Northern Long Term Care - LaingBuisson Events...destabilises the care home market –data from CCN...

Healthcare intelligence LaingBuisson

Northern Long Term CareWednesday 6th December 2017

#NLTC17


How do northern care markets compare with the rest of the UK ?

William Laing, Founder LaingBuisson

First, some national background

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To date, the state (central and local government combined) has failed to adopt

sensible strategic management of the public-facing care home sector.

Councils (knowingly?) pay less that average costs to care home providers

Cross-subsidisation from private to public payors has become endemic, with

private payer fees 40% + higher than council paid fees for the same

accommodation and, in all probability, the same standard of care.

Most care homes which accept council paid residents depend for their viability

on these cross subsidies

All this has been known for a long time. The case for change has now received

powerful support from the Competition and Markets Authority

State paid fees – failure of market management

Analysis of fee variances in ‘unique room sets' (i.e. groups of rooms of similar or identical specification, where it was possible to compare private and council paid fee rates on a like-

for-like basis)

Number of Unique

Room Sets

Number of private

payers in unique room

Sets

Weighted average

ratio

of private to council

paid fees within

unique room sets

Percentage of cases in

which privately paid

fees were higher than

council paid fees for

like-for-like services

Nursing homes 147 776 1.41 94.6%

Residential homes 304 2,663 1.46 96.7

All homes in sample 451 3,439 1.43 96.0%

CROSS SUBSIDISATION, an unhealthy characteristic which

destabilises the care home market – data from CCN study 2015

CROSS SUBSIDISATION, confirmed by the CMA report in November 2017

“The sector has to some extent maintained provision by charging self-funded residents in homes higher fees, we estimate the average cost for care to a self-funder to be £44,000 a year, around 40% more than local authorities pay on average.

We do not consider this to be sustainable; we have seen very few examples of investment in new care home capacity primarily focussed at the LA-funded sector. The upshot will be that in the future LAs will not be able to provide services to all those with eligible needs. Moreover, the number of elderly people who are likely to need support, and the acuity of their care needs, is likely to increase.”

CMA Care Homes market study final report November 2017, short summary for England

CAPACITY CYCLE – UK Independent Sector Care Homes for older people & dementia




-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000 OTHER NET CAPACITY CHANGE(extensions & reductions, etc.)

CLOSURES care homesWITHOUT nursing

CLOSURES care homes WITH nursing

NEW REGISTRATIONScare homes WITHOUT nursing

NEW REGISTRATIONScare homes WITH nursing

TOTAL NET CAPACITY CHANGE IN YEAR

CAPACITY SHAKEOUT FOLLOWING GRIFFITHS REFORMS

BLAIR / BROWN BOUNTY .

AUSTERITY

CAPACITY AND DEMAND – UK Independent Sector Homes for older people & dementia




200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

BE

DS

Capacity Occupied Beds

SCENARIO

Rising demand and falling capacity will shift market

power in favour of providers in many localities


Profitability of care homes for older people – EBITDAR as % Revenue

10%

15%

20%

25%

30%

35%

40%

Barchester (y/e Dec)

Care UK (Residential Care

Division)

Bupa (y/e Dec)

Four Seasons Care Homes

Division (y/e Dec)*

HC-One (y/e Sept)

Caring Homes (y/e March)

Avery Healthcare (y/e March)

AGGREGATE (excluding Avery)


Profitability of homecare and supported living – EBITDA as % Revenue

-15%

-10%

-5%

0%

5%

10%

15%

20%

MiHomecare, formerly Enara (y/e March) Lifeways (80% plus supported living, y/e Aug)*

City & County Healthcare (y/e March) Mears Group Care Division (y/e Dec)

Allied Healthcare (y/e Jan) Westminster Homecare Ltd (y/e Dec)

Helping Hands (y/e Sept) Alternative Futures (y/e March)

Dimensions (UK) Ltd Turning Point

AGGREGATE HOMECARE


Profitability of adult specialist care homes – EBITDAR as % Revenue

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2004 2006 2008 2010 2012 2014 2016 2018Priory Specialist Division (y/e Dec) Voyage (y/e March) CareTech (y/e Nov)Care Management Group (y/e Feb) Prime Life (y/e March) Regard (y/e March)AGGREGATE


Councils’ unit costs for residential care – external providers 2017/18

England, £530

£0 £100 £200 £300 £400 £500 £600 £700

Darlington Borough Council

Durham County Council

Gateshead Metropolitan Borough Council

Hartlepool Borough Council

Middlesbrough Council

Newcastle upon Tyne City Council

North Tyneside Council

Northumberland County Council

Redcar & Cleveland Borough Council

South Tyneside Metropolitan Borough Council

Stockton on Tees Borough Council

Sunderland City Council

North East

Average fees (FOI Request) England



England, £530

£0 £100 £200 £300 £400 £500 £600 £700

Blackburn with Darwen Borough Council

Blackpool Council

Bolton Metropolitan Borough Council

Bury Council

Cheshire East Council

Cheshire West & Chester Council

Cumbria County Council

Halton Borough Council

Knowsley Metropolitan Borough Council

Lancashire County Council

Liverpool City Council

Manchester City Council

Oldham Metropolitan Borough Council

Rochdale Metropolitan Borough Council

Salford City Council

Sefton Metropolitan Borough Council

St Helens Metropolitan Borough Council

Stockport Metropolitan Borough Council

Tameside Metropolitan Borough Council

Trafford Metropolitan Borough Council

Warrington Borough Council

Wigan Metropolitan Borough Council

Wirral Metropolitan Borough Council

North West




England, £530

£0 £100 £200 £300 £400 £500 £600 £700

Barnsley Metropolitan Borough Council

Bradford Metropolitan District Council

Calderdale Council

Doncaster Metropolitan Borough Council

East Riding of Yorkshire Council

Hull City Council

Kirklees Metropolitan Council

Leeds City Council

North East Lincolnshire Council

North Lincolnshire Council

North Yorkshire County Council

Rotherham Metropolitan Borough Council

Sheffield City Council

Wakefield Metropolitan District Council

York City Council

Yorkshire & the Humber



LA homecare unit costs for Northern Regions, external providers 2016/17 (NHS Digital)

0

2

4

6

8

10

12

14

16

18

20£

per

ho

ur

North East North West Yorkshire and the Humber

Unit costs include councils’ SSMSS overheads


CQC Ratings (% good or outstanding) vs councils’ unit costs for external residential care

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

£0

£100

£200

£300

£400

£500

£600

£700

Da

rlin

gto

n B

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Co

un

cil

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nty

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un

cil

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olita

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ol B

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gh

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um

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nd

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an

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%

£ p

er

we

ek

Unit cost % good or outstanding

NO CORRELATION BETWEEN CQC RATINGS AND FEES


THE GOOD NEWS FOR AFFLUENT ENGLAND ….. BUT NOT SO GOOD FOR THE NORTH

- strong private pay demand

- ultimately based of residential property values

- 80% owner occupation penetration among older people

- will last for a good 30 years


Residential property value distributions, norther regions (Land Registry 2016)

Median property values

North East £125,000North West £145,000Yorks/Humber £145,000England £230,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

North East North West Yorks / Humber England


Prospective

Profitability

of care

homes for

older people

RESIDENTIAL

Source: CareSustain


Prospective

Profitability

of care

homes for

older people

NURSING

Source: CareSustain


Financial environment:

- challenging for businesses exposed to council funding

- positive for businesses catering primarily for private pay

National Living Wage ‘hit’ likely to be around 6% for low paid staff (higher

than in 2016/17 when mitigated by ‘compression’ effect

Brexit – could be many indirect effects

Development prospects for care homes – generally negative, though some

localities will support new investment

Prospects for 2018/19


Competition and Markets Authority recommendations“We are recommending that the Department of Health develop policies and practices to

provide for:

(a) enhanced planning by local authorities, so that accurate and meaningful forecasts of

future care needs and how to meet them can be built;

(b) (b) oversight of local authorities’ commissioning practices to ensure plans will deliver

the care that is needed, and improved support to LAs; and 5

(c) (c) measures to provide confidence to investors that they will receive adequate fee

rates.

Cost to the state: between £200-300 million and £1 billion

WILL IT HAPPEN?

Northern Long Term Care - LaingBuisson Events...destabilises the care home market –data from CCN...

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