Care home fees crisis reaches a climax

The campaign by the independent care home sector to get local
authorities to increase the fees they pay has reached crisis point,
with some homes threatening residents with eviction. Jonathan
Pearce reports.

A frog thrown into boiling water will immediately jump out, they
say. But if one is placed in cold water, which is then brought to
the boil, the frog will do nothing to save itself.

For the pan of boiling water read the independent care home
sector, and for the frog, the care home owners. The market in the
sector is almost at boiling point and, although many home-owners
have already found the temperature unbearable, many more have yet
to jump out of the pan. However, there is a twist in the story –
this time the frog has got a gun and taken a hostage.

Across the UK, private and voluntary care homes are rebelling
against local authority fee levels which they claim are forcing
them out of business. The hostages are the council-sponsored
elderly residents in long-term care who are now threatened with

In a move mirrored in other areas, Evedale Care Home in Coventry
has issued the council with an ultimatum: increase the fees or 38
residents will be evicted on 15 July.

“Holding a gun to the head of older people is not in anyone’s
interests,” says a council spokesperson. Maybe not, but with
similar actions taking place in Devon, Birmingham and Scotland it
speaks volumes about the state of the sector.

Although not all the care homes are taking this line, some
councils are being forced to make contingency plans to deal with
the threat of evicted residents, while hoping that negotiations
will prevent care homes taking such desperate measures.

Despite claims of distorted truths and militant activity, there
are some simple facts underlying the crisis. First, the sector is
in meltdown, having grown successfully and profitably out of a
Thatcherite boom in the late 1980s and early 1990s. For decades the
closure of long-stay institutions and the elimination of geriatric
wards kept the market buoyant. Now it is struggling.

Figures from leading sector analyst Laing and Buisson suggest
that more than 1,500 care homes have closed over the past two
years, representing a loss of approximately 16,000 places each
year. The figures are offset by some new home registrations, for
instance 145 new homes opened last year offering about 5,000

The reasons behind the closures are varied, depending on
individual situations and local economies. Devon is a case in
point. About 50 nursing home-owners have given Devon Council seven
days’ notice before terminating the contracts of council-sponsored

Devon’s director of social services David Johnstone is pragmatic
about the crisis. “The public sector can’t bail out bad economic
decisions [by home-owners],” he says.

He sympathises with the plight of the care homes, but believes
such threats undermine the progressive work going on elsewhere in
the county to develop new services.

Some homes will close because they are not economically viable,
he claims, or have not invested properly. The ones that survive are
the ones that recognise the way the market is moving. So that means
a wider mix of services – such as outreach services, day-care
provision, more investment in caring for the elderly mentally ill –
and a shift away from traditional full-time residential and nursing

Each part of the country has a different story to tell, but they
all operate against a background of government policy which has put
the sector through a period of transition.

National care home standards, which come into force next year,
mean owners have to upgrade their properties to comply.
Improvements to employees’ rights in recent years, such as the
national minimum wage and the working time directive, have also
increased staff costs.

In addition, the government wants to promote the independence of
older and vulnerable people, giving them more choice in how they
are cared for and where, leading to an increase in sheltered
housing, domiciliary care and direct payments to clients. On top of
this, last year’s NHS Plan developed the concept of intermediate
care, with the aim of reducing unnecessary hospital admissions,
limiting stays in care homes and getting people back home. However,
all this is happening without any significant increase in the
funding of long-term care.

“We can no longer deliver quality of care at these ridiculous
prices,” says Barry Giddins, chair of the National Care Coalition –
an umbrella organisation of private care associations and
home-owners. “We have tried for two or three years to talk to
social services, but they haven’t listened.”

He sends out a stark message to local authorities: “If you don’t
work with us soon, then you won’t have to, because we won’t be
here.” The NCC is in the vanguard of the campaign against local
authority fee levels – particularly the fact that many councils pay
far higher fees to their own homes.

There are several responses to the independent sector’s cry of
“unfair”. The first says the two rates cannot be directly compared.
The local authority rate is a “unit cost”, while the independent
sector rate is a “price”.

According to accounting formulae, such unit costs must take into
account a relevant proportion of all the local authorities’
overheads and salaries, even though some of these might not be
directly related to the council care homes in question, thus
inflating the unit cost.

The second argues that local authority staff are better paid –
an historical circumstance borne out of trade union organisation in
public sector services.

A third suggests that councils’ own homes only provide about 15
to 20 per cent of the total care provided, and that this is driven
by the fact they care for the more vulnerable clients with high
support needs that the independent sector is not interested in.
Such care inevitably costs more.

Home-owners refuse to buy these arguments, claiming local
authorities are simply running a care market monopoly. Not so,
claim the directors of social services. They are simply trying to
manage the market.

Social services departments spend a massive amount of money
purchasing care – often a half or two-thirds of their annual
budgets. The stark choice lies in paying less for more people or an
overcrowded NHS picks up the overspill.

“At the root there is the argument that government has not got
enough money to purchase the care it needs,” says Middlesbrough
director of social services Glenys Jones. She attributes many of
the problems in the care home sector to “wobbles in the market”
caused by public policy shifts – which are right in principle, but
lacking in money – and economic changes, such as rising property
prices and increasing employment.

High property prices allow home-owners to sell up while the
going is good, while high employment makes it hard to recruit
staff. “If people have a choice, then they would rather not wipe
bums,” she says.

Interestingly, local authorities in England and Wales have
looked at running care homes and have independently decided they
want out – mainly because they cannot afford to meet the new
standards. “It’s primarily about local authorities not having the
capital [to invest],” says Jones.

Scotland has a similar problem, but has approached it
differently. Scottish Care – representing 800 of the 1,100 private
care and residential homes in the country – recently met with the
Scottish executive to discuss funding problems and fee levels.

Estimates from Scottish Care and the Association of Directors of
Social Work put the country’s funding shortfall at between £25
million and £50 million, if care standards are to be

There has been some talk of evicting council-sponsored residents
from homes, but this has not emerged as a major threat just yet. In
Scotland, the issue is seen as one for central government, with the
Scottish executive stepping in to set up a “short-life working
party” to review fee levels and report within about three

This contrasts with the Westminster approach which puts local
authorities in the firing line, while simultaneously developing a
concordat with the private sector on long-term care.

It is unclear exactly what is on the table at the moment, but
the concordat aims to stabilise the industry by improving
commissioning arrangements between local authorities and care

In Scotland, public services are seriously defended and there is
little talk of anything like public-private partnerships, private
finance initiatives or the involvement of the newly created care

It all boils down to definitions and funding of free nursing and
personal care and how much will transferred to local authorities in
preserved rights benefit payments from the Department of Social
Security for pre-April 1993 residents. All these are unanswered
questions both north and south of the border – with the exception
of free personal care in the south.

Whatever the mechanics of resolving the sector’s problems, two
fundamental facts will not go away: the population is ageing
rapidly and long-term care is seriously underfunded.

Local authorities may not be perfect purchasers of care, but
neither is the independent sector a perfect provider. Both are
hampered by a short-term view on how their finances are run. The
care homes need investment, while local or central government needs
to invest in the care home sector to ensure the elderly and
disabled are properly cared for.

If councils could raise capital, then the story might be
different. There may be potential in care trusts for the
development of a different model of public sector provision.

As Middlesbrough’s Jones says: “It’s about managing this
transition in a way which is least painful for everyone.” Including
the frogs.

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