By Debbie le Quesne

Posts Tagged ‘WMCA. West Midlands Care Association

Key industry findings not the case for Midland operators

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Increasing national profit trends in care home business as reported in the latest research data do not necessarily reflect the industry’s economics in the Midlands.

The Care Homes Review document, compiled by real estate advisory organisation Colliers International, reveals that although there has been little change from 2012, the outlook is brighter.

It reports profitability is now “up slightly” from the first half of 2013 in both the personal care and nursing sectors; with personal care profit margins at 31.7 per cent and nursing care profitability at 28.7 per cent.

Nick white, senior surveyor in the Colliers international Healthcare team is quoted: “There appears to be positive news for elderly care homes, which are maintaining levels of EBITDAR [Earnings Before Interest Tax Depreciation, Amortisation And Rent)].

“This is in a period when local authority fees have generally not been increasing with inflation. We have found that many of the more successful operators are focussing on self-funding residents and continue to closely control costs.”

The report adds; “Profit margins in the long-term elderly sectors remained steady, increasing only marginally over the last half of 2013. However, EBITDAR margins for specialist care homes have decreased for the third consecutive period, after remaining relatively stable since 2010.”

But the green shoots of any recovery are scare in the Midlands with my West Midland Care Association offering a very measured response to the findings.

Although this report shows an increase in profit across the country, this is not reflective of the situation in the West Midlands were the average residential care home charges about £430 and the average nursing home fees are £520.

These figures include a small top-up element paid by families, as they local authority rates are less.

With these figures and still-increasing outgoings, many businesses are struggling to have investment sleeve for the future and frankly, the outlook is not great.

The Colliers’ data is based on key performance indicators (KPIs) and the spectrum of providers includes national corporates, regional private companies and operators of single homes.

Occupancy rates have risen in all three sectors – residential (personal care), nursing and specialised care. Occupancy in the nursing and specialist sectors is around 90 per cent; whereas, occupancy levels in the personal care sector remains just under, the report says.

Average weekly fees fell in both of the long-term elderly care sectors; with nursing sector fees showing the greatest decrease over the second half of 2013 (2 per cent). However, specialist care fees have increased by more than 4.5 per cent in the second half of 2013.

Outgoings for wages across the sectors are marginally lower than in first half year of 2013.

In the West Midlands Care Homes Occupancy has remained the same, despite local authorities trying to reduce numbers and keep people in their own homes.


Response to the ‘scandal of secret mark-ups’

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The Telegraph calls it the scandal of the secret mark-ups – the difference between care fees paid by local authorities to care homes and those paid by self-funders.

Figures are published show “on average those people who fund their own care – because they do not qualify for assistance from their local authority – pay on average 13pc above the ‘real cost’ of providing their care, in England.”

Richard Dyson, author of the report writes: “The ‘real cost’ figure, which is generated from in-depth research into the constituent costs of providing food, accommodation and basic help, also includes a reasonable profit margin for the care home operator.”

And he adds: “The price paid by a local authority on behalf of someone who does qualify for State help is lower than this ‘real cost’.”

More weight is added to the article from charity Independent Age, which this week published a report saying that middle-class residents with modest property or other assets, who are thus forced to pay for their own care, are subsidising those paid for out of a public purse.

I’m sure you can image the feedback on this report is robust and no venom is spared.

And yes, I’m equally convinced as the newspaper says “the figures will make uncomfortable reading for about 210,000 individuals, and their families, who are in the position of paying all or most of their care home fees,” especially when data is presented in this way.

Dyson writes: “Under current rules, individuals in England must ‘self-fund’ or pay their care home fees in full, with no help from the council, if their assets, including their homes, are worth more than £23,250.”

One has to ask: Who made the rules? Care providers? No.

The article says cost discrepancy “creates resentment and anger.” True, but so does the fact that care providers are not offered a proper rate to pay for caring, turn a profit and be future proof, pay for business maintenance and investment.

The figures differ by region, the piece says and they certainly do. On average, in England, the cost of providing residential care, including the care home operator’s slice of profit, is worked out at £563 per week, according to Valuing Care, the marketing analysis consultancy which provided the Telegraph information.

I quote: “Based on the English average, that would mean the fees paid by a local authority on behalf of someone qualifying for help would be as little as £507 per week – compared with the self-funder’s £636.

But in the Midlands there is a very different set of figures. Local authority rates include: Birmingham – £405.00, Dudley – £390.00, Sandwell – 378.00, Shropshire – £381.20, Staffordshire – £400.00, Walsall – £365.10. Warwickshire – £365.10, Wolverhampton – £379.53, and Worcestershire – £410.00.

A snapshot average here works out at £384.99, a figure well short of the £486 per week average published in the Telegraph.

I quote: “In general, according to Valuing Care, local authorities use their bulk-buying power to push down care home rates to between 5-10pc below the ‘real cost’ figure.

“Based on the English average, that would mean the fees paid by a local authority on behalf of someone qualifying for help would be as little as £486 per week – compared with the self-funder’s £636.”

Members of the West Midlands Care Association would indeed be very happy with an average residential fee of £486 paid to them by local authorities. I am struggling to see how it now appears that the West Midlands is not at all representative of the national picture, given the Telegraph ‘facts’.

You can image I am now chasing national data as an extra £100 to my members could represent huge improvements in staffing, re-investment and, dare I say it, profit.

Historically the private sector has provided the care pool which local authorities have not and today the demand is increasing. Government is strident in its approach to use the private providers to roll out its care reforms and our MPs support a free market economy too.

Local authority community care is systematically been hived off to the private sectors all over the country and homes are closing still.

I don’t doubt there are ‘victims’ in this system, but I have to ask: In real-world terms how is it going to change? The moral debate can go on at infinitum, but if there’s a niche for say, top-end care provided in luxurious ‘hotel style accommodation’, who are we to condemn?

As for cross subsidising between self-funders and social services paid candidates, yes it does go on – and in many cases it must to make up the hefty shortfall on fees paid by local authorities. The pain of reality is hurtful, but that’s the world most of us inhabit.

Ray Hart of Valuing Care is quoted in the Telegraph as saying: “There is no clear explanation of the difference in fees between self-funders and those who are looked after at the state’s expense. Are the self-funders effectively subsidising those paid for by the local authority, because the local authority is not paying enough? Or are care homes simply using self-funders as a means of generating profit? Either way it does not seem right.”

No answer is simplistic.

Fact: Self-funders are often the difference between keeping a home open or it closing as a non-viable business model.

Fact: Without them many homes in the UK would close and an already over-stretched care provision made more acute.

Fact: Self-funders do help keep residential care services, which the government wants to use, in business.

Fact: The ‘system’ the rules and ‘the way it is’ have not been established by care providers, but rather by successive governments, so please don’t levy all the blame at those who are providers.

Fact: The moral debate can find answers only in Utopia, ironically meaning in the original Greek ‘no place’ before in common use coming to represent ‘good place’.

Fact: I know many of my West Midland Care Association members personally. They are not money-grabbing millionaires who view their residents as a commodity. They are good people doing the very best they can in sometimes-impossible financial situations. They are passionate about good care and desire above all things to deliver it. And does the government help them? Frankly – no, but it’s very happy to use them, decanting its direct responsibility for caring into a third party provider.