Financing The Cost of Buying Into A GP Partnership

The demand for general practices across the UK is growing at an alarming rate, driven by a number of factors, such as an ageing population and more complex health needs. There are also more patients than ever before registered with a GP practice – in July 2019, there were 59,901,236 people registered, and by July 2022, that number had risen 3.2% to 61,768,942.

To put this all together, there’s more demand for GP practices than ever before – but the UK is instead facing a shortage of GPs and practices. As a medical professional, buying into a GP partnership and improving your practice from within presents lucrative opportunities to not only benefit your own career but the wider population too. 

Buying into a GP partnership means acquiring an ownership stake in the business itself. In the UK, that means applying for a position and often having to buy into ownership. Not all practices will ask partners to buy in, but many that own their premises will.  

Here at Rangewell, we support doctors who want to become partners by helping you understand the financial lending market, identify the right lender for your needs, tailor your application to suit their requirements and then negotiate a deal that sees you receive the funds you need without restrictive rates or terms. 

Contact us today to get direct advice, or read on for a general guide around buying into a GP partnership. 

What is a GP partner and why is it financially beneficial? 

A GP partner is a self-employed person who owns part of the practice they operate from. Partners assume greater control over their practices, which in turn tends to mean greater commitments in terms of time and effort. 

A partner is not salaried and is instead paid like a business owner, which means you’ll have a vested interest in driving profitability and efficiency in the practice. The reward is that partners earn more than salaried doctors, with the average UK GP partner receiving up to £140,000 per annum. 

In some cases, becoming a partner carries a ‘parity’ period where you won’t become a ‘full’ partner for a set period of time. This can be short, but may also take a few years – so be sure you know what is being offered when you consider becoming one. 

Becoming a GP partner

Unlike traditional salaried healthcare roles or even that of self-employed locums, GP partners occupy a unique status in that they are business owners as well as providers. This gives you more control over the practice and access to greater financial rewards.

To become a GP partner, you must apply for the position. When taking on the role, you’ll receive a split of shares to give you an ownership stake. Depending on how the business is structured, this may be a 50/50 split between the existing owner and yourself, or you’ll acquire fewer shares and join a wider team of partners. 

You’ll need to apply for the position like a traditional salaried, though the circumstances around the application will determine your approach. For example, many GPs seek to become partners at a practice they already work at, which will require a more personalised approach. 

When you apply, you’ll need to demonstrate:

• Your clinical skills and experience
• Knowledge of the wider primary care environment and healthcare sector as a whole
• Any managerial or leadership experience you hold
• Understanding of quality assurance, governance and regulatory compliance factors. 

Once you’ve passed the interview, you may have to buy into the practice or not, depending on its structure. 

Remember: partners can’t sell a share of the practice, so there are only two different scenarios in which you should have to “buy in”. 

• The practice building: the most common way a partner ‘buys in’ to a practice is to purchase a share of the premises’ freehold value. This is only applicable when the practice owns the property, but is the most likely scenario faced by most new partners. As with other forms of property purchase, the value can be high and will generally mean you need to source finance to support the buy-in. 
• The practice’s ‘capital account’: many GP practices have their own bank accounts with ‘float’ to help manage cash flow. As a new partner, you may be asked to pay into this account. 

Valuing the practice

Before committing to buying into a partnership, you need to know the value of the practice in question. You can’t simply trust the valuation given by any existing partners, meaning you’ll need to perform due diligence to get a fair and unbiased value. 

This process involves looking at the practice’s income tax returns, accountancy statements such as profit and loss statements, the physical premises itself and any land owned by the practice etc. 

Because you’re not able to buy into the goodwill of the business, the most meaningful valuation will come from the value of the premises, as that is generally what a partner will buy into. Consult a property specialist if you have any doubts, though most lenders will verify a value with their own independent assessor when you apply. 

How much does it cost to buy into a GP partnership?

Buying into a GP partnership carries variable costs – mainly based on what arrangement the existing partners ask you to agree to. If buying a share of the property, it will likely be a percentage based on how many other partners are in the practice. For example, if buying into a practice where you’d become the fourth partner, you’d expect to pay 25% of the practice property value. 

If paying into the capital account, how much you pay can vary considerably and will be based on what you can negotiate with the existing team. 

Signing a GP Partnership agreement

The GP partnership agreement is an important document that outlines your responsibilities as a buyer. It contains the conditions by which you and other partners must operate, including:

• You and other partners’ duties and responsibilities
• The overall decision-making process
• A system for resolving disputes between partners
• The rules behind expelling a partner from the practice
• How profits and capital income is shared
• All entitlements such as sick pay, holiday leave etc for partners
• Resignation/retirement policy (often part of a declaration of trust)

When reviewing this agreement, you may also need to sign a declaration of trust that outlines how your relationships with other partners should function. Declaration of trust documents also generally outline what will happen to your equity should you retire or leave. 

Within these declarations, most practices ask that the retiring partner sells his or her shares to the continuing partners, who are obligated to buy it. If you’re only just becoming a partner, this isn’t something you’ll be considering now but it’s certainly a factor to be aware of – especially if another partner in the practice is nearing retirement age and you may shortly face the obligation to purchase said shares. 

Buying a retiring partner’s shares

If you’re an existing partner, you may find yourself liable to purchase a retiring partner’s shares under the conditions we’ve just outlined. This usually means raising finance, typically through a commercial mortgage or similar agreement, but will require discussions with specialist lenders. Lenders may hesitate to offer finance to any sole partner, so if you’re left as the only partner, you might face a difficult challenge in raising the funds needed to buy the shares. 

Rangewell can help you even in these tricky circumstances by offering guidance around lenders and by helping arrange finance on your behalf. 

Specialist medical practice finance to help you achieve your goal

If you want to become a partner, you’ll almost always face some buy-in requirements. If you don’t have the capital in your savings or you’d like to avoid using your personal finances, Rangewell can help you secure the finance you need from the medical finance lending market. 

Once you’ve achieved Partner status, we can also help you raise medical practice finance for all manner of costs – from expanding your practice, buying new equipment or expanding your employee roster.