24/08/2011 : Debbie Mansell
TRANSFERRING NHS CONTRACTS WHEN SELLING YOUR PRACTICE
Selling or buying a practice is hard enough, but there are lots of special considerations to be made when an NHS contract is involved. Debbie Mansell of MediEstates highlights some areas to be aware of
The sale or acquisition of any business can be an extremely stressful experience. Where the target subject is an NHS dental practice, there is the potential for much confusion. Since the government now contract and control all NHS dental work in England through the Primary Care Trusts (PCT), the goodwill element of a practice sale is heavily affected in NHS practices. Medi-Cruit have had to be especially careful since the implementation of the new Personal Dental Services (PDS) and General Dental Services (GDS) contracts in handling the sales of practices that have an element of NHS work within them.
When a principal dentist is looking to leave his practice, for whatever reason, be it due to retirement or relocation the PCT will usually cancel the contract with the practice when the principal leaves and will re-assign the funding. This is done in accordance with their duty of care and the EU Directive advising that Medical Contracts should be re-tendered rather than reassigned. The PCT will then redistribute the funding into localities with the lowest NHS provision. However, if it is deemed to be of most benefit to the PCT and patients that the contract remains with the current practice, the Commissioning Manager at the PCT can re-assign it to the buyer of the practice. This is the most desirable outcome for the principal and the buyer, but can be a sensitive issue to combat.
Special attention should be paid to the PCT contract when buying or selling an NHS practice
Prior to the implementation of the PDS and GDS contracts with the PCTs, goodwill for patients seen under the NHS was always applied in dental practice sales. Many retiring dentists have established their NHS practice over a number of years and it is only in recent times that they are no longer to expect to be rewarded financially for this in the same way as a fully private practitioner is. As such, what is already a stressful time for any vendor often becomes more confusing and emotionally charged than anticipated and the professionals that the vendor chooses to instruct are key in alleviating stress.
For the contract to be transferred to the buyer, the exiting practitioner must contact the PCT and advise them of their intentions. Medi-Cruit recommends that a vendor do this once he has found a suitable buyer and the sale is definitely going ahead. A meeting will then be arranged for the incoming and exiting practitioners to meet with the commissioning manager and the suitability of the buyer can then be assessed. A CRB check is sought (where the prospective buyer is not currently practicing within the Trust) and necessary references will also be sought. Once the PCT are happy with the prospective buyer they will liaise with both him and the exiting practitioner to cancel the contract with the vendor and re-commission the contract to the buyer ready for the date that the new dentist takes the practice over.
It is important to note that it is not guaranteed that the UDA target and rate will remain the same since the existing contract is cancelled and it is a new one that is issued to the buyer.
If the practice is incorporated, the contract with the PCT is usually commissioned to the company, rather than a specific dentist. As such, the transfer of the NHS contract can be much more straightforward as the buyer is then able to purchase the shares in the business. The contract then comes as part and parcel of the company as a going concern. Sales/Acquisitions of limited companies will generally progress to completion much more swiftly than businesses that have not been incorporated. When purchasing a dental practice in this way, it is important to check firstly that the PCT contract has been incorporated as part of the company. If it has, it is also advisable to check the actual contract held with the PCT as there will sometimes now be a ‘change of control clause’ which will nullify the contract from the PCT if the majority shareholding of the company changes.
A partnership sale has the potential to be much more straightforward. When a GDS contract is held, there is a provision in the contract that allows the taking on of a partner. The principal will need to contact the PCT and arrange a meeting with them much in the same way as a direct transfer in an outright sale. In this case the Principal dentist and the incoming partner will meet with the Commissioning Manager, who will then assess the partner’s suitability. A CRB check and references will be sought by the PCT and once the partner has been approved, the principal will need to give 28 days notice that the partnership is to commence. Once the 28 days notice is served, the partner is added to the contract and can take on his new role at the practice.
NHS dentistry is currently undergoing another major change with all dentists and dental practices being regulated by the Care Quality Commission (CQC). There is a good deal of uncertainty regarding the transfer of NHS contracts when the CQC officially take over. As such it is especially prudent to take advice from experienced professionals within the dentistry sector to ensure your protection and peace of mind.