6 issues shaping the care home sector
New developments affecting the care home sector have seen the landscape shift considerably. Paul Birley, our head of public sector and healthcare, says the message now is simple: shape up or get out.
There are six key issues that operators should be aware of – as should brokers if they are to effectively support their clients.
1 – The Care Quality Commission (CQC)
April this year saw the CQC add more bite to its powers, and it is using them.
“Clearly, a care home with a good or outstanding CQC rating will be easier to sell than an inadequate one or one that requires improvement,” says Paul. However, the tougher environment could also lead to new opportunities for brokers, he says, if owners decide they have had enough and want to sell.
2 – Staffing costs
There are two main issues to be aware of here. The first is nursing costs in general, because it’s often difficult to find nurses to employ. “When a broker is looking at a business, look at its agency spend and the type of care that is being provided,” Paul says.
The second issue is the forthcoming national living wage. This will come into force next April, increasing the minimum wage for workers over 25 to £7.20 an hour, before rising to £9 in 2020 (as announced in the chancellor’s budget this year). With staffing accounting for around 55-60% of costs in a care home, the living wage will have a significant effect. “Anyone buying a care home needs to have factored this in,” says Paul. “The other impact of the national living wage is that because it will potentially reduce profits, valuations will also come down.”
3 – The Care Act 2014
This policy, which would have capped some of the care costs that an individual might have to shoulder, has been postponed until 2020 . Both this delay and the uncertainty surrounding the Act’s eventual implementation, Paul says, will have a knock-on effect for the sector. As a result, it’s an issue that needs to be on everyone’s radar.
4 – Local authorities
The Care Act was due to grant cash-strapped local authorities power of advocacy. This would have meant an individual could approach care homes on a local authority’s behalf to ask for a place as a private patient.
A by-product of this would have been to expose the discrepancies that often exist between what homes charge private patients and what they charge local authorities. Homes could then have been pressured into accepting private individuals at the same rate as authority-funded patients.
While the immediate concerns over these issues have now been alleviated, Paul points out that with the Act only postponed, the uncertainty remains.
5 – Reputational risk
With the CQC in possession of greater powers, the reputational risks for care homes have increased, meaning that quality must be at the top of any operator’s agenda. However, a poor reputation isn’t necessarily bad news for brokers looking to sell a home, Paul insists, as long as they know what they are selling.
6 – Government
Government directives can come at any time, so something unforeseen could be just around the corner.
“People coming into this business need to be aware that new regulations can come in overnight and completely change everything,” says Paul. “But wherever there is change, there is opportunity.”