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Kroll Advisory Ltd


Posted: 15 Aug, 2022

Avoiding permanent care home placement could be viewed as a means of delaying dependency as well as the ability of local health and social care services working together to reduce avoidable admissions. But when measuring quality, care home admission levels are a blunt tool, as this is also an indicator of a lack of decent affordable provision.

Overall, the number of council-supported admissions has decreased over time but given the lack of reliable data on home care, this could indicate a fall in social care provision. But we have an aging population, so do we have an increasing level of unmet need, and what impact is this having on care home providers and their finance?

Reduced Admissions

We need to start any discussion on the sector by looking at the stark reality of what happened to admissions before and during the pandemic for the reason this lies at the heart of the challenge the sector faces. According to The Nuffield Trust, the rate of admissions gradually declined from 659 per 100,000 people in 2014/15 to 584 per 100,000 in 2019/20. This was then followed by a fall to 498 per 100,000 in 2020/21. This represents a 24% drop between 2014 and 2021.1

Prior to the outbreak, many providers were operating with incredibly tight margins. Any reduction in patient numbers was going to have a dramatic effect at a time when care homes were seeing additional cost pressures associated with personal protection equipment (PPE), staff sickness and costly agency staff.

The UK government launched an “infection control fund” to offset the additional costs incurred by service providers, and this was subsequently topped up with an additional £546 million and extended through to March 2021.2 The government also launched a £1.75 billion fund to pay isolating staff.3  Both have now ended, and while it was considered welcome news for the sector at the time, it did not address the lower occupancy levels that underpin financial viability. 

Staffing Pressures

The financial pressures facing care home providers are also having a serious impact on care homes’ ability to recruit and retain staff.

Pay and conditions are undoubtedly playing a role, with many established care home workers leaving the sector in search of better pay and less stress. Overall, the social care sector had a staff turnover rate of 28.5% in 2021, which is well above the national average of around 15%, according to Ceridian.

Along with difficulties recruiting new staff, which have been exacerbated by Brexit, there is a shortage of around 170,000 care home staff nationwide,4 according to the National Care Association. In addition, with the rise in the national minimum wage and the rise in national insurance combined with the continued necessity to use agency staff, the pressure on margins has continued apace as care home providers scramble to meet regulatory standards.

Inflation Begins to Bite

With the sector already facing longstanding financial pressures, a precarious and narrow provider market, an undervalued workforce and increasing workforce shortages, inflation is now magnifying these issues. From energy to food, from wages to IT and infrastructure costs, prices are increasing, adding to even greater financial pressures on providers.

There is no doubt that the operating environment for care homeowners is challenging, but it is possible to protect the business if you act quickly to assess available funding options to mitigate any funding requirements as well as more formal restructuring options should that be necessary.

 

Sources:
https://www.nuffieldtrust.org.uk/public/resource/admissions-to-care-homes#background
https://www.gov.uk/government/publications/adult-social-care-infection-control-fund-round-2
https://www.gov.uk/government/publications/adult-social-care-infection-control-and-testing-fund-round-3/adult-social-care-infection-control-and-testing-fund-round-3-guidance
https://www.theguardian.com/society/2021/sep/04/care-workers-in-england-leaving-for-amazon-and-other-better-paid-jobs


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