Sanjeet Bains, Director at C.Co, discusses the importance of collaboration and addressing the fair cost of care.


“Elderly ‘at risk’ home care regulator warns”, “Local authorities braced for collapse of care provider” – the type of headlines to give any Council Commissioner sleepless nights. But such stories dominated the front pages last week, after the Care Regulator Care Quality Commission took the unusual step of warning councils of a “credible risk of disruption” should one of the country’s biggest Home Care providers be unable to give adequate assurance regarding its future financial stability by the end of the month. The impact of financial collapse could be far reaching, with 84 Local Authorities commissioning services from the provider, who support over 9,000 people nationwide, most of which are elderly – subsequently, commissioners are bracing themselves should the worst happen.

For many commissioners, last week’s warning was probably neither shocking or surprising, as the pressures faced by the country’s health and social care system regularly hit the headlines – this warning will only add to existing concerns over the financial health of the care industry and the challenge of battling increased cost pressures and demand with reduced funding.

C.Co recently engaged with home care and residential care providers, and found that the industry has been hit hard by local authority budget cuts and the fees they are often paid by local authorities to deliver care and support services do not cover costs. Providers cite increased business costs, changes to national minimum wage, National Insurance, pensions contributions and recruitment, training and retention as significant factors that influence the local cost to deliver care – meaning that after paying care worker wages and overheads, there is little or nothing left to make a business viable.

As we are seeing, worryingly, as costs increase, margins are squeezed to the point where companies are either going bankrupt or deciding to pull out of local authority contracts altogether in order to focus on the private or self-funder market. If providers are operating with a risk of failure, there is little incentive for them to stay in the sector, let alone work to attract the new investment required to create the extra capacity that will be needed to support the country’s growing population of over 65s.

The Care Act 2014 places duties on local authorities to facilitate and shape the whole publicly-funded and self-funded care and support market and to provide choice that delivers outcomes and improves wellbeing. Unlike previous case law, the Care Act strengthens the general duties of councils when setting fees, meaning commissioner have to “promote the efficient and effective operation of a market in services for meeting care and support needs” and “[have] a variety of providers to choose from who (taken together) provide a variety of services. A less than rosy picture for commissioners, who are facing the paradox of; less money, more demand, less supply – at the heart of which are vulnerable people who need to be cared for.

Driving down costs, managing public spending and increasing efficiency are crucial to reducing waste in public organisations. But in doing so, what we cannot lose sight of is the importance of public value for money.

Squeezing providers can be a false economy. Where market failure occurs, additional administrative burden is placed on local authorities in terms of sourcing alternative care, increased costs for emergency placements and the reduction in market competition leads to authorities paying a premium. In addition, local authority clients risk being priced out of care provision from self-funders who can often afford more, or worse, the creation of a two-tier care system where self-funders subsidise local authority clients. Failing to agree a faircost of care is a lose lose situation, for the local authority, provider and most importantly those who require care and support.

So, what’s the solution? The obvious one is that more money is required for health and care services, again, a well-documented (and evidenced) argument where the sector as a whole is waiting for the forthcoming government Health and Social Care green paper proposals. But in the meantime, changing the dialogue between commissioner and providers is central to tackling these issues – we must begin to answer questions such as “what is a faircost of care that recognises the pressures on all sides?” “How can investment, however limited, be targeted to create the biggest impact on the care market?” “How can commissioning incentivise and stimulate the market either through dynamic purchasing or lead provider models?”

And at the heart of this must be collaboration between the market and local authorities – knowing that by working together, recognising the challenges faced, give and take on both sides and thinking differently about how services are commissioned, the sector meet the rising demand its faces for services.

C.Co, CIPFAs consultancy, work with you to engage your market, understand the cost of care, help set sustainable care fees and provide evidence based options for future commissioning models. Why not get in touch with us today to find out more – SpeakToUs@WeAreC.Co