Hot topics to include in partnership agreement updates

Updating a partnership agreement should not just be the adding or removing of a name, it is an opportunity to make sure that the content of a partnership agreement is still fit for purpose and that it incorporates any changes that have happened with how the practice operates as well as other NHS developments.

In this article I will cover the main newer ‘hot topics’ that should be considered for inclusion in the partnership agreement, if relevant, giving a brief explanation of what the subject is and why it should be included.

Key features:

• For new eligible clinical partners from 1 April 2020 (not having been a partner previously in England).
• They have to work at least 2 clinical sessions per week with a 5 year commitment.
• The new partner MUST sign a partnership deed.
• The monies are paid to the practice who have to pay it over to the new partner within 28 days of receipt.
• There is a pro rata clawback from the practice if the partner leaves within 5 years, although it can be ported across to another partnership.

It is the last point that needs to be covered off in the partnership agreement to confirm that this is a personal liability of the partner concerned and that they will be required to reimburse the practice for any clawback monies that aren’t covered by existing funds that they have in the practice (e.g. partner current and/or capital account balance).

Key features:

• Relates to non-GP Partners who are in the 1995 section of the NHS Pension scheme.
• If their NHS profits increase above the allowable amount in the three years prior to retirement (currently 4.5% + inflation) then the practice will be invoiced a final pay control charge. This is effectively paying a contribution towards the additional pension that the person will receive.
• This was brought in to prevent practices awarding large pay increases for certain employees prior to retirement so that the employee would then benefit from a higher pension. However, this also captures non-GP partners’ whose income can increase significantly purely from a better profit performance of the practice in a relevant year.
• The practice will have to pay this and so the practice needs to decide if it will be a pooled practice expense or chargeable to the partner concerned’s profit share so that they bear the cost.

Again, it is the last point that is the key consideration for the partnership agreement where the practice decision on the agreed treatment needs to be documented to confirm whose liability it is. If it is the partner, then it needs to be made clear that they will have to reimburse the practice for any shortfall not covered by existing funds in the practice.

Specific provisions should be included in the partnership agreement to reference/cover:

• Compliance with the PCN Network Agreement.
• General treatment of surplus or deficits from the PCN accounts within the partnership accounts.
• Inclusion of the PCN member current account balance and/or PCN company shares as assets of the partnership.
• Confirm flow down of PCN monies into each partners’ current account balance.

With an increasing number of partners wanting to reduce their hours leading up to full retirement, and come out of the NHS Pension scheme at the same time for various reasons, then I have seen more 24 hour retirements in recent years.

Key features:

• 24 hour retirement is the mechanism for a GP to draw their NHS pension and then return to work.
• All GPs cannot work for the first 24 hours after their retirement and if they are in the 1995 section they cannot work for more than 16 hours a week in the first month.
• The GP effectively resigns their NHS contract for 24 hours and so needs consent from the other partners to be able to return unless it is automatically allowed in the partnership agreement. Consent will also need to be obtained if the returning partner wishes to change their hours.

The partners should specifically document in the partnership agreement whether there is an automatic entitlement to take a 24 hour retirement or if a partner has to seek permission at the time with a required notice period.

Please note that there are specific difficulties with a 24 hour retirement relating to sole practitioners that are not covered by this article as for them there will not be a partnership agreement.

Although this is not a ‘new’ topic I still class it as a current ‘hot’ topic due to the number of new partners that I have been seeing recently. Although most partnership agreements will have some clauses relating to new partners they may be out of date and not reflect current practice or they may not contain sufficient detail to be clear on what is required and expected. A new partner joining is therefore a good time to review this with the key financial considerations and decisions being:

• The length of the mutual assessment period if not covered by a salaried period before becoming a partner.

• Confirmation of profit-sharing basis, progression to parity and any standard prior share of profit items (for example net rent if property owner).

• Capital buy in requirements if applicable (including timing, valuation basis, buy in amount calculation).

• Lease obligations, possibly including responsibilities for historic service charge arrears.

• Current account buy in (including timing – lump sum, specific instalments or flexible over a period of time?, and basis for calculation – set amount per session or other).

The new partner offer letter must be consistent with the relevant partnership agreement clauses.

The partnership agreement has always been an important document but can often be ignored by practices and easily become out of date or obsolete. The risks in letting this happen can be significant and so it should be reviewed on a regular basis and updated to reflect changes in how the practice operates along with new NHS initiatives and funding. I always advise that a medical specialist solicitor is used for this.