With an ever-growing need for GP surgery space, GP Surveyors explain the options to fund premises improvement works and highlight the pitfalls to avoid.
It has been widely reported that many GP practices are struggling in inadequate premises that require improvement or expansion. According to a major survey on practice premises from the British Medical Association (BMA), only half of the practices consider their premises to be fit for present needs. With eight out of ten GPs saying their premises were not fit to meet projected future needs. The majority of the 1,000 practices surveyed highlighted their need for more space.
This need for space is driven by growing list sizes, demand for expanded GP services, and of course the additional staff to deliver these services under the rollout of Primary Care Networks (PCNs). NHS England recently revealed that PCNs have already recruited 9,100 clinical staff under the Additional Roles Reimbursement Scheme (ARRS), representing a third of the 2024 target of 26,000.
Whether a practice is considering extending its premises, improving access for disabled patients, or simply fitting rolled vinyl, the most cost-effective way to fund the works can be complex and confusing.
There are two options available to owner-occupied surgeries looking to fund premises improvement works, NHS-funded and self-funded (including borrowing capital). Often works are funded by a combination of these two options.
When undertaking any improvement works one fundamental principle applies. In order for works to qualify for NHS rent reimbursement written approval from the NHS must be obtained, including confirmation works will be eligible for rent reimbursement.
To what degree will the NHS fund improvement work?
As part of the 2020/21 GP contract updates, 100% NHS-funded premises improvement grants are now available, lifting the 66% cap stated in the Premises Cost Directions (PCD).
The level of funding surgeries are eligible for will depend upon a multitude of factors and respective contributions will need to be discussed with the NHS during the approvals process.
Notional rent abatements
If a practice opts to receive NHS funds towards the cost of building or refurbishment work the surgery’s notional rent will be subject to an abatement. The surgeries notional rent figure will be abated proportionally to the percentage of funding the NHS have contributed toward the works. No matter the percentage of NHS contribution the abatement section of the PCD should be followed.
How long will the notional rent abatement apply for?
As the works will be completed after 1st April 2013, the 2013 Premises Cost Directions will apply. The 2013 PCD stipulate a proportionate time scale for the abatement, dependent upon the total costs of the improvements:
• Works costing up to £100,000 – are abated for 5 years
• Works costing between £100,000 – £250,000 – are abated for 10 years
• Works costing more than £250,000 – are abated for 15 years
For further information on notional rent abatements please read our abatement guide.
Can a practice still challenge an abated notional rent figure?
Providing the practice has not signed up to an alternative agreement (waiving the rights to receive rental uplift on works), the practices abated rent is still eligible for checking and challenge. Ask a specialist primary care surveyor to check the figures to ensure the surgery isn’t underfunded.
Self-funding GP premises works
If the surgery has or can borrow the capital to fully fund an extension or refurbishment works, it is still imperative that NHS approval is obtained before undertaking any works. Gaining the NHS’s approval will ensure any works to the practice will be eligible for notional rent reimbursements.
Is third-party input required?
Working out the most cost-effective way to fund GP premises improvement works over the lifetime of a notional rent abatement or a loan can be complex. Calculating the increase that improvement works will have on notional rent and the capital value of the surgery is a specialist area. If a practice is planning improvements it is advisable to seek valuation advice from a specialist primary care surveyor.