On 14 June 2017, the Competition and Markets Authority (the "CMA") published an update paper on the progress of its market study into the care home sector. The paper identifies the CMA's initial competition and consumer law concerns relating to the care homes sector and sets out potential recommendations to resolve the issues identified. As with the reaction to the so-called dementia tax, the final outcome of this market study is likely to be the subject of considerable public reaction.

Here, our health and care experts analyse the CMA's provisional findings and consider what the next steps will be.

The market study

The CMA launched its market study on 2 December 2016. The study considers the provision of residential care home for people in the UK aged 65 years or more.

The purpose of the market study is to consider:

  • how prospective care home residents choose care homes;
  • the regulation of the care home sector, including procurement of care homes by the public sector;
  • the level of competition between care homes and consideration of the key pressures for care home providers; and
  • consumer protection issues, including complaint and redress systems.

The CMA's provisional findings

The paper identifies a number of initial concerns. These relate to:

  • consumer choice when selecting care homes;
  • the complaints and redress systems available to care home residents; potential breaches of consumer law by care home providers;
  • the complexity of certain local authorities' procurement processes; and
  • the market's inability to meet future demand for care homes.

Consumer choice

For the care homes market to work well, prospective residents and their families need to be able to make informed choices. As might be expected, the market study so far considers that people find making decisions about care to be a highly stressful experience and often do not take account of relevant information, even where it is available.

The paper finds that most residents are therefore not in a good position to exercise informed decisions and drive competition.

Recommendations under consideration in relation to consumer choice include:

  • ensuring that relevant information relating to care homes is published in an accessible and consistent format;
  • encouraging the public to give consideration to look into care homes at an earlier stage in life (e.g. as individuals approach retirement) to allow them to make a properly informed decision; and
  • exploring ways in which prospective care home residents can receive up-to-date accurate information.

Complaints and redress systems

It is often not realistic for residents who are dissatisfied with their care home to relocate to another home. As the paper notes, once settled, the upheaval process can be extremely disturbing for elderly residents and can even have an adverse impact on resident's health. As such, it is essential that effective mechanisms exist to allow residents to voice any concerns they may have and, further, that such concerns are acted upon.

The market study has found that complaints and redress systems in the care homes sector often do not work well, with residents often finding it very challenging to make complaints.

Options currently under consideration include:

  • introducing model complaints processes which are specifically designed for care home residents;
  • the provision of advocacy services to help people make complaints; and
  • making it easier for care home residents to contact the ombudsman and/or regulators.

Potential breaches of consumer law

The CMA has concerns that certain business practices employed by some care homes and identified during the market study may breach consumer law.

The CMA's concerns primarily relate to the treatment of self-funded (as opposed to local authority-funded) residents and include:

  • issues around the lack of indicative pricing information on care home websites;
  • care homes having a wide discretion to ask residents to leave;
  • the charging of large upfront fees and deposits; and
  • care homes imposing requirements to pay fees for an extended period after a resident's death.

On the basis of these concerns, the CMA has opened a separate investigation into a number of care homes, focusing on the latter two issues. To the extent that the investigation finds gaps in the protections offered by consumer law, the CMA will consider whether legislative or regulatory changes would be an appropriate response.

Procurement processes

On a positive note, the market study has generally found evidence of competition between care homes to provide care home placements to local authorities. However, the paper notes that some care home providers have complained of "complex, inflexible and insufficiently person-centred" procurement processes being run by local authorities and the NHS.

The CMA is considering how it could support local authorities to share with one another best practices as to procurement processes. It is also considering whether the imposition of greater transparency requirements on local authorities would result in a greater degree of accountability

Demand for care homes and lack of investment

With an ever-ageing population, demand for care homes is expected to increase very substantially over the next two decades. The update paper notes that the number of people aged 85 or over is projected to more than double by 2039.

The CMA's initial financial analysis of the sector suggests that the anticipated returns on investment are insufficient to attract the necessary investment to meet future demand for new care homes.

Issues identified by the CMA as potentially deterring greater investment include the rates currently paid by local authorities for care home residents and the absence of certainty over future funding. The CMA has found that those areas where there are likely to be higher numbers of local authority-funded residents, and generally lower rates of return, are most likely to suffer from lack of investment.

If the CMA's initial findings are confirmed, it will go on to consider how local authorities can share good practice on: market shaping, planning and procurement. One possibility the CMA has indicated it may consider would be to set up an independent body or bodies with a duty to: guide long-run planning, facilitate the development of appropriate capacity and structure, and set reasonable fee rates.

Next steps

As the CMA made clear in its notice of 1 June 2017, it has decided not to refer the market study for a more detailed market investigation. At this stage, the CMA considers that the outcomes it is pursuing can be achieved through: (1) the use of recommendations; and (2) the parallel investigation into potential breaches of consumer law.

The CMA has invited affected stakeholders to comment on the issues identified in the update paper and will consider responses provided by no later than 5 pm on 5 July 2017.

The CMA's final report will be issued on 1 December 2017. Ahead of this, care home providers and local authorities have an opportunity to pre-empt the CMA's final recommendations.