There has been much debate over GPs potentially making a profit out of health care budgets as result of GP commissioning.

A study for the Guardian estimated that GPs could earn more than double their average income – perhaps up to as much as £300,000 per year – if they were able to share in the profits of any ‘savings’.

However, it is highly unlikely that the average general practice will profit in this way. GP practices cannot receive a profit-share on savings as commissioners, and even as members of a consortium, the quality premium payment (for achieving targets as part of a re-worked contract) will represent no more than 10 per cent of a practice’s overall income.

And while some GPs might gain income for taking up a management position in a GP consortium, the money they receive is unlikely to do much more than “backfill” the time spent away from surgeries.

The big money doesn’t lie in commissioning, however, but in a new type of service provider that takes on a risk-sharing contract for delivering care, with the commissioner. For example, this may involve the creation of an integrated care organisation (ICO) made up of a consortium of general practitioners working together with a private company, as was recently reported on the Channel 4 News.

Innovations such as ICOs look like an attractive option: it makes sense for commissioners to enter into risk-sharing arrangements with providers to take forward clinical and financial responsibilities; set quality standards; promote innovative practice; deliver a comprehensive and integrated package of care to patients, and be held accountable in the process. It is an approach The King’s Fund and The Nuffield Trust recommended in a co-written paper last year.

However, if these new provider organisations are allowed to profit from savings on the budgets they receive, then the potential income to the entrepreneurial GPs who might run them could be very lucrative. Let me illustrate with the following hypothetical scenario:

  1. A GP practice partner develops a new ICO, in association with a private-sector company, to manage primary and community care for a population of one million patients. The GP partner holds a 40 per cent stake in the business.
  2. The ICO receives a health care budget of £100m in a risk-sharing arrangement with the local GP commissioner to provide and improve the management of certain patients with chronic illness. Strict criteria and standards are written into the contract, but it is agreed that 50 per cent of any savings can be taken by the ICO as profit (over and above the management fee they receive). This is seen as fair given the financial risks being taken.
  3. All local GPs who are members of the ICO agree to an enhanced local contract with the private company. This provides bonuses for achieving quality standards set in the contract – potentially worth an additional £20,000 to each GP practice. However, practices do not take a profit-share arrangement as this would undermine their clinical autonomy; undermine the doctor-patient relationship with patients; be too much risk to take and  be seen as a direct conflict of interest by the consortium. As a result, all of the financial risk in the management of the budget is taken by the owners of the ICO business.
  4. At the end of the first year, the ICO excels on its quality targets and generates a surplus of 5 per cent (£5m), a result it puts down to better integration of care, reduced levels of unscheduled hospital admissions, and better business processes. The GP commissioner pays out the quality premium attached to the contract to those GPs who performed well. So the GPs are happy, while their patients report high satisfaction. Of the surplus, 50 per cent is returned to the commissioner for re-investment in patient care. The remaining £2.5m belongs to the ICO business and the GP partner’s share for the year is therefore £1m (over and above his practice income and the bonuses made by his practice in meeting the ICO’s quality targets).

This story is not as far-fetched as it may seem. The question is, are we ready to allow profits to be made on savings from health care budgets in return for better and more cost-effective services?

If so, are we also ready to accept the £1m GP?