Stethoscope

Rationalising Notional Rent essential to solving GP shortage

By: Ben Gowland @ccginsider
Published: Monday, September 8, 2014 - 11:24 GMT Jump to Comments

The way the NHS pays rent to GPs must be made the top priority for the new co-commissioning agenda or the shortage of general practitoners will only get worse

‘Notional rent’ is not a term many outside of general practice will come across very often, but it is becoming increasingly important. This is because it is arguably the single biggest factor that is preventing the development of general practice.

Put simply, 'Notional rent’ is the money paid by the NHS (through NHS England) to general practice for the use of its premises. In the vast majority of cases, the NHS does not own general practice premises. GP surgeries are independent businesses that the NHS contracts with. The reimbursement that the NHS has agreed to pay GP surgeries for the use of their buildings is known as notional rent.  

You will not be surprised to know that there are further levels of complexity to notional rent (it is the NHS after all!), but the point of this article is not to go into its detailed nuances. What is important here is to understand why GP practices being reimbursed for the use of their premises is acting as a barrier to change.

Notional rent is paid by NHS England. NHS England’s budgets are under significant pressure, and it has very few sources of income to offset any rise in notional rent expenditure. There is therefore very little incentive for NHS England to help practices solve problems with notional rent. But this impacts not only practices, it also impacts CCGs, who all have plans to develop services outside of hospital.  This separation of responsibility between NHS England and the CCGs sits at the heart of the problem. 

It is probably best to illustrate this with a number of examples of situations where premises, and the issues around notional rent, are preventing any plans to expand or develop.

There are a large number of practices that are in premises that are no longer fit for purpose, whether it is state of repair of the building, flooding problems, or the premises simply being too small for the number of patients the practice sees. 

In many cases practices can find developers to build new premises for them because property developers are required to make a contribution to the cost of the healthcare provision that arises as a result of new developments they are involved in. But even when offers are made by developers to build a new building for these practices for free, the deal falls over because the required notional rent for the new building is higher than the existing rent, and NHS England won’t agree to pay it (because they have no funding source for it).

In some cases, practices agree to fund the uplift in additional costs themselves, i.e. take the hit on the additional cost of the building with no uplift in notional rent received. But even then NHS England are insisting on large and complex business cases simply to transfer the existing notional rent cost level to a new building, despite the costs of the new building clearly being higher.

Where two practices want to come together to work in larger joint premises, but the total size of the new premises is smaller than the two existing (separate) premises, NHS England is insisting that the notional rent is reduced. As a result practices won’t go ahead with any plans to merge (because the impact on underlying profitability is too great) and practices stay small.

No problem sits in isolation, even that of GP premises! The issue of the difficulty of recruiting GPs has been widely reported recently. The problem is being exacerbated because of the premises issue. Many practices have notified NHS England that they are intending on selling and leasing back their premises to a national GP premises company (there are a number that exist) in order to enable the recruitment of new partners who do not want to invest large sums of money into the practice. If a practice owns a property an incoming partner has to pay a percentage share of the total value of the property in order to join (and because GP premises attract notional rent the value is inflated, making the cost of joining very high). 

So the sell and lease back solution would be a good one, as it reduces the entry cost to practices for potential new GP partners. But unfortunately it is thwarted because the national premises companies are insisting on long term leases (often 25 years), and won’t accept any shorter term break clauses (the BMA recommends a 5 year break clause). No one, it seems, can help practices to solve this problem, despite the fact that problems over the recruitment of GPs is affecting the whole healthcare system.

I am sure there are other issues on top of the ones that I have identified. Undoubtedly this is a significant issue, and my sense is that this is possibly the biggest current obstacle to the development of general practice. Until we unlock this, new buildings cannot be built, practices cannot merge effectively, and we cannot accelerate the recruitment of new GP partners. Without it, the system will not have the capacity of an expanded general practice that I suspect the majority of 5 year plans up and down the country are founded on.

The good news is that the problems surrounding notional rent are solveable. What it will require is practices, CCGs and NHS England to work together. I believe that we should make this the top priority for the new co-commissioning agenda, because if we don’t I fear that the change we are seeking in general practice will simply run up against a brick wall.

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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