An NHS contract is really just a payment collection mechanism
An NHS contract is really just a payment collection mechanism
Some contracts look better in terms of the actual income they generate

By Ross Martin, Management Consultant at Hive Business

Why is an NHS contract so good? The conventional answer: because of the revenue it generates, which seems guaranteed and is particularly appealing to risk averse business owners.

Granted, a divide has emerged between underperforming rural practices where recruitment and retention problems affect contract performance, and larger practices in more central locations where contracts are performed well. So some contracts look better in terms of the actual income they generate.

But viewed another way, no NHS contract is intrinsically worth anything. It’s simply a payment collection mechanism, ensuring that you are paid at a fixed rate for the work you do. It also includes a crude marketing function that incentivises a particular type of patient to turn up. It doesn’t do the dentistry for you, and if you don’t deliver the right number of UDAs the NHS will claw money back at the end of the financial year, so its not guaranteed income after all as some practice owners painfully discover.

Is any of that desirable? I know people who feel trapped in this system, not enjoying the dentistry, not feeling it provides an appropriate level of patient care, but depending on the monthly paycheck all the same to keep the wheels turning. And if you are servicing your contract well you’re even more stuck because the whole industry tells you it’s worth a mint. It’s “guaranteed income”.

I don’t deny that, say, a well run £300k contract represents a revenue stream of up to £300k, but it’s not as good as it sounds. You’ve still got to deliver the work, so why is it worth more than if you generated £300k of private revenue by introducing your own efficient marketing systems and setting your brand position appropriately for your market catchment demographics?

Why should dentists feel so hung up about finding their own revenue? All businesses outside the public sector do it. If you were looking at best practice, you would be comparing like for like, asking yourself whether £300k of revenue is better via NHS or private patients. It’s a choice that many practice owners don’t consciously make.

Yet choosing NHS revenue comes with serious drawbacks. You may think, “Now I won’t have to fight to get that revenue and those patients in,” but there’s a cost that’s borne across your business, in staff morale, margins and price capping. All things that if you were in another line of work you wouldn’t stand for, or at the very least you’d think carefully about.

NHS patients are becoming steadily more disgruntled, as are NHS dentists. If you’re working in that space, is it a conscious decision, or are you stuck? Probably less than half of dentists feel NHS dentistry is the type of work they want to be delivering, although a sizeable minority do think the opportunity it provides to upsell is a significant advantage. To me that seems like trying to sell Chablis in Burger King. It’s not that it’s impossible, but it jars and confuses the consumer and doesn’t make long term business sense.

When we talk to our clients about converting from NHS to private, we never endorse turning off the contract immediately — that can be financial suicide. Rather, the plan is usually to replace the income gradually with a different profile of patient and collection mechanism.

It’s not a case of reducing the value of your business by throwing the NHS contract away, it’s about keeping the same value by evolving and replacing your collection mechanism, inevitably increasing profitability.

The feedback we get is that that is a more gratifying way to work and you are no longer at the mercy of the flawed NHS. It’s so much more than a payment collection mechanism that attracts disgruntled patients at a fixed rate that is often unrelated to the value or volume of the work you’ve done. I would boldly say that success is more guaranteed as you reclaim control of the destiny of your own business.

Ross Martin
By Ross Martin Management Consultant
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