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Editor’s blog Saturday 31 July 2010: Scale and sale

This story on the £8 billion potential value of the sale of goodwill in GP practices, by HSJ's smart news editor Sally Gainsbury, made me think a little about the changing dynamics of the system.

The sale of the goodwill in a GP practice - the projected income and profit - is essentially the registered list. It is forbidden to sell this, at the present time.

This document by Carter Lemon Camerons Solicitors, written for GP's 'Medeconomics' series, states that "The sale of goodwill by GP practices has been prohibited since the government, in effect, ‘bought it’ in 1948 when the NHS was created. The ban was restated in 2004 for practices with a patient list in the Primary Medical Services (Sale of Goodwill and Restrictions on Subcontracting) Regulations 2004".

The DH guidance on this (which seems to be the last issued) can be read here. It defines a contractor to have a registered list "if it is providing essential services (or their equivalent) during core hours", and notes that PMS contract holders fit this category.

The goodwill in GP practices has an owner, who is the Secretary of State for Health.

GP principals and partners own shares in the physical assets of their practice, if it is owned.

There would of course be tax implications - capital gains tax would be payable in full, and according to the CLC article, stamp duty might also become payable on part of the value of the goodwill when it was sold.

This article, by chartered accountant Laurence Slavin of Ramsay Brown for Healthcare Republic, points out that "sale of goodwill by GP contractors that do not have a list is now permitted".

It adds that the ban also does not apply to additional, advanced or out-of-hours services, and points out that any existing holders of GMS and PMS contracts wanting to accrue saleable goodwill might be able to benefit by converting to APMS contracts.

The Policy Exchange think-tank suggested this approach in their January 2010 'Which Doctor?' publication.

One frequent criticism of UK general practice is that it operates at too small a scale to facilitiate investment in diagnostics and new infrastructure (both physical sand technological) to meet the laudable ambition of providing better care closer to home and outside dangerous and expensive acute hospitals.

Practicalities of selling
Allowing the sale of goodwill at practice level would involve a lot of money being made. It would also involve a significant capital gains tax one-off 'windfall tax' (and further, more gradual revenue as the market matured). But it would have high transaction costs, dealing with every GP practice that wanted to do it - and not all would.

I was thinking about this when Health Secretary Andrew 'Turquoise Hair' Lansley was launching his White Paper.

And I thought that if you really wanted to have a big bang, you would look at scaling goodwill to GP consortia level.

That would be how you could reduce transaction costs and achieve scale.

So I asked the Secretary Of State For Health, who owns the goodwill in GP practices lists, this question: "who will own the goodwill and intellectual property in GP commissioning consortia, and will there be an asset lock on these?

Mr Lansley replied, "I see no basis on which consortia could realise and distribute goodwill".

It's an interesting and thought-provoking reply, isn't it?

editorial AT healthpolicyinsight.com