Practice matters: Future proof your partnership

Mark Jarvis of Capsticks LLP considers the changing primary care landscape in England and Wales and the need for revised partnership agreements to reflect the move toward federated practices

A FIRM foundation is essential for any business venture and as we progress down the road set out by Simon Stephens in the Five Year Forward View, we are seeing a wide range of flexibility in approaches towards new models of care.

With a strong emphasis on integration between primary care, community services and hospitals, the new models of care envisage GP practices working together with a range of other providers. Such arrangements may be complex and involve several layers of governance and representation. The multi-specialty community provider (MCP) models envisage GP practices working in federations to realise this.

Federating itself is being driven by a range of motivating factors, whether these are to achieve economies of scale, to bid for new services with an integrated function, to provide staffing support, to share a premises solution or to achieve any number of benefits from collective working. The message of “form follows function” has been key to GP practices intending to work collectively – the aim being to get prospective federating practices to sit and consider what their business plan is to enable an appropriate federating vehicle to be formed around that business plan.

Key amongst all of this is governance – ensuring the intentions of the parties are properly and comprehensively documented. The relationships, liabilities, decision-making, exit strategies and more will all need to be agreed on and documented. Federating groups have been keen to ensure the robustness of collective working arrangements; however, the foundations of these federations and new models of care will be the GP practices themselves. What hope then for collective working if the foundation itself lacks governance?

GP PARTNERSHIP DEEDS

For the majority of GP practices, ensuring appropriate governance is in place will mean a well-drafted and comprehensive partnership agreement. However, surprisingly large numbers of GP practices operate without a partnership agreement or one that is up-to-date.

The absence of any written agreement doesn’t mean there is no agreement at all. Instead it means the agreement that does exist will be governed under the Partnership Act 1890, which can have entirely undesirous consequences. For example, this will include immediate dissolution of the partnership on notice of death, and capital and profits being shared equally (regardless of contribution). This can have disastrous consequences for the primary care contract that underpins the practice. It should also be noted that where a partnership holds a GMS contract, it is a requirement on the contractor that any person who becomes a member of the partnership after that contract has come into force is bound automatically by it whether by virtue of a partnership deed or otherwise.

Those working collectively in MCPs or federations (and indeed lenders to them) will want to ensure that every practice has its “house in order” such that internal issues do not spill over and adversely affect the functioning of the collaboration.

Whilst a benefit of having a written agreement is to reduce the scope for costly litigation, it is important to ensure that this is kept upto- date. An outdated partnership agreement can have a contrary result to the original intentions and this can also lead to costly disputes.

Practices participating in collaborative arrangements may be doing so on a practice representative basis and it would be sensible for parties to include appropriate provisions in their partnership agreements dealing with this role, its extent and its power to bind the partnership, as well as providing appropriate indemnity should liabilities fall on that partner as a result of that role. The deed may also need to ensure that income derived from a collaborative arrangement is properly considered in constituting core practice income or perhaps should be apportioned differently between partners based on participation.

CHANGES IN LAW

Of course, aside from ensuring they properly reflect involvement in collaborative arrangements, partnership deeds should be kept up-to-date with any changes in legislation. The drive to ensure efficiency and achieve outcomes means that the NHS has undergone a number of reforms in the past decade alone. With the arrival of cocommissioning, the division of commissioning responsibilities leading to practices holding primary care and community services contracts means that practices should ensure that their deeds do not leave this to assumption. Partnership deeds may well apportion income streams differently between former enhanced services and the provision of core essential services, and it is important the provisions of the deed remain relevant today.

CQC registration is also a pertinent issue for GP partnerships. As the registered provider of regulated activities, all of the partners will be jointly liable for meeting the legal requirements and for the relevant actions/inactions of all the other partners. A partnership deed can allocate and set out the responsibilities of a “registered manager” to a particular partner or a practice manager. It may also be appropriate to include an indemnity for any partner conducting this role on behalf of the partnership and in accordance with their joint instructions.

NEW PARTNERS

Another perhaps more common trigger for the need to update a partnership deed is the introduction of a new partner, which can be expected to void the existing agreement. Setting out a probation period and the consequences of completing the same are important considerations. However, there will be a range of other questions that partners should be considering. Will the new partner buy into the premises/capital and in what proportion and over how long? The introduction of a non-clinical partner may require more careful consideration of the provisions of the deed. Provisions on decisionmaking, partner obligations, etc may well require distinctions to be made between clinical and non-clinical partners. The CQC registration position will also need to be factored in as a prerequisite of the partner joining.

A new partner is a good opportunity not just to update the parties to the agreement but also to ensure that it still reflects the intentions of the partnership as a whole.

PROPERTY CHANGES

A change in the property position is another occasion which should trigger a review of the partnership deed. Many practices are looking to release equity by agreeing to a sale and leaseback of their practice premises. Federating drivers and premises funding opportunities have also seen practices looking to relocate with neighbouring practices, a collaboration which would be expected to require amendments to the partnership deed to reflect a change in the property position, as well as integration with a form of overarching property arrangement, for example.

Even where many of the property provisions are dealt with separately in a property deed, it can be expected that the partnership deed may need some adjustment to reflect this. It follows that property trust deeds should also be kept up-to-date and any new partner or partnership property acquisition is a signpost to review and update both arrangements.

Mark Jarvis is a senior lawyer at Capsticks LLP and a specialist in partnership arrangements