I understand the primary aim of PCNs is not to be a source of income for practices, but it is important they don’t become a drain on already under pressure practice finances.  So do PCN finances stack up?

Just as a reminder, the aim of PCNs (according to the BMA) is to focus services around local communities, help rebuild and reconnect the primary healthcare team across the area, alleviate workload, be practice-led, and allow GPs and primary care practitioners to deliver a new model of care for their patients and communities.  It is interesting there is no mention of money, despite the financial challenge in general practice PCNs are supposed to be part of the solution to.

The headline investment figure into PCNs is the Additional Role Reimbursement Scheme (ARRS), which brings with it total investment of £1,412M by 2023/24, equating to an average reimbursement pot of £1.13M per PCN.  Member practices receive a £1.76 participation payment.  PCNs directly receive £1.50 core funding (which I discussed last week), 2 to 3 sessions reimbursement for a Clinical Director, and the Investment and Impact Fund – the proceeds of which PCNs have to commit to reinvesting in additional workforce or primary medical services.  There are also extended hours payments and care home “premium” payments, but these are funds for specific pieces of additional work.

The eye catching figure is of course the investment via the ARRS.  But what is increasingly emerging are a set of hidden (and not so hidden!) costs for PCNs and their practices associated with these roles.

Many areas have not been able to recruit the roles within the salary reimbursement available, and each role where this has been the case becomes a cost pressure on the PCN.  These cost pressures will accumulate as more roles are added, and as staff expect pay rises beyond the reimbursable amounts available.

It is also unlikely the on costs will meet the training, supervision and professional development costs of the roles, along with equipment and property costs – apparently NHS Property Services has recently stated that where its property is used to house PCN services this will incur additional property costs for those practices.

When PCNs were first being set up there was quite a bit of talk about the risk of incurring VAT, but that died down relatively quickly.  However, as PCN turnover starts to exceed the VAT allowance of £85,000, which it increasingly will do as the number of roles recruited to increases, then the spectre of this charge will quickly re-emerge.  There is no obvious source of funding to meet any such VAT charge, other than directly from member practices.

The other issue for PCNs to consider is whether they should be creating a financial buffer, to mitigate the potential risk of any employment costs that may arise out of the new PCN staff group.  Often companies will try and ensure they have at least three months of salaries as a financial buffer, which by 23/24 would be £250-300K for an average PCN.  That money will need to come from somewhere.

What approach, then, should PCNs take to PCN finances?  It seems to me that PCNs have one of two choices.

They could choose to think about PCN finances in terms of the net impact on member practice finances.  This would mean practices actively monitor the total positive impact on practice profitability of the PCN.  They would take the £1.76, the impact of the new roles in reducing staff costs, and any increase in income from PCN contracts, and subtract any direct costs to the practice of the PCN, such as financial contributions, property charges and staff time, and ensure that it remains net positive.

The key to making this approach work would be ensuring each practice receives a direct positive impact from the additional roles that are brought in, rather than treating them as PCN-staff that are not really anything to do with the work of the practice.

The other option would be for PCNs to operate financially like a business.  The principle here would have to be that the total income of the PCN should match the total costs.  Outside of the DES contract itself there are soft funding pots available, both through the national PCN development funds and local initiatives.  The Investment and Impact Fund was initially presented as an opportunity for PCNs to earn money by reducing secondary care expenditure, but that was lost as it was watered down into what we have now.  The big potential income generating opportunity on the horizon is the shift of extended access funding to PCNs from next year.  It remains to be seen whether this too will still exist once the final guidance has been agreed.

My worry is that many PCNs at this point in time are not taking either of these approaches.  PCN finances can stack up, but to do so will require active financial management.  The big risk is that without this in place PCNs could end up having a significant negative impact on member practice finances.