The National Health Service (General Medical Services Premises Costs) (Wales) Directions 2004

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Charleen Willis
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1 The National Health Service (General Medical Services Premises Costs) (Wales) Directions 2004 The Premises Directions provide the contractual rules for the funding of primary care premises under the new general medical services (GMS) contract and came into effect on 1 April They describe the circumstances under which LHBs should consider supporting the making of payments to general medical practices to cover all or part of their premises costs and the nature of such payments. The Statement of Fees and Allowances The SFA (Red Book) was in effect until 31 March 2004 and provided the legislative basis for payments both direct and indirect to GPs independently contracted by LHBs to provide general medical services to the NHS. This included reimbursement to GPs of costs associated with the provision of primary care premises. Under the SFA premises costs were funded from two funding streams of revenue: cash limited baseline allocations ( based on historic expenditure patterns uplifted for inflation); and non-cash limited funds. The former was used for cost rent ( GP developed and owned schemes) and improvement grants schemes and the latter enabled LHBs to support premises developments ( particularly third party development schemes) with the rental costs being met without limitation by centrally held funds. Under the new GMS contract the premises sections of the SFA, paragraphs 51, 55 and 56 have with effect from 1 April 2004 been replaced by the Premises Directions and the non-cash limited funding stream has been abolished. Welsh Health Circulars relating to paragraphs 51, 55 and 56 of the SFA and the premises flexibilities have also been superseded by the Premises Directions. Criteria for payments under the Premises Directions The Premises Directions support the provision of new and improved primary care premises in that they state that LHBs should only support payments where practices: agree to move to premises that are suitable for the delivery of modern primary care medical services, or agree to procure newly built or refurbished existing premises. This means that LHBs should only support payments towards premises costs where practices occupy or are planning to occupy modern practice premises. In the context of the Premises Directions modern practice premises can be defined as premises that a practice occupies after 1 April 2004 that are newly built or modernised according to the recommendations of the Primary and Social Care Premises Planning and Design Guidance available on the Department of Health s website and meet the requirements of the schedule 1 of the Premises Directions as a minimum requirement.

2 In addition, all development proposals must be in accordance with the LHB s integrated service and estate strategy. Funding Stream applicable in Wales The revenue requirement of primary care development projects approved or specifically agreed by the Assembly prior to 1 April 2004 is covered by the existing GMS funding stream. From 1 April 1004 all new projects whether 3 rd party developer schemes, proposed LHB capital schemes, GP led and owned cost of borrowing schemes ( similar to former cost rent), and improvement grant schemes including refurbishment/extensions are now subject to a new funding regime as described in Welsh Health Circulars (2004) 055, (2004) 074 and (2005) 008. GMS funding monies for new-build and improvement projects is held centrally by the Welsh Assembly Government and allocated by the Primary Care Estate Forum which meets monthly. The allocation of funding is accessed in two separate ways: 1. A bid for funding is required in the following circumstances: 1.1 New development proposals covering: new or additional revenue commitments by GPs or LHBs ( eg. third party developer schemes); new capital schemes to be developed and owned by LHBs; new percentage cost of borrowing schemes to be developed and owned by GPs and eligible for percentage cost of borrowing or notional rent reimbursement. 1.2 Improvements and extensions to current premises covering: renovation, modernisation works from a set limit of 300,000 excluding VAT. Details of the bid process is provided in WHCs (2004) 055 and (2005) A streamlined two stage application and draw-down process is applicable where minor improvements and works where the cost of the works is less than 300,000 excluding VAT. Details of the improvement grant application process is provided in WHC (2004) 074. LHB and Welsh Assembly Government Discretionary Powers The following phrase appears throughout the Premises Directions: The LHB must consider that application for financial assistance and, in appropriate cases (having regard, amongst other matters, to the budgetary targets that it has set for itself), grant that application. This means that although LHBs must consider all applications for payments as covered by the Premises Directions, they are not obliged to approve them. Because LHBs do not have their own premises funding budgets, all applications for payments

3 which the LHBs support must be submitted to the Primary Care Estate Forum for consideration. GP practices must not commit themselves to premises expenditure on the assumption that they will automatically be reimbursed through their GMS contract. The new funding processes must be followed. Contents of the Premises Directions The Premises Directions are sectioned into six parts with three attached schedules: Part 1 General ( Paragraphs 1 to 6) Part 2 Premises development and improvement ( Paragraphs 7 to 12) Part 3 Professional fees and related costs incurred in occupying new or significantly refurbished premises ( Paragraphs 13 to 14) Part 4 Grants relating to relocation of a contractor ( Paragraphs 16 to 30) Part 5 Recurring premises costs ( Paragraphs 31 to 53) Part 6 Supplementary provisions ( Paragraph 54 to 59) Schedule 1 Minimum standards for practice premises Schedule 2 Current market rents and notional rent abatement Schedule 3 Notional rent abatements and notional rent supplements Appendix A provides further guidance on the Premises Directions.

4 APPENDIX A: PREMISES DIRECTIONS: FURTHER GUIDANCE A number of bids to the Primary Care Estate Forum have raised questions of interpretation on the Premises Directions and the following information provides guidance on how various issues have been dealt with: 1. GP owned and developed primary care premises: Where GPs organise and own the development of primary care premises they are eligible to be funded on the basis of the percentage of the borrowing costs or notional rent payments. According to paragraph 37(b) the cost elements that may be aggregated to assess the amount to which the prescribed percentage may be applied include the following items, where incurred: site purchase; building works; reasonable surveyors and architects fees and reasonable legal costs arising out of the purchase of the site and the building or refurbishment; any rolled-up interest incurred on loans taken out to procure the premises; local authority and planning application fees; purchase or lease costs of adequately fitting-out and equipping the new premises, and VAT and Stamp Duty Land Tax The prescribed percentage is: (a) if the loan is a fixed rate interest loan (for the duration of the loan period) the 20 high year gilt rate issued by the Bank of England plus 1.5%; (b) if the loan is not a fixed interest rate loan (for the duration of the loan period), the Bank of England Base Interest Rate plus 1%; or (c) if the contractor is financing the building or refurbishment scheme wholly or mainly from its ( or its partner s or shareholders ) own resources, that which the LHB determines as representing best value for money. 1.1 Professional Expenses that may be reimbursed Where notional rent payment are to be paid in respect of newly built or refurbished practice premises, paragraph 14 of the Premises Directions states that the reimbursable professional expenses are: reasonable surveyors and architects fees, and reasonable legal costs in connection with the purchase of a site ( where applicable) and the construction or refurbishment work However the District Valuer has advised that payments in accordance with paragraphs 14 and 37 of the Premises Directions would amount to double-counting in respect of professional expenses. When the District Valuer appraises the project costs

5 of a development scheme he takes into account these expenses and so they will be reimbursed within the notional rent rather than as a separate claim for payment. 2. Third Party Developer Schemes Where GPs agree to move to modern practice leasehold premises provided by a third party developer, who has experience in providing healthcare premises, the following items have been reimbursed by the Primary Care Estate Forum: 2.1 Monitoring Surveyor s Fees Under paragraph 14 (b) (i) reimbursement may be considered for the reasonable costs of engaging a project manager to oversee the interests of and give advice to the GP practice, up to a maximum reasonable amount which is 1% of the total reasonable contract sum relating to the construction or refurbishment work. This has been interpreted to mean a monitoring surveyor who provides advice and guidance in respect of the construction elements of the project. The 1% relates to the reasonable contract sum of the works related to the GMS portion of the premises rather than the total build if the premises accommodate space for other non-gms service providers. GPs should obtain three quotations from qualified professionals. 2.2 Legal Costs Under paragraph 14(b) (ii) reimbursement may be considered for the reasonable legal costs incurred by a GP practice in connection with agreeing the lease or a contract for the lease. Legal costs relating to the sale of existing GP premises is not an eligible item for reimbursement under para. 14(b) ii. The Primary Care Estate Forum has agreed to provide reimbursement of reasonable legal costs in connection with agreeing the lease or a contract for the lease of modern practice premises but may agree to make a contribution rather than pay all of the costs. GPs should seek legal advice from solicitors with experience in healthcare development projects and who are willing to provide services on a lump sum fee basis, where applicable. 2.3 Stamp Duty Land Tax Under paragraph 30 reimbursement may be considered for Stamp Duty Land Tax on leases. The Primary Care Estate Forum has agreed in general to reimburse stamp duty land tax incurred as a consequence of a GP/LHB signing a lease in respect of modern practice premises. 3. Equipment Lease Costs Paragraph 35 refer to the consideration of payment of equipment, etc lease costs for modern practice leasehold premises.

6 The Primary Care Estate Forum made a policy decision at its meeting of October 6, 2005 that it will not support the payments of equipment lease costs as a separate item of claim. 4. Temporary accommodation Paragraph 6 refers to circumstances that are not contemplated by the payment arrangements set out in the Premises Directions. One of the main examples refers to cases where a GP practice required temporary accommodation (whether in the form of portable premises or an existing building) while new practice premises are built or existing premises are refurbished. In such cases the LHB is required to submit a bid for funding to the Primary Care Estate Forum.

DIRECTION ISSUE CHANGE RATIONALE PART 1. Wording added: These Directions are given to the Local Health Boards. some definitions:

GP Premises- Revised Directions Detailed amendments and stated rationale DIRECTION ISSUE CHANGE RATIONALE PART 1 General 1 Citation, Commencement and application 2 Interpretation Additional Definitions