The care market of the future; corner shops or supermarkets

The Institute of Public Care Leading on the DCMQC programme and led work with the NMDF. Developed the concept of market facilitation and the use of market position statements. Work with CQC, with umbrella bodies such as VODG and NCF. Projects with a wide range of providers and local authorities around the market, including work on pricing, on service development, on outcome based contracting and on quality standards. Recently published a leading paper on the home care market. 2

Corner shops or supermarkets What does care provision look like now? What shape might care provision take in the future? Will it be an individualised, small, locally produced, tailor made service or a delivered by a large, interdisciplinary, health housing and care provider? 3

What kind of care market do we have?

One where the local authority exerts increasingly less control. A fragmented market. A significant economic force. A continuing level of financial instability where despite Southern Cross there are still care business buyers. A large number of frustrated providers. 5

Local authority purchasing of care beds by region RegionTotal care bedsLA Purchased% purchased South East84,00035,00041 South West57,00024,00042 Yorks & Humber49,00023,00046 Eastern51,00024,00047 East Midlands43,00021,00048 West Midlands46,00023,00050 North West63,00033,00052 London39,00026,00066 North East18,00015,

Distribution of Care Home Groups (beginning with B) 7

A fragmented market Nearly 12,500 social care providers registered with CQC, of whom just over half are registered care home providers. 13,134 residential care homes with 247,824 beds registered in England, and 4,672 nursing homes with 215,463 beds. 6,830 agencies providing domiciliary care In our sample there were 636 homes of which 508 were owned by just two groups, Barchester and BUPA. The remaining 128 homes were owned by 17 other companies. 8

A significant economic force Last year (2012) local authorities spent over £4.5 billion pounds on older peoples residential care, at an average of £30 million per authority million people work in the care sector. Around two-thirds (65%) of all jobs in adult social care are in the private and voluntary sectors. For example in Bradford out of a workforce of around 100,000 in employment, caring and leisure services employs around 18,000 people

A significant economic force Barchester in our example has 11,000 residents and 14,000 staff. It holds assets of around £1bn and a turnover of £413 million (a large company is normally considered to be just under £6 million and over 250 staff). Barchesters highest paid Director earns £864,000 per annum. BUPA is a world-wide organisation. 29,000 care home residents, 38,000 employees (27,000 in UK). In the UK revenues last year were maintained but the surplus was marginally lower as a result of lower occupancy rates (overall occupancy was 87.3% in 2011, compared to 88.0% in 2010). There were increases in employee costs. 74% of BUPA residents receive some form of state funding. 10

Investment and control Top ten providers control 11% of the care homes but 21% of the beds. Savills in 2010 were arguing there was still considerable demand for the purchase of care homes. At that time they saw a low tier home (below 30 beds with compliance issues, few en suite facilities, low profitability, little or no room for expansion) as fetching around £30,000 – £40,000 per bed. A high end home (purpose built, high average fees, profitable, located in an area with high barriers to entry and room to expand) fetching around £80- £100 thousand per bed. 11

Planning investment Weve got all sorts of computer models and things but just, crudely, there are 10,500 major postcodes in this country and we profile every one of them in terms of wealth, demography, competitors or just the number of care beds. There are probably that wed like to be in that were not. Another little exercise that weve done before: the target market for Barchester is very similar to Waitrose and to Majestic Wine. There are 200 Waitrose locations where there isnt a Barchester location and an equal number, if not more, of Majestic Wine locations. Mike Parsons Chief Exec of Barchester 12

Financial instability Bondcare reported in the Guardian in November Bondcare…. could see itself – in part or entirely – transferred to Lloyds. No part of Bondcare is insolvent but this summer Bank of Scotland appointed receivers from Ernst & Young to part of the business. Part of Bondcare was transferred to Akari Care in October Akari is reported as having £12 million in liabilities and £10 million in book value. NHP registered in the Cayman Islands and the owners of many Four Seasons homes have a debt burden of £1.8 billion as reported in November

Financial instability Barchester it was reported in November last year (2012) had £1bn debt due to mature in October The company also owes RBS £487m. Barchesters holding company Grove Ltd is based in Jersey. Barchesters Annual report for 2012 states Barchester Healthcare Limited's main subsidiary is Barchester Healthcare Homes Limited. Barchester Healthcare Homes Limited is an operating company which holds the trade of the group and pays rental to the property company, Bluehood Limited, who own all of the care homes by way of an internal lease arrangement. 14

Frustrated providers We went to a meeting about the cuts. There were six members of the commissioning team there. One spoke, the other 5 just watched. (Res care provider) They think things are bad for them but I am on the verge of going under because the price for home care is not at a level where I can provide the kind of service I came into this business to deliver. (Home care provider) I cant get out because I owe too much. I cant continue because I am losing money week on week. (Single home res care provider) I trained as a nurse, but as a home care provider we now do the things a district nurse used to do, but we dont get paid for them (Home care provider ) 15

However providers also said… We wish Local Authorities would come to us and say this is the scale of budget reductions we need to make over time, how can we work together on this. (Res care provider) If we are given time we can make changes but you cant just throw a business into reverse overnight, however if supply is guaranteed it is one way of saving money. (Vol sector provider) We would welcome opportunities to discuss the future without doing so in the context of a tender process. (Home care provider) Some of the systems that have been put in, cost more than they save. (Home care provider) 16

What might the care market of the future look like?

Context Less local authority funding available. Small providers struggling and some exiting the market. Greater use of Direct Payments and Personal budgets. Greater expectations around delivery. Despite much talk of integration difficulties in engaging in a joint health and social care dialogue. Still a distance between social care and the planning authority 18

Key strategic directions Greater scrutiny of large providers. A more consumerist view of care. State funding of care more focussed on outcomes. Tension between fiscal control and user control of spending. More of an emphasis on a housing approach to older home owners. Greater emphasis on inner city care accommodation and targeted at more diverse communities. 19

Key strategic directions In the case of older people three types of residential care: High cost user funded res care (hotel style care) Alternative health care provision (out of hospital, end of life care and dementia). Care homes as care hubs which deliver a range of community funded services. 20

So what will a good care market look like? A different dialogue between LAs and providers, less focussed on price and a master-servant relationship. Users of services having a much greater say in what type of care is delivered,when, with greater choice about the types of care provision available. Care much more evidence based and outcome driven. If you wouldn't like it then dont fund it or provide it. 21

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