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STOP PRESS: New Dental Policy Changes - The Potential Effect on the Sale and Purchase of Dental Practices

on Monday, 30 April 2018.

Changes made in the new Dental Policy Book may cause difficulties in the sale and purchase of NHS and mixed dental practices.

Furthermore, there is the risk that if you are a buyer and relying on bank funding to assist with your purchase, the ability to access these funds at completion may be effected.

Partnership Contract Variations and CQC

On 11 April 2018 we wrote about the new Policy Book that had been published for Primary Dental Services. Having had the opportunity to review the updated document in further detail, we note the following significant provision inserted at point 6.6.(f) on page 46:

"Commencement of the new contract should be made conditional on the new contractor being CQC registered. The CQC will issue a sales and transfer position statement document but this is no guarantee of registration. A practice cannot commence seeing patients until they have received their registration certificate with the regulated activities included. "

Similar provisions are repeatedin the remainder of the Policy Book. We understand that in practical terms this means a new partnership should be CQC registered before a contract variation is issued.

Certain Local Area Teams/Regional Teams have previously claimed the above as "policy", without it being referenced in the then current policy book. However, it looks like the position is now official on a national basis.

What Does This Mean?

In the sale or purchase of a dental practice holding a GDS contract, the "partnership route" is used to transfer the GDS contract from seller to buyer (this is not applicable for share sales). This involves the seller and buyer forming a temporary partnership to allow the transfer of the GDS contract. Previously this partnership would be CQC registered at completion, and contract variation would take place at completion. Advance notice of completion and proposed variation is given to both NHSE and the CQC.

Typically the CQC would provide a sales and transfer position statement (formerly known as a comfort letter)  stating that, in principal, they agree to register the GDS partnership from completion without conditions. Previously NHS England would be happy to process contract variations on receipt of this document meaning both the CQC registration and the contract variation took place together at completion.

This seems to no longer be the case. We understand that NHSE have advised staff that the appropriate CQC registration needs to be in place before a contract variation will be issued. This causes issues in sales and purchases as either:

  • the GDS partnership will need to be CQC registered prior to completion, so that contract variation can take place at completion; or
  • if a CQC registration is activated up for completion, NHS contract variation may happen after completion.  

This causes a few technical issues. If buyer is relying on funding from a bank to assist with a completion payment, this funding is often released on the basis that NHSE have confirmed the GDS contract will be varied as at completion. This confirmation will have usually been provided on the basis of a comfort letter.

Furthermore, the CQC will only de-register a sole provider registration, and register a partnership provider once legal contract of the business had transferred to the partnership. This does not of course happen until the GDS contract is transferred and this creates a catch 22 situation, where neither NHSE nor the CQC will act until the other has. This may also create problems when partners are joining, or retiring from existing partnerships.

GDS Contract variations would often contain the following wording: "This variation is valid only if appropriate registration with the Care Quality Commission takes place on or before the date on which it becomes effective, otherwise it becomes null and void." In the event a CQC registration was not effected for completion, the issued NHS contract variation would be void in any event, and it is unclear whether additional policy changes were required.

We have yet to see how the above changes may be implemented in practice, however it is worth being aware of them.

Further Changes

There may be further changes to NHS policy and once we have had the full opportunity to review the Policy Book we will provide further updates.

For more information, please contact Adam Siwak in our Healthcare team on 020 7665 0963.

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