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A B C D E F G H I J K L M N O P R S T V W Y

Healthcare Bulletin

A quarterly update from our Healthcare Law team keeping you informed of the latest updates on legislation, policy and commentary on issues affecting healthcare professionals.

Latest Issue

In the latest edition of our Healthcare Bulletin we outline the main issues that you need to consider if you are buying a pharmacy, take a look at dental practice equipment warranties, plus why GP partnership agreements are important and finally fixed costs in clinical negligence cases which are on the not too distant horizon. Our dental expert Nicola Lomas has published a series of blogs all about dentistry practice matters, covering a variety of topics from exchange of contracts to stock valuations which might be of interest to you. Please follow this link to view the dental blogs.

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What’s driving demand in the dental and pharmacy markets?

Tuesday 21st November 2017

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Healthcare Bulletin - Issue 4

The dental practice and pharmacy sectors are extremely buoyant with demand far outstripping supply. The trend is the same across our regions with increasing numbers of buyers looking for dental practices and pharmacies seemingly uninhibited by the sluggish growth of the UK economy (0.3% in the second quarter) and the uncertainties of Brexit.

As the medical sectors rely on non-discretionary spend this tends to make them more resilient to the ebb and flow of the wider economic/political climate. They also, in many cases, include an NHS income stream, which is seen as guaranteed income and makes them attractive to investors. This is also the reason that banks and other lenders regard them as ‘green light sectors’ and are happy to lend.

The two sectors share many parallels in terms of the drivers fuelling buyer appetite.

An imbalance of supply and demand – but could this change if more NHS providers decide to sell their practices or more pharmacists become disillusioned?

Possibly, but demand is so high that any increase in market liquidity is hardly likely to have a significant impact. As a guide, we estimate that there are currently some 3,000 'active' dental purchasers in the market and only around 750 practices for sale annually. In pharmacy the picture is similar, we have in excess of 5,700 applicants registered and we estimate that out of c.7,700 independent dispensing chemists only 250 (excluding major deals) come to the market annually.

Regulatory - Both sectors are facing NHS changes with the recent funding cuts in pharmacy and the looming contract reforms in dentistry.

A lot has been written about the dental reforms (with 79 ‘High St’ dental prototypes in total), which ultimately means that dentists will receive their remuneration from a mixture of capitation and measured activity. In truth many dentists have adopted a ‘business as usual’ approach as the deadline for reform is likely two to three years away.

The reduction in funding to pharmacists, on the other hand, took effect as of December 2016 with much reporting on the negative impact to independent pharmacy values. In spite of this doomsday reporting, Christie & Co has seen little evidence of a negative impact with no slow down in the market nor a reduction in pharmacy sale prices. In fact, we are seeing increased competitive bidding from first time buyers and expanding regional operators.

In terms of dentistry, none of the above would automatically have a negative impact on demand. In fact, it might be argued that the greater emphasis on patient care and prevention makes NHS dentistry more attractive from a clinical perspective.

Locum/associate rates - As a result of the funding cuts, many operators are looking to mitigate the reduced remuneration. One of the biggest expenses in a pharmacy is the pharmacist, and by cutting not only the hourly rate but also the hours worked, many owners are seeing a considerable saving. This is driving demand from locums to buy pharmacies and at its peak in 2016, nearly 80% of our registered purchasers were first-time buyers.

Dental associates face similar challenges and are feeling the pinch too from their flat lining profits and this is leading many to search for their first practice.

Lender’s appetite – In dentistry GDS contracts are effectively in perpetuity and offer 'protected' income. These two factors are fundamental in supporting the market and any move to time-limited contracts could have a detrimental effect on the security of income and therefore banks' appetite to lend.

In spite of the cuts, banks still have a strong appetite for the pharmacy sector with new lenders entering the marketplace. Christie Finance, our sister company of commercial mortgage brokers used over 20 different banks and financial institutions in 2016 to help fund pharmacy buyers’ acquisitions and that number is only set to rise.

First time buyers in both these sectors are often helped by the ‘Bank of Mum and Dad’ with raising capital or providing guarantees.

Strong market conditions – Many Principals and pharmacists are receiving direct approaches from prospective purchasers for their business and it’s easy to think that selling ‘off market’ could be an attractive prospect. However, any owner should carefully weigh up their options when considering a sale to ensure that the value they’ve created, sometimes over many years, is fully appreciated on exit. Only by approaching the open market can sellers realise the best price for their business, by instructing a proactive agent to generate considerable interest.

If you are interested in hearing more about what's driving demand in the dental and pharmacy markets and would like to discuss any matters in more detail please do not hesitate to contact Jonathan on the details provided below.

Jonathan Watson
Associate Director - Christie & Co
T: 0161 833 6935
Email Jonathan

 


The dental lawyer’s guide to unlocking your NHS pension- 24 hour retirement

Tuesday 21st November 2017

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Healthcare Bulletin - Issue 3

You own your NHS dental practice, you love it, you couldn’t bear to leave your wonderful patients and staff, but you wish that you could still get your hands on that NHS pension which you have accrued over the years. So how can you achieve this whilst still remaining in practice? Don’t worry, the dental team at Brabners can help.

To claim your pension you must: i) retire from your NHS contract for a minimum period of 24 hours and ii) have not worked more than 16 hours a week in the month preceding this retirement. If you have a partner on your NHS contract, this might be a simple process. However, for sole practitioners submitting notification to the NHS of your retirement would have the effect of terminating your contract.

If you want to continue to run and own your practice after claiming the pension, steps can be taken to ensure that this does not happen. The appropriate way forward is to add a second name onto your NHS contract, another dentist, who would act as a nominal partner. This allows you to ‘retire’ from the NHS for the obligatory 24 hours, and subsequently allows you to re-join the NHS and claim an entitlement to your pension the next day.

Obviously, the partner needs to be someone you can trust. It may also be sensible to have a document prepared, to formally stipulate that whilst this partner’s name appears on the NHS contract, the benefit of the goodwill and income will continue to be owned by you.

From the nominal partner’s perspective, it is worth bearing in mind that although they would have no actual right to any of the money from the NHS in accordance with their agreement with you, they do have obligations to the NHS once they appear on the contract. For example, if the practice runs behind whilst they are a partner, they are responsible (together with you) for clawback payments. If this is a significant risk, this partner may wish to ensure that their name is removed from the contract as soon as your name has been re-added to the contract.

The CQC is another factor to consider in this process. NHS England is likely to look to ensure that the partnership only starts once an application has been processed for CQC registration in the joint names of yourself and your proposed partner.

Once a CQC application has been processed, notice can be submitted to the NHS to add the second name to the contract and a date will then be set for your brief 24 hour retirement. Once this date is known, you can submit the ‘NHS BSA Pensions- Retirement Benefits Claim Form’ (AW8) to the Business Services Authority.

Following the 24 hour retirement, any changes that have been made to your NHS contract and CQC registration can be reversed. Your NHS contract can be returned to your sole name and you can re-apply as an individual for CQC registration.

However, for a number of reasons, you may wish to consider retaining the assistance of your nominal partner for a little longer.

For example, timescales for termination of a GDS contract upon the death of a sole practitioner are short and can only be extended at the sole discretion of NHS England. This puts an added and potentially avoidable stress on your family and executors, at an already stressful time.

Leaving a second nominal partner on your GDS contract would ensure that the NHS contract survives in their name following completion. In the event of your death, it would give your executors and family flexibility, giving them more time to sell on or possibly choose to continue running the practice.

Now all you need to do is find that trusted dentist friend and give us a call.

If you are interested in hearing more about what's driving demand in the dental and pharmacy markets and would like to discuss any matters in more detail please do not hesitate to contact Jonathan on the details provided below.


Nicola Lomas

Senior Associate
Dental Lead
T: 0151 600 3321
Email Nicola


Innovation and regulation in the pharmacy sector

Tuesday 21st November 2017

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Healthcare Bulletin - Issue 4

Mobile apps allow us to try new restaurants without leaving our homes, hail cabs, check in for flights, have GP consultations and order our prescriptions. The pertinent question is no longer “what can we do with our mobile devices?”, but rather “what can we not do?”.

The pharmacy sector has not been left behind in the field of innovation, with several repeat prescription ordering apps providing a much needed convenience for patients. Traditional pharmacies can diversify their offering by making their services accessible via a mobile app which utilises the NHS Electronic Prescription Service, enabling patients to have prescriptions sent electronically to their chosen pharmacy.

The recent revocation of Uber’s private hire operating licence in London highlights the importance of regulatory compliance when providing an innovative service. GPhC guidance suggests that any app utilised in the provision of pharmacy services should clearly display:

  • The pharmacy’s GPhC registration number;
  • The name of the owner of the registered pharmacy;
  • The name of the superintendent pharmacist (if any);
  • The registered pharmacy that is supplying and preparing the medicines;
  • Information about how to check the registration status of the pharmacy;
  • The contact details of the pharmacy; and
  • Information about how patients and users of the app can provide feedback and raise concerns.

Transparency and patient choice remain vital when providing pharmacy services via a website or app. Convenience should not come at the cost of a patient’s ability to make an informed choice, and information about how a patient can obtain further advice should be clearly displayed within the app or website. The patient’s consent is also still required and access to the prescribing services should be limited until explicit consent is provided by the patient.

Apps or websites offering prescription services may be considered to be specialist equipment and are likely to collect personal data about patients, including their GPs and current prescriptions. As with traditional pharmacies, those providing prescription services via an app or website should be aware of data protection legislation and the requirements to identify how the patient’s consent to process such information was obtained. The advantage that apps and websites have is that they are in a position to explicitly ask patients for their consent and, as such, can easily identify how and when such consent was obtained.

Registration with the Medicines and Healthcare products Regulatory Agency (MHRA) is required for an app or website selling medicines to the public and allows an online pharmacy to be included on the MHRA’s list of UK registered online retail sellers. The registered EU common logo must be displayed on the pharmacy’s app or website. Pharmacies registered with the GPhC can also apply to use the GPhC voluntary internet pharmacy logo.

Innovation should be embraced, especially where it enables pharmacies to provide better, more rounded services that are suited to patients’ busy lifestyles. However, it is clear that starting an online pharmacy or developing a pharmacy app requires careful consideration about the regulation involved.

If you are interested in hearing more about innovation and regulation in the pharmacy sector, please do not hesitate to contact us on the details provided below.


Richard Hough

Partner & Pharmacist - Head of Healthcare
T: 0151 600 3302/ 0161 836 8800
Email Richard

 

Buying a Pharmacy?

Wednesday 26th October 2016

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Healthcare Bulletin - Issue 3

Buying a pharmacy is undoubtedly one of the most significant business decisions a pharmacist will ever undertake. If approached correctly, it can be prove a profitable investment; if handled incorrectly, however, the buyer risks losing their investment.

As is true for any business, the acquisition process can often be complex, with many legal implications to consider and various traps and pitfalls awaiting the unwary or unprepared. For pharmacy businesses, further complexity is imposed by the strict regulation of the sector. With additional duties upon the buying pharmacist(s) and numerous regulatory compliance issues to be considered, it is imperative to get things right.

There is no substitute for a buyer securing early and quality legal advice from a law firm specialising in the buying and selling of pharmacies. Occasionally, our firm is asked to pick up the pieces after the event by pharmacists who have bought pharmacies acting on poor advice, and we have been instructed to recover their losses through litigation, which is notoriously costly and uncertain. Without question, it is therefore far better to receive sound advice at the outset of the process, than to rely on the vagaries of litigation to recover your losses afterwards. 

Pre-contractual Negotiations

We would always advise that the parties agree upon a set of Heads of Terms at the outset. This document sets out the main points of the deal, and reduces scope for disagreement between the parties later on. Generally, the Heads of Terms are not intended to be legally binding. Certainly, from a buyer’s perspective, until all necessary investigations are carried out, you will want the option to withdraw from the transaction at any point. However, if the Heads of Terms inadvertently contain the essential elements of a contract, the parties may end up unintentionally being contractually bound. It is therefore important to instruct solicitors when preparing such documents.

Financing the Acquisition

Finance is usually obtained through a pharmaceutical wholesaler or a bank. With the former, the buyer’s discretion to purchase stock cost-effectively from a variety of suppliers will be fettered, as the wholesaler will require that, as a condition of providing the finance, significant levels of stock are purchased from it. A bank’s security is established through either a debenture over the buyer’s assets (if the buyer is operating through a limited company) or a charge over the business premises, possibly supported by a personal guarantee and/or a second charge over the buyer’s home. 

Due Diligence

Due diligence is a vital pre-acquisition exercise in which the buyer checks the health of the target business, its operations and the accuracy of any information provided by the seller. Enquiries should be made of NHS England’s local area team, doctors’ surgeries, nursing homes and whether any third party relocations or NHS contract applications are pending, all of which may adversely affect profitability. The buyer should obtain the last three years’ annual accounts and FP34s to accurately quantify historic prescription sales, as well as current management accounts, which will reveal any recent business deterioration.

Regulatory Issues

Change of Ownership Consent – when buying a pharmacy business (as opposed to acquiring the shares in a company), you will need to make an application to NHS England for a change of ownership. Completion should also be made conditional upon such change of ownership being registered.

Electronic Prescriptions – regulation requires the buyer to inform patients who had previously nominated the target pharmacy for receiving electronic prescriptions that the ownership has changed and check that they wish to continue to nominate the pharmacy. This needs to be undertaken within 6 months of change of ownership.

Fitness to Practise - pharmacies are required to provide a Fitness to Practise declaration to NHS England before they can provide NHS services. As this is the backbone of a dispensing pharmacy, it is important to check that there are no problems in satisfying these requirements before committing to buying a pharmacy.

Ownership of premises – the GPhC needs to be notified of a transfer of ownership of any pharmacy premises within 28 days of the transfer taking place.

Superintendent Pharmacist – if the buyer is a limited company which does not already own pharmacy premises, it will need to nominate a superintendent pharmacist.

Pharmacy Premises

The buyer’s solicitors should investigate the seller’s title to the property to ensure it is free from mortgages or restrictions and can legally be used as a pharmacy. Enquiries should also be made to ensure that the premises are directly accessible from the public highway, are served by utilities and have planning consent. If the seller occupies the premises under a lease, the lease will be assigned to the buyer and a number of important factors need to be considered. Our expert commercial property team can help you with this. 

Need advice or wish to talk to us?

If you are interested in buying a pharmacy and would like to discuss any matters in more detail please do not hesitate to contact us.


Richard Hough

Partner & Pharmacist, Head of Healthcare
Tel: 0151 600 3302 / 0161 836 8800
Email: richard.hough@brabners.com

 


Dental practice equipment warranties - what is reasonable to expect?

Wednesday 26th October 2016

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Healthcare Bulletin - Issue 3

If you are buying a dental practice, a major part of the work that a specialist dental lawyer will undertake on your behalf will be to negotiate the ‘warranties’. These warranties are a series of promises made by a seller that give you some assurances that the business you are acquiring is what you think it is.

The warranties will cover a wide range of issues and will be tailored to the specific practice and your personal requirements. A breach of one of the warranties given in the sale contract could allow you to make a claim against the seller following completion.

One area which is often in dispute between a seller and a buyer is the area of equipment warranties. Buying an operational practice will usually include a purchase of all of the equipment within that practice. However, don’t expect the type of warranty you get in Curry’s for your dishwasher!

The warranties given by the seller will apply on the date of exchange of contracts - which if you are buying an NHS practice is likely to be at least 28 days before the date you take over. It is wise to seek a provision in the contract to say that the warranties are repeated on the date of completion.

You are very unlikely to get a promise that something is going to continue to work for a year or two following the purchase. It is possible that you will get a promise that something will work on the date the warranty is given; although even this is not a given, as the seller may say that they are not sufficiently qualified to make such an assurance.

As a buyer, you might seek warranties not only that the equipment is in working order on the date of completion, but further that the equipment that you are being sold is adequate for both the continuation of the practice in the same way that the seller operates it (i.e. that the seller isn’t going to remove a vital item of equipment prior to the sale and leave you unable to practice). It is also reasonable to seek a warranty that the equipment available is sufficient and adequate to ensure that the practice complies with current GDC and CQC guidelines. A dental lawyer will also seek to give you protection that the equipment has been properly maintained, partially by making enquiries relating to certain statutory inspection and maintenance regimes (such as for the pressure vessels and X-ray machines), and partially by seeking warranties in relation to servicing and maintenance.

Finally, a sensible buyer would seek a warranty that the equipment within the practice is actually owned by the seller free from any finance or lease agreement.

A seller will look to limit the warranties in relation to equipment as much as possible. Firstly, by ‘disclosing’ against the warranty. If information is disclosed to you prior to completion, then you are usually prevented from making a warranty claim relating to that information.

A seller might also look to make a disclosure that you have had an opportunity to inspect the equipment and that any issues that would be reasonably apparent on such an inspection are deemed to be disclosed. This means that you would be prevented from making a claim for breach of warranty in relation to anything that would be apparent from an inspection of the equipment. The question is what sort of inspection would this cover. A qualified technician who inspects the equipment might find a fault in an item that a cursory glance around the practice would fail to bring to light. A sensible approach, if a seller seeks to disclose anything that would be apparent on inspection, is to ensure that this is limited to a brief visual inspection by a lay person.

Warranties will also be limited in terms of both value and time. You will have a limited amount of time to bring a claim for breach of warranty following a practice acquisition. It is important that you are aware of the timescales for bringing a claim. A seller will also seek to place a minimum value on any claim. For example, the contract may stipulate that any claim under the warranties must be worth at least £500 as a single claim or if you have a large number of small claims at least £10,000 added together (although the exact figures would be negotiable and will depend on the practice and circumstances).

It is important that both the seller and the buyer understand the warranties that are being offered in any sale agreement. Equipment warranties should offer the buyer some assurance that what they are buying will be fit for their requirements even if they don’t purport to promise that things won’t break in the weeks, months or years following your acquisition.

Need advice or wish to talk to us?

If you would like more information about dental practice equipment warranties please do not hesitate to contact:
 

Nicola Lomas

Senior Associste
Dental Lead
Tel: 0151 600 3321

GP Partnership Agreements – why does my practice need one?

Wednesday 26th October 2016

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Healthcare Bulletin - Issue 3

Due in large part to the legislation surrounding GP contracts, the majority of medical practices now operate as general partnerships. This means that, in addition to being physicians (first and foremost), those GPs acting in partnership are also business people, for whom the establishment of sound business foundations should be a paramount consideration.

The simplest and most practical way of achieving this is to have a professionally drafted partnership agreement put in place. This serves to govern the relationship between the partners and, provided it is drafted correctly, should set out clearly how the partnership is to be managed. In the absence of such express agreement, the partnership shall be governed by the ‘default provisions’ of the Partnership Act 1890 (the “Act”). These can prove very restrictive and may not always reflect the reality of your practice. Whilst the Act forms the basis of today’s partnership law and covers most of the necessary ground in setting up a partnership, it is far from all-encompassing and many of the provisions are now outdated. We therefore advise all our partnership clients to enter into a formal partnership agreement, not only to address these legislative shortfalls, but also as a means of providing clarity and certainty as to what can or cannot be done, reducing the areas where there may be conflict, and the adverse impact (and disruption) that entails.

A few key issues that you may wish to consider are as follows:

  • Capital contributions of each partner – subject to contrary agreement, the Act dictates that the capital of the partnership be shared equally and no account is taken of the partners individual contributions in determining the share of net assets or capital to which they are entitled. Where capital investment is to be unequal, you may wish to consider making the share of capital the subject of specific agreement.
     
  • Future funding – consideration should be given as to what arrangements there will be for future funding and how additional working capital requirements shall be fulfilled. 
     
  • Division of profits and losses – under the Act, partners are entitled to share equally in the profits of the partnership and must contribute equally towards any losses. In practice, there are many variations that you may wish to make to this default provision. Shares of profits may be unequal, capital profits may be shared in different ratios to income profits (for example, they may be shared by reference to the length of time a partner has been in the partnership since the acquisition of the asset from which they arise) and losses may be treated differently to profits (for example, senior partners may be willing to shield junior partners against all losses or losses exceeding a certain figure).
     
  • Fixed share partners – we appreciate that not all GP’s wish to commit to a full profit sharing (equity) partnership, with all the risks and commitments that entail. In this event, you may wish to consider making provision for ‘fixed share partners’ – in respect of which, more information can be provided, if requested.
     
  • Maternity, Paternity, Adoption and Parental Leave and Pay – partners are not covered by legislation providing employees who are parents with rights to take time off work. As such, you may wish to consider adopting equivalent or enhanced provisions to the statutory minimum entitlements afforded to employees and make specific provision for if, and how, a partner’s entitlement to and liability for net profit and losses shall be affected. You may also wish to consider whether, in such circumstances, the other partners shall be at liberty to engage locum cover and how the expense of such cover is to be borne/apportioned.
     
  • Provision for 24 hour retirement – whether you wish the partnership agreement to contain any provision concerning 24 hour retirement and return (to take advantage of the NHS pension rules enabling GPs to drawn down their pension whilst continuing their NHS responsibilities).
     
  • Termination of the partnership – in the absence of specific agreement, termination of the partnership can be enforced simply by one partner issuing a notice to the other partners. Such notice could force the sale of partnership assets and the redundancy of staff, and the creation of a new partnership, following dissolution, may require the prior approval of the relevant CCG or NHS England (as appropriate).

Even where there is a partnership agreement in place, in carrying out work for our partnership clientele, we frequently encounter changes that have occurred during the preceding year(s) (such as, the death of a partner, the transfer of a partnership interest from one partner to another or the allocation of profits/losses using a new formula or arrangement) and discover, quite often, that the operating agreement has not been amended to incorporate these changes.

It is imperative that your agreement reflects the current intentions of the partners and the operations of the current business. If your practice partnership agreement has not been reviewed recently, we would advise that now is a good time to do so – especially in light of the recent and significant changes to the NHS landscape and commissioning structure. 

Need advice or wish to talk to us?
 
If you would like more information about business partnership agreements, or any other partnership matter, please do not hesitate to contact:
 

David Seddon

Solicitor
Tel: 0151 600 3375

Healthcare Bulletin - Issue 2 - May 2014


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Healthcare Bulletin - Issue 1 - January 2014


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