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Care home sector needs 'urgent reform' to survive, warns competition regulator

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The care home market is not sustainable without additional public funding, the government’s competition regulator has warned.

The sector needs “urgent reform”, the regulator said following an extensive review of whether it was working well for older people and their families.

“The fees currently being paid by local authorities are not sufficient”

CMA report

A report published today by the Competition and Markets Authority (CMA) said providers that primarily support council-funded residents will struggle to survive at the current level of fees paid, with significant reforms needed to bolster the sector to meet rising demand.

The CMA’s profitability analysis of the sector found the average fees paid by councils were below the costs of supporting residents. However, the sector as a whole, including self-funders, was “just able” to cover operating and capital costs.

The analysis found many individual care homes are currently not financially sustainable, with those supporting council-funded residents particularly vulnerable.

The CMA report said: “This shows that the fees currently being paid by local authorities are not sufficient to sustain the current levels of care under the current funding model.

“The implication is that public funding needs to increase if the current model of funding is to continue, or alternatively, if current levels of funding do not increase, the funding model for care will need to be changed,” it added.

The analysis found about a quarter of care homes are most at risk of failure or withdrawal, as they have more than 75% of council-funded residents.

“Councils and providers are united around the severity of the challenges the system faces”

Izzi Seccombe

For these homes, the CMA estimates fees paid by councils are up to 10% below total running cost, which equates to a funding shortfall of £200m-£300m across the UK.

A CMA analysis based on larger providers found that fees paid by self-funders were on average 41%, or £12,000 a year, higher than those paid by councils.

However, it said most self-funders are not wealthy, with a current assets threshold for council-funded support in England of £23,250 resulting in “practically anyone” who owns a home being required to cover their own costs if they enter a care home.

The report said: “We already observe that nearly all new care homes being built are in areas where they can focus on self-funders.

“While we would expect that many mixed homes with differential pricing could continue to operate for some time, there will be a need for additional funding to support further care homes that would not be sustainable without the benefits of this price differential.”

The report also said that councils’ approaches to responsibilities under the Care Act to shape local markets was variable.

It noted: “This understandably reflects the current pressures on local authorities and their lack of long-term certainty on future funding patterns and levels.”

“Choice is not always possible when there is poor commissioning”

Martin Green

Izzi Seccombe, chair of the Local Government Association’s community wellbeing board, said the report showed the “stark reality of the social care crisis” and called for urgent government action.

“Councils and providers are united around the severity of the challenges the system faces around care home availability and viability,” she said. “If the system is left to carry on as it is, then we will see more and more providers either pulling out of council contracts or going out of business altogether.”

Professor Martin Green, chief executive of Care England, said the year-long study provided in “depth analysis” that should give the “impetus” to the government to recognise the importance of fair funding and proportionate regulation.

“As the report makes clear, choice is not always possible when there is poor commissioning,” he said, noting that the CMA had recommended that an independent body oversee fees.

“This body needs to have teeth and the authority to compel local authorities to pay,” he said. “If the market continues without a considerable funding injection or better commissioning practice, the closure of care home providers will limit choice and competition.”

“This telling report highlights how vulnerable people can be when moving into a care home”

Margaret Wilcox

Margaret Willcox, president of the Association of Directors of Adult Social Services, said: “This telling report highlights how vulnerable people can be when moving into a care home and shows that adult social care is not sustainable without extra funding. 

“We recognise the importance of providing information and advice to help people make informed choices about care homes that meet their needs, that making comments and complaints after the upheaval of moving can be difficult and that the capacity to plan for the future and growing need is difficult in the current climate,” she said.

“Balancing the funds available, the price that can be paid to providers, the level of quality and the number of people that can be supported is an unenviable task. It is deeply unfortunate that this report is published a week after a budget that ignored the crisis in social care,” she added.

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