Family Doctor Association National Conference 6 th September 2014

1. Family Doctor Association National Conference 6th September 2014 Access to Finance & other Banking & Sector Issues A presentation by David Wood-Griffiths ACIB Relationship Director, HealthCare

2. Agenda • Confidence Index • Changes in the sector • Federations • Mergers and partner changes • Banking issues

3. Lloyds Bank Primary Care Confidence Index

4. Lloyds Bank Primary Care Confidence Index Are you expecting more practice mergers, co-locations and / or larger practices over the next 5 years? • Key findings: • The majority (91%) see more mergers as inevitable (77% 2013) • Those now saying ‘definitely’ is also hardening 38% v 25% 2013

5. Lloyds Bank Primary Care Confidence Index Are you currently or planning to bid to provide services under the new AQP (or similar) criteria? • Key findings: • The number answering ‘yes’ has been 37% for last two surveys • Only move has been reduction in ‘no’s’ to 34% (48% 2013) • Suggests more are now in the ‘undecided’ camp

6. Lloyds Bank Primary Care Confidence Index • Key findings: • There is clear and consistent evidence that pharmacists are more enthusiastic about taking on private work • There is however some signs that GPs are beginning to recognise the potential benefits

7. Federations and Mergers – what’s driving change? • Income Squeeze (push): • GMS/PMS >1% increase • DES/LES and other elements under threat • MPiG and Seniority Payments being phased out • New Income (pull): • Potential of new income streams via joint working • Potential to widen scope to more private work? • Potential cost savings from economies of scale • Demographics (fact): • Over 40% of GPs to retire within 10 years • Some new GPs don’t want to be partners • Demands for more work flexibility

8. Look at the Business of Primary Care... • Demands Issue: • Increasing demand from an increasing population • Ageing population, more long term conditions • Do not have the ‘pricing’ option • Options: • Increase productivity – do more with same • Increase resources – do more with more • Re-engineer – find a new/better way of doing things

9. Look at the Business of Primary Care... • Re-engineering: • Consolidate and benefit from economies of scale • Make more use of technology; telehealth, internet self help • Restructure workflows and refocus use of expensive resources

10. Federations - do you see what others see.............. 10

11. Federations - do you see what others see.............. • A friendly caring sharing group: • Sharing back office admin etc to help cut costs • A means of providing better services to patients • Working together for the greater good! • A necessary evil to stop others: • Get in quick to stop others invading your space • United you stand....... • Would prefer not to but...... • An opportunity to make money: • A unique (?) opportunity to expand services • An opportunity to increase income/profits • The start of a journey to consolidation .........or a combination of the above?

12. Federations – banking considerations • Objectives: • Business plan; what are you trying to achieve; are all parties aligned? • Run as a business not a practice – not all costs are covered! • Procurement rules include financial viability – can you prove it? • Structure: • Partnership, Club, Limited Company, CIC • Seedcorn capital; directors, ownership, rewards? • Take advice regarding tax, VAT and NHS Pensions • Finance Options: • Who borrows; the Federation or performer?

13. Mergers and partner changes – banking considerations

14. What can a bank help with? • Partnership: • Lend to partners to buy-out exiting partner • Lend to new partner to buy-in to partnership • Change the account names; help/review bank mandates • Property: • Lend to partnership to buy-out exiting partner • Lend to new partner to buy-in to property • Potentially provide support to sale to third party (exiting partner?) • Mergers: • Lend to partners to buy-out any leavers • Lend to help equalise capital accounts • Lend to buy, develop or improve premises

15. Partner changes • Options: • Take advice; new partner or salaried GP • Buy-in for cash; trial period and/or staged buy-in? • Beware ‘last man standing’!! • Who will lend: • Many banks but ‘stand-alone’ less attractive now • Main Practice Bank should offer best rates and sort quickly • Beware old loan terms; fixed rates, penalties etc • Term & Rates: • Term to suit your plans. Up to 25 years • Circa 2% to 3.5% over base depending on term • Interest only an option

16. Working together Solicitor YOU Accountant Bank

17. Summary - some basic rules • Professional Advice: • Invest in good advice; act in haste..... • Plan: do not put heads in the sand! Have a route-map of ownership over next 10 years • Have a up-to-date partnership/federation agreement • Finance: • Banks lend to serviceability not security • Things are changing and not all costs are covered • Track record and projections • Commitment: • Consider longer-term A-Z • Make sure all parties have interests aligned • A loan is only profitable in the last two years.....

18. The advert  LBG SME lending growth +5.6% HealthCare Sector +14.1% Doctors +16.9% July 2014 Finally are banks lending?

19. IMPORTANT INFORMATION 19