance Society, Business Advisory Services - Shaun Phelan, National Manager 0800 800 MAS

• Ministry of Health, Primary Care section, www.health.govt.nz

• Kings Fund (www.kingsfund.org.uk) and Health Improvement & Innovation Resource Centre (www.hiirc.org.nz) for general information, current clinical evidence, ideas and updates that are useful when planning projects/new services

• General Practice New Zealand – www.gpnz.org.nz