A big part of the apparent ongoing crisis in the NHS is ‘delayed transfers of care’ from hospitals into the social care sector. It’s not clear if the cause, alongside a change in demographics, is a lack of suitably qualified professional carers or just an inability to fund the additional support these people require – or both. One care home in Whitby pointed to the ‘national shortage of trained nursing and care staff’ as the primary reason for its decision to close in February.

Most contracts awarded by local authorities are awarded on “best value” through competitive tender. The financial element, to determine best value, is increasingly dominant within that process.

Finding appropriately trained and experienced staff to work in such a sensitive environment is difficult, especially in London, where employers are expected to pay higher than the national living wage. Potential restrictions on immigration postBrexit could exacerbate this. As care providers are generally unable to increase prices to local authority customers they face thinner and thinner margins. This problem is not going away.

Regulatory requirements mean that, in facing this financial squeeze, care providers cannot just cut staff to reduce their costs. At some point where providers cannot make some form of return on the capital employed in the business and/or make strategic investments for the future, they will look to close or to exit the market by selling. Charitable care providers are being encouraged to merge with each other to create economies of scale but mergers amongst charities are not always easy to pull off. Charities have much more limited financial options in the way they are structured and cannot as easily access investment capital.

Property costs in many areas may provide a further incentive for some incumbents to exit by selling premises. However, closing a care home to release capital value will not always be as attractive as it may first appear, given the potential costs of redundancies and the difficulty of obtaining alternative use from the planning authorities, but some service providers will no doubt be considering this option.

Some well capitalised businesses may look to expand and take on care homes along with their staff where these are well positioned, even if they are not profitable as stand-alone businesses. A larger organisation may be able to provide some of the back office services, for example regulatory compliance, for a very small marginal cost and may exercise greater buying power and so make the service financially viable as part of a larger group.

It is clear that, while there remains a shortage of funding and suitably trained professionals, the pressure on care providers will remain and, as in many business areas, market forces will drive out the smaller bespoke service in favour of the large homogenised service provider.

The demographic and funding situation means the entire sector needs a fundamental rethink. There are some exciting emerging models which reconsider how services are delivered, whether providing integrated services for families alongside provision for older people, or where younger people can access accommodation in return for providing basic help to an elderly home owner, addressing the need for care services and fighting loneliness at the same time.  

This article was first published in Caring Times.