Many more care home providers across the UK will follow Southern Cross into administration this year because of cuts to care home fees, a study by sector analysts Laing and Buisson predicts.
Councils are cutting care home fees by 2.5% in real terms this financial year, its Annual Survey of Local Authority Baseline Fee Rates found.
The average fee level increase was said to be the worst since 1993.
Although fees increased by 0.3% on average across 197 councils this will be offset by a 2.8% increase in costs.
The results reflect those of a study conducted by Community Care in February, which showed one in five providers expected to go out of business because of reduced local authority fees.
William Laing, chief executive of Laing and Buisson, said: “As the news of Southern Cross’s demise sinks in, the care home sector will have to think hard about its response to real terms cuts in local authority fees.”
Nadra Ahmed, chair of the National Care Association, said that the picture may be even worse than the figures suggest. She said information from her organisation’s members showed councils were demanding efficiency savings of between 4% and 5%.
“If the trends continue some established providers will continue to operate but there will be pockets of variability where there will be providers with borrowing who will be challenged by the cuts,” she added.
Laing argued providers should lobby government to try and get increased fees. “Though Laing and Buisson has always believed that the Department of Health would be strongly resistant to taking on a fee-fixing role, maybe the fallout from the Southern Cross failure will encourage ministers to take a more interventionist line.”
The lack of uplift in fees follows five successive years of below-inflation increases. But it said this year’s low level increase was not helped by the government’s public sector spending cuts.
The report concluded that the real-term cuts were to some extent offset by councils continuing to place people in residential care. Nearly half of councils said they did not expect to reduce the numbers of people they placed into residential care over the next year.
Only seven councils in Wales increased their fees, once inflation in costs had been accounted for.
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