Many consultants consider private practice to generate more income. The current size of the UK private healthcare market is about £4bn with 7.5 million insured patients (13% of the population). About 19% of the market is self-pay.
Minimum requirements to set up in private practice include a registerable medical degree, FRCA or equivalent, a certificate of completion of training or equivalent, and entry in the appropriate specialist register of the GMC.
Any doctor doing private practice will be required to pay a higher medical indemnity subscription, have more complicated accounts and must make sure that their private work does not conflict with their NHS contract.
Before starting in private practice, the consultant should get advice from a chartered accountant about their tax situation and from a colleague who is an experienced independent practitioner.
Admitting rights in private practice
Before a doctor can work in a private hospital, admitting rights or practising privileges need to be obtained. All private hospitals have a Medical Advisory Committee (MAC) that comprises consultants of all subspecialties, one of whom will be the chairman. The senior manager of the hospital should grant practising privileges to consultants who meet the standards set by the MAC. Practising privileges are not awarded by right; some hospitals may refuse to award them even to consultants who meet the criteria. The private hospital will provide a consultant with the necessary application forms on request.
Consultants must adhere to the appropriate clinical governance requirements as determined by the private hospitals and agreed by the MAC of these hospitals.
Registration with a private medical insurer
Before a private medical insurer (PMI) will pay a consultant directly for treating their customers, consultants need to register with them. This may involve providing copies of documents that will satisfy the PMI that the consultant is suitably qualified to provide medical care to their customers.
The larger PMIs include: Axa PPP Healthcare, BUPA, BCWA, Aviva and WPA.
Accountants for private practice
An accountant with experience in private practice will provide invaluable advice on billing, banking, taxation and expenses. They will also be helpful when planning pensions and eventual retirement from both NHS and private practice. The fee that an accountant charges for work done that relates to private medical practice is a tax-deductible expense.
Billing in private practice
The keeping of accurate records is the key to efficient billing. You should keep a record of the following for every patient you treat: name, address, telephone numbers, date of birth, insurance details (PMI, registration number, authorisation number), date of procedure or treatment, the hospital at which the procedure was performed, other consultants involved, procedures performed (both narrative and OPCS codes) and any unusual occurrences or circumstances.
A logbook or database that contains this information will obviously contain confidential information. Electronic records come under the terms of the Data Protection Act, and appropriate registration and data protection are required. A secure backup of all data should be kept. Many consultants starting in private practice choose to do their own billing and to keep their own accounts. The consultant should keep precise and careful records of the date and amount billed, and the date and amount received. Commercial software packages are available that will facilitate this process. However, as private practice volumes in increase, many opt to pay others to do their billing and financial record-keeping. Consultants whose partners have no income or whose earnings are less than the threshold for higher-rate income tax may benefit financially from paying their partners to do the billing.
Setting of fees in private practice
There is a difference between benefits and fees. Benefits are what insurance companies pay out on behalf of patients according to the terms of their policy contract with them. Fees are what consultants charge patients for their professional services.
These two terms should not be confused. Most PMIs make their benefit schedules available to consultants. Some, such as the WPA, make their schedule publicly available.
It is for the individual consultants to determine their own fees. Agreeing with a group of local consultants to charge the same fee as other group members can be considered anti-competitive and should be avoided unless the group is trading as a partnership with an established legal identity.
Factors that influence private practice fees
Individual consultants are free to set fees according to a variety of factors they feel are pertinent. These might include:
1. The time taken to provide the service, including pre-operative, intraoperative and postoperative care.
2. The training, qualifications and experience necessary to provide medical care safely.
3. The complexity of the medical care provided.
4. The rarity of the skills necessary to provide safe and effective care.
5. The risk to the patient of the procedures being performed.
6. The time of day and day of the week that the service is provided and the degree of urgency.
7. The risk to the consultant of providing the service.
Consultants should review their fees on an annual basis. Read for more information.
Banking in private practice
Take advice from your accountant on how to manage your bank accounts. Most consultants who conduct private practice maintain a separate bank account that is wholly dedicated to their private practice. A consultant setting up in private practice should keep a full and accurate record of all payments into this account and all payments made from it.
Tax issues
Never forget that tax has to be paid on the money that the consultant has earned through private practice, so take advice from an accountant. Many consultants ring-fence 40% of their private practice income in a separate account so that they always have the money available to pay the tax.
Every year some doctors are investigated by the Inland Revenue. Most are chosen at random, some because they have drawn attention to themselves through poor or suspicious accounting. A tax investigation is time-consuming and costly for the individual concerned. It is possible to take out an annual insurance policy to cover the costs of an investigation.
Indemnity in private practice
A consultant undertaking contracted NHS work in a private hospital would normally be covered by the NHS Litigation Authority. NHS indemnity does not cover the defence of staff involved in disciplinary proceedings conducted by statutory bodies like the GMC, police investigations arising from professional practice or Good Samaritan acts.
It is essential for consultants – especially those undertaking private practice – to be a member of a medical defence organisation or have some other form of appropriate insurance cover. This indemnity will cover clinical negligence claims, complaints procedures, Good Samaritan acts, advice on legal and ethical dilemmas arising from professional practice, GMC enquiries, disciplinary procedures, inquests and fatal accident enquiries, and police investigations arising from professional practice. Absence of protection can lead to professional and financial ruin.
These subscriptions are allowable expenses against private practice earnings. Policies with commercial companies are on a ‘claims made’ basis. This means that the insured doctor is only covered for claims arising from incidents which both occur and are reported whilst the policy is in force. When the policy expires, so does the cover unless a run-off payment is made. The mutual organisations offer ‘occurrence or incident-based’ schemes that give protection for claims arising from incidents that occurred during the subscription period no matter when they are reported, even if it is many years after that subscription had ceased. These provide ongoing protection at retirement or death – the latter prevents one’s estate being liable for claims.
More information at the MDU and MPS.
Medicolegal work
Medicolegal work can be divided into personal injury and negligence. The former entails examining clients who are making claims for injuries that they have sustained outside the medical arena, often occupational in nature.
The latter – clinical negligence – involves assessing the care of patients. The consultant has to derive a likely sequence of events from a bundle of documents, largely clinical records; explain those events in terms that an intelligent layman can understand and decide whether the standard of care would be regarded as acceptable by a reasonable body of peers. They produce a report and may have to appear in the witness box.
The advantages are that much of the work can be done from home and its reasonably rewarded. However, deadlines are tight and reports are often challenged and there are risks if you step outside your field of expertise. For more advice visit the Academy of Experts and the Expert Witness Institute.
Legals of private practice
Professional liability insurance for clinical practice does not necessarily provide cover for medicolegal work. Consultants can fall foul of doctors who might have been unfairly castigated in a report, of patients who feel that the consultant has not been sufficiently supportive of their claim, or of lawyers who are dissatisfied with the service the consultant provided. Cheap medicolegal insurance is available from all the major defence organisations.
Avoiding a clash with NHS work
Consultants should not undertake procedures or care for which they are not appropriately trained, experienced and in ongoing practice. NHS consultants should have similar clinical portfolios in both sectors.
There will be times at which the demands of these two practices will seem to clash. The consultant contract specifies that private practice should not normally be conducted in contracted NHS hours or when on-call for NHS patients. If an existing private patient unexpectedly develops a complication that requires urgent treatment, it can be acceptable to leave NHS duties or to delay them provided adequate cover is given for those NHS patients under your care.
Chambers and group practice
Most consultants start out in private practice as sole practitioners. Some will find that an established group practice already exists. It is particularly attractive within specialties like anaesthesia, radiology and pathology with discrete episodes of direct patient responsibility.
The advantages include sharing costs and expenses, practice accommodation and administrative support and strength in negotiating with private hospitals. This has to traded off against loss of professional autonomy and the tax advantages of paying a partner for secretarial work.
Consultants can work together through chambers or partnerships. Most chambers offer a system whereby the members contribute to these common expenses by paying a percentage of their gross income. However, there is no profit-sharing as in a partnership and individual members of the group keep the fees they earn beyond what they have to pay towards the chambers expenses.
A partnership is a type of business entity in which partners share the profits or losses of the business undertaking in which they have all invested. The shares may be equal (equity partnership) or may be fractional, based upon the seniority or some other factor that varies only by the consent of all partners. A true partnership must have a legally drafted partnership agreement signed by all partners and there should be regular partnership meetings.
Generally, partners have an obligation of strict liability to third parties injured by the partnership. The liability of limited partners is limited to their investment in the partnership, hence the term Limited Liability Partnership.
Without a legally drafted partnership agreement, the group will not benefit from the legal advantages of a real partnership, such as the ability for all partners to charge the same fee without an accusation of price fixing.
Partnership administration can be largely left to the salaried partnership manager who acts under the immediate direction of the elected partnership chairperson.
More information can be gathered from the representative organisations FIPO and IDF.
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