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By Debbie le Quesne

LaingBuisson: Plan for the future amidst the gloom

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It is, say some, a bit of a mouthful in a single bite, but Stabilising the Care Home Sector and Preparing for implementation of Part 2 of the Care Act 2020, is a document that should be essential reading for every self-respecting MP and councillor in the UK.

The report, produced by Healthcare expert LaingBuisson tables some bleak forecasts under its ‘Imminent care home capacity crisis’ banner, but despite the emotive language, it is a serious authoritative report.

Market analysis experts L&G are not know for scaremongering or pandering with their PR to the ‘red tops’. But here on the first page of this new white paper we read: “There is a real and imminent danger of a care home bed capacity crisis hitting many localities in the course of the next few years, as the margins of operators serving state-paid residents continue to be squeezed, as investment in new capacity ceases and as existing capacity exits the market, against a background of rising demographic pressure of demand.”

A “real and imminent danger” . . . emotive? Yes, and perhaps a little out of character with L&G. Overplayed? No! Definitely no.

The conclusion for how, as they put it, ‘equilibrium will be restored’ is also a scary read. The Chancellor’s two per cent council tax plan gets well-deserved dismissive treatment and the long-term future solution lands fair and square in the lap of central Government, according to the report.

This is what they say: “Our realistic conclusion is that the 2% Council Tax ‘precept’ flexibility to supplement social care funding, announced in the 2015 Comprehensive Spending Review, will not throw a financial lifeline to the care home sector. It may pay for initial National Living Wage cost increases, but councils will want to spend most of the additional funding on meeting demand pressures (service volumes) and downward pressure on unit prices and margins will in all probability continue, reinforcing provider disinvestment.

Indeed, Sandwell and Dudley have both announced that they will take up the option to increase the Council Tax.

“At some stage, ordinary market forces can be expected to resolve any care capacity crisis, but only when it is full blown. At that stage, falling capacity will make it increasingly difficult for councils to make placements locally at their usual prices. With rising occupancy rates, market power will shift to providers and a point will be reached where central government has no other realistic option but to provide councils with the means to re-incentivise sufficient investment in care home capacity to enable councils to fulfil their statutory duties.

“The resolution may be complete by 2020, by which time the cost to the state of paying for long term care for people without the means of their own will probably be substantially higher than it is today.”

The paper goes on to warn that if its conclusions are correct, that the care home sector’s equilibrium will ultimately be restored by market forces rather than pre-emptive financial support from central government, the next few years “are likely to witness a spate of financial failures and home closures.”

With words that drip like honey to the converted, the reports adds: “The development of a ‘stand-off’ between central and local government in which central government argues that it has made adequate financial provision and that it is up to each council to make best use of its (adequate) resources, while councils for their part argue (probably correctly) that the funding is not adequate and therefore they cannot pay providers reasonable prices, and in turn providers cannot afford to pay carers a living wage. In effect, no part of government is taking full responsibility for good market management of the care home sector.”

L&G says there is weakness in the present system of state funding care which has nurtured the growth of polarised economics.

Quote: “It is this absence of good market management (including failure to fund social care adequately) which has allowed the care home sector to evolve into its present highly polarised state, with inadequate profits in areas highly exposed to public pay and super-profits earned by some providers in areas of high private

pay. It is also the root cause of endemic cross subsidisation, with private payers now paying an average 40% plus premium over public payers for like for like.”

If Mr Cameron is not concerned by this forecast he should be and just in case he hasn’t a clue what to do, L&G offers a proposal for government action.

Reforms would include the creation of a national economic regulator for the care homes sector. Its role would include:

 

  • Setting a target rate of return for care home property used for council placements.
  • It would be based based on CQC physical environment standards, establishing a process for determining local capital cost benchmarks per room, taking into account local land prices (and local construction/ maintenance costs if necessary).
  • CQC would be one obvious candidate for this extended economic regulation function since (a) it is already responsible for light touch financial regulation of larger providers and (b) CQC physical environment standards (such as minimum room size) are key determinants of benchmark capital costs per room.

 

  • Another would be Monitor, the economic regulator for the NHS.

 

  • Further options included in the proposal to head of the terminal descent of the industry include;
    Transfer responsibility and funding for paying care home property costs from Councils with Adult Social Service Responsibility (CASSRs) to Housing Benefit. The effect of this would be to rationalise funding for all care modalities, placing care homes on the same basis as extra care for older people and supported living for younger adults with learning disabilities and other needs.
  • Set up a process for classifying each care home with a council contract with an appropriate physical environment grade, linked to a complementary set of locally based care home Housing Benefit bands.

 

 

I cannot begin to image the outcomes of such plans, but at least L&G has one with a rationale I can understand.

 

 

As regional care providers face such a gloomy forecast, they appear to fall three distinct categories:

  1. Those looking to close or make changes to their business plans
  2. Those who are keeping fingers crossed for a better tomorrow, but do nothing
  3. And those who will will increase their costs which must be paid by residents or their families

The problem, however, with areas like Sandwell and Walsall, and indeed other West Midlands regions, few people in care or receiving care have disposable funds to pay more. Sorry, I have no inspired answers, but, believe me, the fight for a fair rate for the care delivered goes on at both regional and national level.

 

There is so, so much more to this paper and I intent to attempt a number of blogs on the ‘hotspot’ subjects. Perhaps in the meantime, the movers and shakers, the policy makers and generally those privileged people who can initiate change and influence events, could make it bedtime reading and enjoy their nightmares.

 

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