Is the incorporation of primary care networks helpful?
First published in Practice Management in November 2020
Justin Cumberlege from specialist healthcare law firm Hempsons, provides some guidance on incorporating a primary care network
Incorporation is the formation of a legal entity (most commonly a company) by a group of individuals, and it is registered at Companies House and evidenced by a certificate of incorporation.
The benefits of a company are that it has limited liability and it is a legal entity in its own right, unlike a partnership or an unincorporated association, which might best describe a primary care network (PCN).
This means that the company is able to enter into contracts in its own name, and if the company is sued, then normally the most that the claimant is able to recover is the entire assets of the company but they cannot claim from any individual members of the company, unlike a partnership where each individual partner is personally liable.
Most commonly, the company is limited by shares, meaning the members of the company invest in the company by buying shares and they receive in return dividends on the profits the company makes. An alternative is a company limited by guarantee which is often the structure used by social enterprises, such as a Community Interest Company (CIC), and membership type organisations, which are asset locked companies, where profits are re-invested.
As a corporate body, the PCN would sub-contract to provide the Directly Enhanced Services (DES) for the practices and employ the staff to perform them. The Additional Roles Reimbursement Scheme (ARRS) does not provide payments to cover the cost of management (except for social prescribers) so those costs, and the cost of funding the company, would have to be paid for by the practices, or the company providing other services on which a surplus is made. These costs need to be weighed up against the advantages of having a company.
‘An advantage of a company is that statute imposes some governance requirements’
The good news is that now the employees of such a PCN company are able to be enrolled into the NHS pension scheme through a temporary arrangement which is anticipated to become permanent. Another advantage of a company is that statute imposes some governance requirements, and a degree of transparency. This means that the company does have a framework which you are able to build around. Also, as it is a legal person, it acts as one. Obviously, there are differences of opinion in the board room, but they should be kept well behind closed doors with the public facing part of the company speaking with one unified voice.
There are some other issues to consider, such as, unless the company has an NHS primary medical service contract with a patient list, DES payments have to come via a practice. It will need to be CQC registered and have data sharing agreements in place. It should be structured to ensure there is no VAT supply to practices.
While the PCN will still need its Network Agreement, it should be aligned to the company to avoid duplication, so having a PCN company may be a way of creating stability for the future.