Thoughts on Managing Financial Risk in the New Primary Care Environment
Primary Care in England is changing, with merging GP practices and Primary Care Networks (PCNs) being key to that change – accompanied by the planned extension of the services provided by, coordinated by or funded through the new organisations. Working with clients on implementing these changes, I am frequently asked what this means in terms of primary care financial risks management, so here are my thoughts on managing financial risk in the new primary care environment.
We are likely to see more and more larger primary care organisations with more services, more finance and more and different staff working in different ways all with a range of new and existing partners. As Integrated Care Systems are introduced that scenario becomes even greater in extent and complexity.
The actions that need to be taken in terms of clinical services and partnership working are for other articles. Here, I will deal with the Finance governance and administrative issues. It is important, however, to appreciate that all aspects of planning and management are inextricably linked.
With Opportunities Come Competition
The opportunities for Primary Care to be a driver for improved health and wellbeing in their communities are considerable. Working with partners across the health sector, local government and the third and private sectors could be a real game changer. But the NHS will also seek to drive greater effectiveness and efficiency from the new arrangements. That will, inevitably and rightly, lead to a focus on costs and value for money. At the same time, major private sector providers are trying to persuade patients and the government that they have or, indeed, are the answer.
My view is a simple one. I personally value the services provided by Primary Care in the UK and wish it to continue. But, at the same time, it needs to develop organisationally and in the application of technology. For instance, there is no reason why existing providers should not apply technology such as virtual consultations while continuing to provide and improve the current high levels of personal service. High profile organisations are trying to use such technology to take over primary care in the interests of profit. To compete with them, it is vital that the new arrangements developed by existing providers are managed as well as is possible.
So, this means that the new Primary Care organisations need to:
- Be well manged, using resources effectively and efficiently;
- Use technology proactively to improve services and reduce costs
- Be aware of and manage the significant financial risks that are inherent in larger more complex organisations;
- Understand fully their costs and income and manage finances proactively; and
- Be financially accountable to the NHS and partners for the management and disbursement of funds.
Who Bears the Primary Care Financial Risks?
During the past two years I have worked with existing larger scale primary care organisations who have got into trouble simply because their financial management arrangements were not “up to scratch”.
There is anecdotal evidence of some other enterprises providing primary care services facing financial difficulties. It is worth stating that I also have experience of such organisations that are well managed and financially sound. It is also relevant that these organisations all have “limited liability” status.
Generally, the organisations running into trouble did not have a clear enough appreciation of the actual financial position until it was too late or, alternatively, the management did not listen to the messages they were receiving.
In General Practice, organisations are usually unlimited liability partnerships meaning that increased risk will tend to lie with the partners personally. That provides a very good reason for a focus on mitigating the financial risks. It also provides a motivation for considering organisational forms where that personal risk is mitigated.
Primary Care Financial Risks Management Actions
The actions that need to be taken begin during the formation of the PCNs so that a solid base is established from the start. These actions include:
- Having a plan with realistic financial projections (aka a budget) including a:
- Time profile
- Cashflow projections
- Clearly defined management responsibility for each budget heading;
- Effective budgetary review and control processes; and
- Financial information systems that provide correct and timely financial information during the year.
The current arrangements in many GP practices where the cash position is monitored by the Practice Manager during the year and the accounts are produced by an accountant some months after the year end will not do. Having an ongoing, accurate understanding of the costs and income of each area of activity is critical.
That must be much more sophisticated than is currently often the case. Only by so doing can operational and clinical actions to be taken to keep the organisation on financial track. That is not to say that clinical decision making should be finance driven but that it should be done in the full knowledge of the financial implications.
Use of Modern Financial Systems
Modern financial systems are available (often used in GP practices). These can enable much easier and more accurate generation of information. But, usually, they are not used in that way. That must change.
The generation of that information enables control that assists in mitigating the risks that are faced. That information will also provide a basis for accountability for the application of NHS and other resources. General Practice and PCNs are expected to drive population health services and be enablers for change. Clear and accountable financial management and opportunity development must service that change.
Managing Financial Risks in the New Primary Care Environment
For more detailed information and advice on managing financial risks within the changing primary care environment, please do not hesitate to contact At Scale today.