The private sector dominates the care home market, but is dependence on low-paid staff is an issue according to a recent Commons briefing paper – especially with this year’s introduction of the National Living Wage.

 

Social Care: The State of the Care Home Market (England) by Tim Jarrett takes a comprehensive look at the market structure, the current issues it faces, the Spending Review and provisional local authority funding settlements, the role of the local authorities and the Care Quality Commission.

The number of residential care places in privately-run homes (for older and/or physically disabled people) has been on an upward trend since the 1980s and in 2014, the number of private sector places was 200,200 (74 percent of all places – with local authority and voluntary bodies providing the rest. For nursing care homes, in 2014 the private sector had 187,800 places (some 86 percent of all places, compared to 17,600 in the voluntary sector and 12,300 long-stay NHS beds.

Just over 15 percent of care beds are provided by four privately-run companies – Barchester Healthcare, Bupa Care Homes, Four Seasons and HC-One Ltd. The next 21 biggest providers (including six voluntary sector providers) have nearly 15 percent of beds.

Although the private sector does dominate the market, many of their clients are funded in full or partly by local authorities and many private care home providers operate a business model that depends on that funding – although Barchester Healthcare is targeted mainly at private payers.

Care homes, the briefing paper states, often require substantial loans in order to purchase a building and then incur further costs to convert buildings into homes that meet the statutory requirements as laid out by the regulator, the Care Quality Commission. In recent years though, the previous sale and leaseback agreements used by care home operators have resulted in failures (in the case of Southern Cross in 2011) and that many private operators had “excessive debt”.

Payroll is the biggest cost when it comes to care homes and the report acknowledges that the care home sector “depends heavily on low paid staff”, a state of affairs that will change this year when the National Minimum Wage is replaced by the National Living Wage. Tighter immigration rules mean there is also less likelihood of recruited nurses and care assistants overseas.

The big providers of care homes are lobbying the Government to provide an extra £1 billion pounds to fund the wages increase until 2020.

In a statement on the Spending Review made in November last year, the chancellor said that there was a need for new sources of funding to meet growing social care needs – and that local authorities that are responsible for social care in future will be able to levy a 2 percent increase in council tax that is to be used exclusively for social care. However, the Association of Directors of Adult Social Services have warned that the council tax precept will raise least money in the areas of greatest need.

Since April 2015, the Care Quality Commission has had oversight of the financial health of certain social care providers – ones that local authorities would find difficult to replace if they failed. However, the report makes it clear that the Government will not provide bail-out for failing providers. The Department of Health recommends that authorities should have effective communications with care home providers in their area to minimise the risk of unexpected closures and failures.

When a provider fails, under the provisions of the Care Act 2014, the local authority is expected to step in to provide care for those affected. The report also says local authorities have a responsibility for “market shaping” so that people in the areas have a variety of services to choose from and enough information to make informed decisions.

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