Competition & Markets Authority Care home sector report 2018

1. Competition & Markets Authority
Care home sector report

2. • Market sustainability and capacity
– Is the sector functioning properly?
– Will it continue to do so?
• Consumer protection
– Do consumers have the information they need to access
care effectively?
– Are they treated fairly?
Areas of focus

3. The sector overview stats
• 5,500 providers,11,300 homes, providing 410,000 beds
• 55% nursing beds and 45% residential
• Largest 30 providers - 30% & single home providers - 29%
• For-profit - 83%, voluntary sector 13%, local government/
NHS 4%
• Growth of 85+ population (from 2015 to 2025) 36%
• 85+ will grow at 4.62% p.a. between 2025 and 2035.
• 40 beds on average. Optimum size 60 to 70 beds
• Occupancy : nursing 89.6% & residential 91.1%
• 70% rated good or above

4. Sector sustainability
Fees
(Revenue)

5. Fees - sector stats
• Ave. fee - Residential £590 & Nursing £756 pw
• Ave. SF fee - £846 pw BUT £670 in N.E to £1060 in S.E
• Average LA fee - £621 pw
(See below)
• East Midlands – SF is £780 and £485 for LA
• SFs pay £12,000 p.a. more than LAs for place in same home
• 41% are self-funders (East Midlands - 43%)
• 25% of LA-funded residents have 3rd party top-ups
– Typically between £20 and £100 per week

7. CMA Conclusion 1
Clear “cross-subsidisation” of LA
funded residents
No problem..…..but
Informed choice becomes key
Vulnerable
people
Re-focus on consumer rights

8. Sector sustainability
Profitability
Operating profit vs. Economic profit
Operating profit – day to day costs
Economic profit – includes capital cost (assumed ROI of 6.5%)

11. • Sector wide operating profit positive & stable between 2010 to 2016
• But 25% of homes have more than 75% LA-funded residents
– LA-fees are, on average, 10% below total cost of care for these
homes
– £200-300 million shortfall in funding across the UK
• Mixed care homes (25% - 74% LA-funded residents)
– big gap between fees and costs
– only viable charging more to self-funded residents
– Disguised funding shortfall for LA-funded residents of £700-800m
Total gap between LA fees & costs across sector c. £1bn
Funding gap

12. CMA Conclusion 1
LA funded = Lower fees
Lower profitability
Low/no investment in LA stock
Reduced capacity in market
Unsustainable

13. • Improve LA capacity planning/commissioning
• Transparency around pricing/costs of care
• “Robust funding principles” to assure investors of its future viability
• Independent body to oversee and enforce
• The CQC!
• Can it cope? Is it independent?
CMA Recommendations

14. • Better LA planning
• Transparency around pricing
• “Robust funding principles” to ensure investors of its future viability
AGREED IN PRINCIPLE
• More oversight/New independent body……..….the CQC?
NOT AGREED
No detail and subject to the long awaited Green Paper
due out this summer!
Government response

15. Consumer protection
Informed choice/protection for vulnerable consumers
Fees
Guarantors
Contracts and Admission process
Residents' deposits
Complaints
Eviction

16. Consumer protection GENERALLY
Fairness, clarity and transparency
Terms creating an imbalance to consumer’s detriment unfair
Takes into account subject, all terms and all circumstances
vulnerable consumer and the difficulty of moving homes
Unfair terms not enforceable & money paid is recoverable
Consumer Protection from Unfair Trading Regulations 2008
Consumer Rights Act 2015

17. Consumer protection - FEES
Generally
On death
CHC

18. Consumer protection - FEES
Generally
Be transparent and no hidden fees
Be clear in your contracts
• how they are calculated
• exactly what are they for
• when are they payable
• when, why and how can they be increased
Publish indicative fees on website or in marketing materials
Large upfront fees are discouraged

19. Consumer protection - FEES
On death
Up to 3 days or until room is cleared of possessions
Operators can clear rooms and store/sell/dispose of the
deceased’s possessions
• Clearance charge
• Storage charge
• Prior notice of sale/disposal
• Costs of sale
• Balance to estate
FNC & 3rd party top ups

20. Consumer protection - FEES
CHC and FNC
Uncertainty around extra charges for NHS funded residents
FNC uncertainty around basis for payment/treatment in care
home contracts
Clarity required!
Government guidance expected April 2018
3rd party top ups:
to be agreed with and paid via LAs
3rd party top up agreements to be subordinate to LA agreements

21. Consumer protection - GUARANTORS
Guarantees of full fees (including LA funded fees) for minimum
periods are unfair
Guarantor provisions and liabilities must be clearly explained
Contracts should repeat and highlight guarantor liability

22. Consumer protection - CONTRACTS
Ensure fairness, clarity and transparency
Publish standard terms on website/marketing materials
Provide to resident/families prior to admission
Use of policies – no point in being more lenient than contract
Model self-funder contract
3rd party top up agreement
• between payer and LA
• If between payer and home – reflect & subordinate to LA agt

23. Consumer protection - DEPOSITS
Solvency risk
Trust account
Bond insurance

24. Consumer protection - COMPLAINTS
Perception that complaints lead to reprisals
“…we want to see a culture shift in the approach to complaints. We
know the best councils and care providers empower their
workforce to deal with complaints and to view them as free
feedback and an opportunity to learn from their mistakes to drive
service improvements.” Michael King - LGSCO
Regulators inspect – effectiveness, listening, acting on feedback
and signposting
More funding for advocacy services
Statutory requirement for providers to signpost to the LGSCO
LGSCO to issue guidelines April 2018

25. Consumer protection - EVICTION
Significant concerns about rapid evictions
Fair process
Provide structure and dialogue, involve stakeholders
Statutory referral to CQC to be required
Protection against eviction regulations

26. Not much specific action!
CMA to progress enforcement action
Govt. to start drafting strengthening legislation
Govt. to support CQC, which already deals with
some aspects of consumer protection
FNC and CHC – new guidance by April 2018
LGSCO to report by April 2018
Top ups – report by October 2018
GREEN PAPER
Government response

27. Roger Harcourt
Mobile : 07789 746016
Email : roger.harcourt@shma.co.uk