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The future of care homes

Douglas Cooper summarises the final findings of the Competition and Markets Authority’s review of the care home market.

The Competition and Markets Authority (CMA) has spent a year studying the 11,000 plus residential care and nursing homes that offer support to over 65s around the UK.

It was an in-depth examination of what it was like to both provide this service – by hearing from those of you who own and work in care homes – as well as what it’s like to use the service, as a resident or family member of someone living in such a home.

We know the vast majority of you strive to do an excellent job, often in very challenging circumstances. We also know that your care homes provide vital services for thousands of older people, and often after they have reached a vulnerable point in their lives.
That’s why this work was so very important.

More investment needed

Given the sector is crucial in supporting people in great need, it’s vital the system is funded properly so that it can be sustained.

However, our extensive financial analysis found that on average, care homes catering largely for local authority-funded residents were making returns that, while covering operating costs, did not cover full costs (including the cost of capital).

This does not provide an incentive to invest in modernising and expanding provision to the state-funded sector. Our analysis suggests that it will be increasingly difficult for local authorities to procure care home spaces in the future, and while they will continue to explore alternative means of care, against the growing needs of an ageing population this creates a substantial risk for meeting needs in the future.

Our analysis also found that where a local authority is not paying the true cost of what it takes to provide a person’s care, this has led to homes charging more of people paying for their own care, to ‘prop up’ state-funded residents. We found average fee differentials within larger mixed homes of 41%. This is not only often seen as unfair by those paying for their own care, it’s also not a sustainable financial model for such a vital sector, as homes will not continue to serve local authority-funded residents if fees are not covering costs.

If this situation were to continue, we expect increasing numbers of care homes primarily serving state-funded residents would close. We have estimated that an extra £1bn a year is needed from local authorities across the UK to pay for the full cost of caring for the people it funds, and to provide a full incentive to attract the private investment needed if the sector is going to be able to serve the predicted increase in the number of people needing care. At least £200m to £300m a year would be needed just to support the most at-risk homes with the greatest number of state-funded residents, which have the least opportunity to cross-subsidise.

Better planning for the future

We also found that the sector has to begin building the extra spaces needed to meet the predicted increase in state-funded residents soon, if it is to be ready in time. However, local authorities are often failing to plan appropriately and are not in a position to provide confidence to investors over future fee rates and resident numbers.

The CMA is now calling for an independent body to oversee and support planning at a local authority level in England and Northern Ireland. In Scotland and Wales, measures are already being introduced to improve planning and base fee rates on the full costs of care; these should be kept under close review.

Better information and support for people

People need care at a time when they are likely to be under great pressure – it can be a very emotional decision to go into a care home, and potentially an extremely expensive one. This can happen just when illness, accidents or bereavements leave prospective residents and their families least prepared and most vulnerable.

Therefore, it is very important that people get the support and information they need to make good choices. Unfortunately, we found that the information available to help people make these choices is often lacking – and often it’s fundamental information, like how much someone could expect to pay for their care or whether they are eligible for support from their local authority.

We also found that, once living in a home, they don’t always get the services they expect and find it hard to complain when they experience a problem.

We have, therefore, recommended that the national care regulators should take a greater role in protecting vulnerable people, helping to ensure that care homes meet their consumer law obligations, and ensuring there are effective systems in place for people to complain.

We also want people to be able to better plan for their care options, and to get the right kind of support in making these, often difficult, choices. We have, therefore, recommended to all nations’ governments in the UK that they should work with the NHS, local authorities, care homes and charities to provide more support to prospective care home residents and their families.

On this point, we want local authorities to clearly set out how the care system works, what people’s rights are, and the choices involved. This should be somewhere easily accessible online.

We have also explained that it is very important that care homes should provide better and clearer information on key factors. This is to help prospective residents and their families understand how the system works and the implications for them in advance of needing care, and also to help them in choosing the right type of care and the most suitable homes when they do need it.

We have made recommendations for specific rules requiring care homes to display indicative fees and their terms and conditions on their websites. We have also proposed new rules to safeguard deposits against the risk of insolvency, and to notify the sector regulator when they ask residents to leave or impose any ban on a visitor.

Enforcement action

Finally, we uncovered evidence that led us to believe that some homes were not complying with consumer protection law when it came to their fees and contract terms.

We have already launched enforcement action against some homes. So far, this is focused on homes charging large upfront fees – typically several thousand pounds – that we think are not fair or transparent, and/or charging families for extended periods of up to four weeks after a resident has died.

Next steps

The CMA is now consulting on new guidance about fees charged after death, along with separate, wider guidance for care homes on the standards of behaviour they should be meeting to comply with consumer protection law. It is available on www.gov.uk/cma and CMA is urging everyone with an interest to respond.

However, it is still important that all care home providers review and, where necessary, revise their existing contracts to ensure they are compliant with consumer law in light of our market study findings and the compliance guidance we will be publishing.

The CMA also stands ready to take further enforcement action should that be required. We will continue to monitor practices in the sector and will take enforcement action, where appropriate, on other issues of concern where we identify providers engaging in serious and harmful practices.

The CMA’s recommendations are now being considered by the national governments and regulators in each nation. While it is for them to decide whether and how to take forward our recommendations, we do expect the market study’s recommendations to be acted upon, in order to provide the reform this industry needs, and in particular to ensure that the care homes sector is able to grow and meet future needs, especially for state-funded residents.

Separately, the Government in England has already said it will publish its plans to improve the provision of care for the over 65s in the summer. We look forward to informing this work alongside the other experts appointed to help shape it.

Douglas Cooper is Project Director of the Care Homes Market Study at the Competition and Markets Authority.

Email: general.enquiries@cma.gsi.gov.uk Twitter: @CMAgovuk

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Related links

Charging care home fees after death – consultation – NEWS
Final review of the care home market published by CMA – NEWS
Care home market study: Are care homes working well for residents and their families? – FEATURE

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