Beyond the DES – a new era for PCNs

It was recently reported that Hertfordshire and West Essex ICB intends to award a GMS contract for delivery of primary medical services at the Limes Surgery in Hoddesdon to a PCN (GP Online 28 September 2023: PCN to take on GMS practice contract in landmark move for general practice).

This is notable for two key reasons:

1. In recent years, when new GP contracts for core services have been awarded, these have been time-limited APMS contracts rather than GMS contracts; and
2. It is reported to be one of the first (if not the first) examples of a PCN being awarded a contract to deliver core GP services.

Award of new GMS contract

The decision to award a GMS contract is significant because, in recent years, new contracts for core primary medical services have been time-limited APMS contracts. The concern about APMS contracts is that their short-term nature prevents long-term investment in the practice.

The ICB in this case explained that the decision to award a GMS contract arose from concerns that the potential for multiple changes of provider over a short period impacts long-term sustainability at the practice.

It will be interesting to see whether this marks a more general change in direction that will see more new GMS contracts being issued.

Award of core services contract to a PCN

There has been some uncertainty about the role and future of PCNs as we approach the end of the current network contract DES period. We have already seen contracts for local enhanced services being awarded to PCNs in parts of the country which are set to run beyond the current contract year. The fact that an ICB plans to award a GMS contract ‘in perpetuity’ to a PCN is further evidence that PCNs have potential to play a role beyond the scope of the current DES specification.

PCN limited companies

Hertfordshire and West Essex ICB commented that it was exploring a range of different contracting models to increase resilience, capacity and value for money, including working with GP federations and PCNs where they are a legal entity (our emphasis), which implies that the decision to award the contract might not have been made if the PCN had not incorporated a limited company. While there is no legal reason that a GMS contract can only be awarded to an incorporated PCN, for practical purposes, the alternative would be to award it to a new partnership between all the partners of all the PCN practices. This would create an additional layer of organisation and the practices might not be keen to take on this additional layer of risk alongside their own practices.

We have seen increasing numbers of PCNs forming limited companies as a vehicle for their activities (although in most cases this doesn’t result in the PCN itself becoming a legal entity as such – the network of practices that hold the DES contract continues to exist alongside the company). As PCNs themselves are informal networks of practices, they do not have a distinct legal personality and cannot employ staff or hold contracts in their own right. Forming a company enables a PCN to delegate or sub-contract certain functions to the company, such as employment of network staff on behalf of the PCN practices, while protecting the practices themselves from the liabilities of the company in relation to its functions.

In this case, the PCN company would additionally hold the GMS contract, own the practice assets and employ the staff delivering the services separately from the PCN practices, but under their management. In other areas, we have seen PCN companies being awarded NHS standard contracts for local enhanced services as lead providers for their PCN, with the delivery of services then being subcontracted to the member practices.

It seems clear that a PCN company vehicle alongside your network has the potential to fulfil functions beyond supporting delivery of the network contract DES and we are likely to see even more PCNs pursuing this option.

Mergers and PCNs

For a number of years, there has been a drive towards primary care being delivered at scale. Another trend that we have observed is PCNs exploring the option of mergers of practices within their network so that core services as well as enhanced services can be delivered collaboratively at scale.

There are various different options for practice mergers, including the “decentralised” model, which involves practices forming a merged over-arching partnership, but retaining separate GMS or PMS contracts. In this model, the merged partnership holds all the contracts and employs all the staff, but the original practice partners retain a degree of devolved control over their own practices. Benefits of this model include:

• A bigger pool of partners to share workload
• Less risk of contracts being “lost” as partners retire
• The ability for practices to employ a shared workforce that can be utilised flexibly across the PCN
• Economies of scale – for example, being able to bulk purchase goods and services and invest in shared equipment and facilities
• A wider range of services and more consistency in the services available to all patients across a neighbourhood
• Contracts can be kept separate initially, but with the potential to merge into a single contract and patient list over time (subject to ICB consent)

A further development could then be to apply to the ICB to incorporate the practice contracts into a PCN company owned and managed by the practice partners.

How we can help

Hill Dickinson’s primary care team has supported numerous PCNs with the formation of limited companies and review of governance arrangements. We have also helped implement many practice mergers. We advise on the various models available and provide support throughout the process of implementing your chosen model.

For further information and support, please get in touch.