A judge has dismissed a judicial review brought by national care provider body Care England against a local authority it said had breached its Care Act duties by setting fees too low.
Care England argued that Essex council had fixed the fees it offered to providers under a new commissioning framework at a level “significantly below their costs of care”.
It said this contravened section 5 of the Care Act, which stipulates local authorities must promote an efficient and effective care market and “have regard” to ensuring its sustainability.
The issue was highlighted last month by a report from the Competition and Markets Authority (CMA) which found care home operators had been charging self-funding residents an average of 41% more than council-funded ones in order to remain solvent.
The CMA’s research, which followed well-documented cases of care providers going bust or handing back contracts, pointed to a £1 billion funding gap by 2025.
But in a judgement published this week Mr Justice Lavender concluded that section 5 duties “cannot be viewed in isolation” from other pressures on local authorities’ resources.
“It was the defendant’s responsibility to strike a balance between these different considerations,” the judge said.
The judicial review was brought following Essex’s introduction of a new commissioning framework in 2016, under which care homes and nursing providers were offered a maximum of £538.37 and £577.29 per week per resident respectively.
A costs of care analysis completed by the council a few months later set ‘ceiling fair market prices’ at £641.15 for residential and £665.35 for nursing care.
But the local authority said raising all rates to these levels would be financially unviable. Instead it offered providers a weekly per-person uplift of just under £14 to compensate for increased costs incurred by the National Living Wage.
Care England argued that providers had signed up to Essex’s new framework out of “commercial fear” and that they were “deeply concerned” that the maximum prices were well below their costs of care.
Justice Lavender said this was “not supported by details” such as operators’ names or details of the funding gaps they faced. He drew attention to evidence from Essex councillor Dick Madden, who said that few care homes closed in the county because of financial distress.
‘Duty to obtain value for money’
It was common ground between Essex and Care England that the council was “under a duty to obtain value for money”, the judgment said. Government guidance from 2001 notes that driving down prices can run counter to this by forcing providers to the wall, destabilising the market.
But Justice Lavender said, “one aspect of promoting efficiency in a market can be ensuring that fees are not set too high”.
The judge added that “benefiting care providers” was not the purpose of the Care Act’s section 5 duties.
Justice Lavender found Essex had given due regard to the sustainability of the care market in the process of its costs of care analysis, something Care England had disputed.
“The section 5 duty cannot be viewed in isolation,” he concluded. “The defendant faced other competing pressures and duties, including the limits on its resources and the duty to obtain value for money.”
Care England chief executive Martin Green described the judgment as “deeply worrying”.
“It is particularly disappointing that the judge formed the view that the councillor who made the decision had carried out a sufficient enough enquiry into the sustainability of the Essex care home market,” Green said.
John Spence, Essex council’s cabinet member for health and adult social care, said the council’s fees were on average higher than care providers’ costs. A “full enquiry” had taken place before any decisions were made based on the costs of care analysis, he added.
“There is no evidence to suggest an issue with market sustainability in Essex,” Spence said. “Few homes are closing and if they do it is rarely for financial reasons. Any homes that may have closed are often taken over, demonstrating there is a viable market for providers.”