Good Practice: Reducing the cost of expensive residential placements

Basil Mallinison at Turning Point’s Park View home in Watford, with support worker Devi Mohun (pic credit: Nick Wright)

Hertfordshire Council has cut the costs of its residential placements in adult care while maintaining its level of service, reports Jeremy Dunning

Project details

● Name of organisations: Hertfordshire Council adults’ services and consultancy OLM.

● Project name: Reducing the cost of long-term care placements.

● Number of service users affected: 1,050.

● Cost of contract with OLM: Confidential but not based on a percentage of savings made through project.

● Savings: £2.5m a year and expected to rise to £7.3m a year by end of next year.

● Staff numbers: Six from OLM and two full time from Hertfordshire Council; 12 Hertfordshire staff shadowed OLM staff during negotiations with providers.

Long-term placements have always vacuumed up a large chunk of adult care budgets. But as local authority budgets tighten, councils are looking to review these high-cost arrangements to release funds for other needs and services.

With more than £100m tied up in residential placements, Hertfordshire Council, which proportionately has one of the highest number of people with learning disabilities in the UK, is no exception.

In July 2008, it joined professional services consultancy OLM Financial Management for a three-year project to review its high-cost care packages, which range from £850 up to £4,000 a week.

OLM deployed its service MyCareCosts to help the council save up to 10% a year on the placements.

The service starts with the council’s project manager asking OLM to review care packages. OLM then asks providers to fill out a cost template for each client, which is compared with the sum charged to the authority.

The template looks at hotel costs, staffing and non-direct care costs, such as mortgages. This is compared against average costs of similarly-sized residential homes nationally.

A tolerance level is then applied depending on the size of the package.

The second part of the process can take six months and involves the negotiations, which take place when OLM believes there is scope for efficiency savings. If a dispute arises between the council and a provider over price, a cooling-off period is applied, during which no new placements are made with the provider.

The work began as a pilot. OLM reviewed 50 high-cost care packages to establish a reasonable price based on each individual’s required care and support.

Hertfordshire and OLM also looked at the profit margins of the care providers – some of which were found to be generating large profit margins.

These first cases saved £345,000 a year.

The project has now reviewed 258 individual cases, saving £2.5m a year. The plan is to look at about 1,000 cases.

While some providers have not been so positive, others, such as social care organisation Turning Point (see case study), have embraced the process.

Ray Hart, commercial director for OLM Financial Management, says the intention was not to make the market unsustainable for providers, but to provide value for the taxpayer. “We won’t ask the provider to make ­savings where we think they are not ­sustainable,” he says, adding: “It’s about transparency of the costs provided in the package. At the moment it is also about savings, but what it does is go through the package to work out what that package should cost.”

Because Hertfordshire staff shadow the OLM consultants, it is unlikely that this exercise will need to be repeated.

Iain MacBeath, the council’s assistant director for performance and business support for adult care, says the savings are helpful but are small compared with the total the council and his department will have to make over the next three years.

“Hertfordshire is looking to make £144m of cuts over the next three years,” MacBeath says. “It’s staggering and adult care plans will be responsible for £45m-50m.”

Project manager Andrew Leather says the project has provided evidence of value for money but admits that reviewing the specialist placements could be challenging because such clients will need to be placed.

But he adds: “It’s been very useful. In terms of the economic climate there’s a lot of pressure to be making savings and if not to establish that what we’ve got is what it says on the tin and is value for money.”

Leather adds that the council has improved its internal communications so social care staff are aware if the council and a provider are in dispute.

It spoke about the project with a number of user groups at the beginning of the 50-case pilot, but beyond that these groups have not been involved in the process.

The council insists it has seen no reported change in quality or quantity of care, an assertion supported by Hertfordshire Local Involvement Network, which represents service users. It says it has not received any reports from its members or other residents concerning changes in the quality of care since July 2008 as a result of renegotiated contracts.

Case study: ‘It isn’t about slash and burn. It’s about value’

Turning Point is one of the providers that has worked with Hertfordshire Council and consultancy OLM to reduce the cost of care placements.

So far 33 individual care packages have been negotiated for clients with learning disabilities, saving the council £3,369 a week on its contracts with Turning Point.

A few more are due to be examined when the next tranche of case reviews is undertaken.

Project manager Andrew Leather says he believes the process, which began last June, was relatively painless for both parties, but admits that not all providers understood the need for the project or could explain why a package cost what it did.

By contrast, the Turning Point renegotiation was “quite straightforward”. “They took a decision at the top of the organisation that it was in their interest to go with the tide.

“We aren’t the only local authority asking them and so they engaged in the process. The result was that, although we’ve made some savings they had confidence they were offering value for money and were prepared to show it. It was a positive interaction.”

Lord Victor Adebowale, Turning Point chief executive, says negotiations have been tough but fair.

He says Turning Point had looked at how it could restructure services to deliver high-quality care at lower cost in Hertfordshire, by looking at the most efficient ways to deliver the outcomes required for clients.

He has concerns that some authorities look at blanket reductions, which fail to take quality into account.

“It’s necessary for local government to work closely with providers and communities to look at improving efficiency and effectiveness,” he says. “The good practice in Hertfordshire isn’t slash and burn. It’s about value.”

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This article is published in the 23 September issue of Community Care magazine under the heading No pain, plenty of gain.