HPC National Care Home Survey

Funding and Fees

The results of the HPC National Care Home Survey 2014 are clear – whilst operators continue to show total commitment to the industry, funding for growth and a Fair Price for Care are crucial to the sector.

The turn of 2014 saw HPC launch the survey throughout England, covering key industry aspects including fees, the Care Quality Commission (CQC), funding and media. Having being publicised heavily throughout the national care media the exercise also included the mailshotting of 2000 independently operated care homes.

With results collated, the findings include pleasant surprises, including the regard in which CQC are held. Somewhat more surprising (in the wake of recent negative media coverage and publication of The Tomlinson Report) is the positivity shown by respondents to their various High Street lenders. Whilst key challenges for the year ahead include falling occupancy, a shift in policy to domiciliary care and a lack of nursing staff availability, the most significant frustrations are undoubtedly inadequate local authority fee levels and the need for banks to fund further growth.

So how do operators perceive the level of local authority fees?

With 87% of respondents considering local authority fees to be less than adequate, operators have had little choice but to secure an increased level of income from self fund clients. As a direct result, 82% of responding providers operate a fee differential between public and privately funded; the reasoning is consistent – maintaining viability. An interesting outcome from the survey was not only the need for an uplift in local authority fees to truly reflect a fair price for care, but also the desire of 76% of operators to incorporate quality standards within the fee profiling.

Regulatory bodies are rarely popular, so it is something of a pleasant surprise that 63% of operators perceive CQC to be fit for purpose (or better). Indeed, not only are operators keen to link quality and fees, but they also support a national quality grading system overseen by CQC. Many operators were clearly left bewildered following the abandonment of the last CQC star rating system after it had apparently overcome the majority of initial teething problems and gained, at least in principle, support from the sector. Whilst concerns exist amongst responding operators (cost, paperwork, inconsistency and increased CQC media publicity), the support for a new five star CQC inspection based format is substantial.

The last four years have been a difficult trading period for care home operators who have seen occupancy levels fall and local authority fee levels fail to keep pace with inflationary cost increases. With margins ever more squeezed, there has been an increasing reliance upon bank support. Market share (in terms of lending) has undoubtedly fluctuated over recent years; despite consistent protestations in respect of being ‘open for business’, several banks effectively disappeared from the care sector by virtue of offering unrealistic terms. Survey respondents confirmed the Royal Bank of Scotland (RBS) to be the most significant current provider of loan facilities, closely followed by Lloyds, NatWest and Santander. Indeed these four banks between them accounted for 76% of ongoing loan facilities.

In the wake of the well publicised Tomlinson Report (November 2013), the breakdown of operator perception (in respect of bank approach) is extremely interesting.

Although frequently caveated by the comment “all banks are helpful until you require assistance”, it is encouraging to see that a substantial 78% of operators deemed bank support to be adequate or better over recent years. As we draw (hopefully) towards the end of an era through which many operators became increasingly reliant upon their funder, the picture we drew from operator feedback within the survey was one of general positivity.

Although the last decade has seen an increase in viability concerns, enhanced regulatory bureaucracy and negative media reporting, operator profile is intriguing. The care industry is not a short term profit opportunity, a factor indicated by 78% of survey respondents having owned the care home for a decade or more. Indeed, with 86% intending to remain in the industry for at least a further three years, 71% anticipate expansion during that period.

The longevity of care home operators within the industry underlines their commitment to care. If an acceptable quality of care is to continue, the focus must now switch to finance. Over 70% of operators anticipate staying with the current bank for at least a further three years and it is up to the banks to show a corresponding level of commitment and support of expansion plans held by the majority of operators. Similarly, with a massive 87% of operators confirming local authority fee levels to be inadequate, the continued requirement for self funding service users to underpin viability is unacceptable and a Fair Price for Care reflecting quality standards is essential.

May 2014