Memorandum by Southern Cross Healthcare
PLC (PEX 23)
EXECUTIVE SUMMARY
(a) Southern Cross Healthcare welcomes the opportunity
to respond to the Health Select Committee's call for evidence
as part of its inquiry into Public Expenditure and to offer its
views on the impact of Government spending on social care provision
and the broader social care sector.
(b) The issue of social care provision should
be a key element of government social care strategy; with projections
showing that the UK population aged over 65 will increase by over
2 million between 2009 and 2017; with an increase of 350,000 for
over 85s over the same period. It is also projected that 82,000
more people will need 24 hour care by 2017, with the numbers of
people suffering from dementia increasing.
(c) Against this backdrop of increasing demand,
budgetary pressure is resulting in more stringent interpretations
of the government's guidelines being applied across the country,
leading to people being admitted to care homes when their needs
become more acute than was previously the case and more intense/acute
interventions being delivered through domiciliary care.
(d) Research by the Department of Health itself
has shown that there is a strong correlation between funding cuts
and the number of people being denied care as a result of those
cuts. The Department of Health social services research unit has
stipulated that cuts of approximately 25% over four years to local
authority social care budgets will almost treble the number of
disabled people denied care, leading to up to 260,000 people classified
as "high dependency" being denied formal care by 2012-13.
(e) In addition to the general more stringent
interpretation of the guidelines, the guidelines are also being
interpreted in different ways in different local authority areas.
Both this and the previous trend are likely to continue, impacting
the quality of life of those who need care, exacerbating the "postcode
lottery" that already exists and creating an added administrative
cost on the care home sector in responding to a variation of Local
Authority practices.
(f) Despite the desire of local authorities to
maximise value for money, many often fail to secure the best value
for the taxpayer, maintaining high cost in house provision where
more cost effective alternatives are available in the private
sector and viewing domiciliary care as the default solution and
(incorrectly) as a way to save money over residential care.
(g) There is also clearly a demonstrable lack
of visibility amongst commissioners of the overall cost to the
taxpayer of certain types of care—resulting in inefficient
commissioning of care services.
(h) There is a view amongst many commissioners
that individuals should be maintained in their own home environment,
which is a laudable consideration and should be honoured if it
is the wish of the individual. However, it must be recognised
that this is not necessarily the wish or expectation of all individuals
requiring long term care. Indeed, it could be argued that those
elderly who remain at home with intermittent domiciliary care
and assistance are lonely, have little or no external stimulation
and as a consequence become less mobile and depressed, with successive
returns to expensive acute hospital care and a poor quality of
life.
(i) Further, evidence from one city centre NHS
acute teaching trust demonstrates that the weekly cost of a bed
in an acute medical ward (commonly 60% -70% elderly occupancy)
is £1,100 rising to £1,477 for those patients with complex
discharge needs. This data does not take account of the on costs
of management time, buildings or utilities but is more than twice
the amount local authorities would pay to place the most acute
of their residents in a residential care home.
(j) Budgetary pressure is already resulting in
local authorities depressing the fees provided by the independent
sector past unsustainable levels with evidence of fees decreasing
in real terms in the next year. This will impact the sector's
ability to deliver the levels of service expected by commissioners
and residents, damage the sector's ability to invest in improving
infrastructure and care levels and may lead to capacity reductions,
increasing the future shortfall between supply and demand.
(k) Private providers of care are not currently
seen as partners by the majority of commissioners but as service
providers where short term objectives (such as cost) have more
prominence than long term strategic partnering and planning.
1. COMPANY PROFILE
1.1 Southern Cross is the largest provider
of care homes and long term care beds in the United Kingdom, caring
for over 32,000 people in 754 homes across the UK and employing
almost 45,000 staff. This amounts to a provision of about 10 of
the nation's requirements, managing a capacity larger than that
of Bupa and Four Season's combined.
1.2 Southern Cross provides care services
for the majority of UK local authorities which, together with
the NHS commissions, represent over 80% of the group's residential
population.
1.3 Southern Cross Healthcare works closely
with local authorities, PCTs, our employees and other stakeholders
to provide the highest possible levels of care to our residents.
1.4 The average age of our residents is
85 with an average length of stay of less than 18 months, reflecting
the increasing age and acuity of needs amongst residents.
1.5 As providers of care we are currently
half way through a significant internal investment and change
programme to ensure continued development of quality of care,
service user experience, and staff experience, whilst ensuring
efficiencies and effectiveness of service delivery.
2. LOCAL AUTHORITIES
AND CARE
SERVICE COMMISSIONING
2.1 The majority of care services in the
UK are commissioned by local authority Adult Social Care Departments
whilst the majority of care home services are provided by the
private sector.
2.1.1 As of April 2009, the total UK capacity
for residential and nursing care was 472,600 beds, of which around
88.5% were operated by the private sector, a proportion that is
likely to continue to increase.
2.2 Each local authority has an obligation
to assess the needs of an individual against Government criteria
prior to commissioning appropriate care services for that individual.
However, there is evidence that local authorities interpret these
criteria differently in terms of the amount of care that an individual
might require. This inevitably results in a "postcode lottery"
where individuals with the same needs are assessed differently.
2.3 In the past year Local Authority fees
have increased at an average of less than 1% cent at a time when
RPI exceeded 3% and the national minimum wage is set to increase
by more than 2% in October 2010.
2.4 In the past year, as local authority
budgets have come under increasing pressure, we have already seen
a gradual drop in occupancy rates as authorities opt instead either
to provide domiciliary care or to decline care altogether (by
setting the assessment bar higher). This trend has been seen in
both residential and domiciliary care.
2.5 If this trend continues, it will have
two likely consequences.
2.5.1 The first is to increase the number
of people who do not receive appropriate care or who only do so
when their condition becomes chronic. This results in increased
cost of care when it is provided and reduced quality of life
2.5.2 The second is to threaten the long-term
sustainability of the private care sector, on which local authorities
and the NHS rely, along with almost 90% of residents, for the
provision of residential and nursing care facilities.
3. THE TRUE
COST OF
CARE
3.1 The most important aspect in determining
which intervention to follow for an individual is assessment of
the most appropriate level of care for the individual's needs
and personal circumstances. Residential care is often perceived
by policy makers and commissioners as a less attractive proposition
compared with care in an individual's home, with the latter often
being seen as the default option. However residential care has
many demonstrable benefits, not least the alleviation of loneliness
and isolation (as identified in the Department of Health's report
"Putting People First") which home care packages (on
average around two hours a day) are unable to address
3.2 Where cost is a key determinant of the
care package (as is often the case and with tightening of budgets
will become more so), a lack of joined up budgets and failure
to appreciate the true cost of care means that the taxpayer often
doesn't benefit from the most cost effective solution
3.3 Equally, where there are sunk investments
(such as the provision of "in house" care homes) there
is an articulated belief that these provisions should continue
to be used despite the private sector opportunity to provide a
more cost effective alternative.
3.4 By way of example, the average cost
for North Yorkshire County Council of in house provision of residential
care in 2009-10 was £645 per person per week with no facilities
for full en suite. At the same time the council was seeking a
price freeze from the independent sector for residential care
at £390 a week.
3.5 A similar picture existed in Durham
where an internal report highlighted that weekly costs for in
house care averaged £834.60, compared with £436.60 for
residential care and £481.44 for nursing care from the independent
sector.
3.6 The private sector is able to provide
comparable services at lower costs relative to the public sector.
If cost is a key driver local authority commissioners must apply
the same standards to their own provision of care homes. In the
case of sunk costs these services should not be supported indefinitely
at extra cost to the taxpayer where viable private sector services
exist.
4. THE TRUE
COST OF
CARE ALTERNATIVES—DOMICILIARY
CARE
4.1 Many commissioners see domiciliary as
a more cost effective alternative to residential care and the
sector has seen a trend (similar to that of the care home sector)
of interventions being focused on fewer people with more acute
needs—as local authorities raise the bar for the interventions
they will fund.
4.2 Whilst viewed from the point of view
of the Adult Social Care Department's budget the current cost
may be less than residential care. However, such reasoning fails
to assess the total cost to the taxpayer.
4.3 Once housing costs such as Housing Benefit
and Council Tax benefit are taken into account and additional
eligible Department for Work and Pensions benefits such as Pension
Credits and Attendance Allowance, even a modest care package is
likely to cost the taxpayer at least £500 a week.
4.4 Notwithstanding the current cost outlined
above, should the current trend continue to favour caring for
people in their own homes along with ever increasing levels of
dependency, the cost of providing domiciliary care in the less
efficient surroundings of an individual's home may well soon surpass
the costs of providing the equivalent care in a dedicated care
home.
5. THE TRUE
COST OF
CARE ALTERNATIVES—EXTRA
CARE HOUSING
5.1 Extra Care housing was seen as a preferred
alternative to residential care by the previous government and
received significant financial support; £76.5 million to
26 local authorities in 2008-10 alone to build 1,856 new extra
care places
5.2 Whilst we would not argue that extra
care has no part to play in the provision of care, funding Extra
Care in this manner is not a long-term solution to the conundrum
of how best to meet rapidly increasing demand. It is estimated
that an additional 82,000 people will require 24 hour care by
2017. To meet this using Extra Care alone would require a subsidy
in excess of £3 billion from the taxpayer—a clearly
impossible sum in the current financial climate.
5.3 Even on a like for like basis, extra
care housing can prove expensive compared with the residential
care alternatives; the cost of the Lower Greenfoot extra care
housing scheme in Settle was £139k per place (with the private
sector funding £65k of this). An equivalent 60 place state
of the art residential care home would cost no more than £74k
per person. Even if a subsidy was offered for costs over £65k
this would be £9k per place as opposed to £74k. Both
central and local government should reassess the emphasis that
they place upon the provision of Extra Care Housing as a cost-effective
alternative to residential care.
6. MAINTAINING
A SUSTAINABLE
CARE SECTOR
6.1 There has long been a historic tendency
amongst many in central and local government that residential/nursing
homes are "institutions" of last resort. However, the
evidence does not support this with many privately funded residents
making an active decision to move into homes because they offer
a sense of community and access to activities that they would
not otherwise have.
6.2 To benefit fully from residence in a
care home it is important that individuals move when they still
have the health standards to form new friendships/benefit from
group activities. This is contrary to the current market trends
where increasingly local authorities are placing people when they
already have significant health problems and are thus not able
to get the full benefits of residential care. The care home environment
must not be seen simply as an "end of life" facility,
but as a true opportunity to enjoy life in a safe and homely environment
with cost effective services and a good use of tax payer's funds.
6.3 Commissioners need to view their role
not just in terms of the short term objective of placing an individual
at the lowest possible cost, but more strategically as market
shapers. Instead of focussing simply on spot price, the long-term
benefit of patients and providers would be better served by local
authorities partnering with operators to develop the services
that they will require to meet the challenges of the future.
6.4 If commissioners fail to grasp the opportunity
to shape the market they risk reducing provision in the short
term and a lack of capacity to meet expected long term demand.
6.5 Commissioners also need to be mindful
of their statutory duty to pay sustainable rates for services.
Fee rates differ markedly across the country; for residential
care this amounts to a difference of over £9,000 a year between
different local authority areas. In addition fee rates do not
necessarily correspond to the cost to operate in an area; one
Local Authority in one of the highest cost areas to operate in
the UK pays amongst the lowest rates. This needs to be addressed
if there is to be a sustainable model for the sector.
6.6 In considering alternatives to the existing
model of care, the Committee may wish to take account of models
used by the government in other sectors. In the utility sector,
for example, the UK regulator specifies how much companies must
invest, what rates they can charge and then rewards them for over
delivery/penalises them for under delivery (including quality).
This recognises that companies need to generate adequate rates
of return whilst limiting price inflation and delivering the required
level of service. We believe such alternatives should be considered
to secure the long term future of the provision of care services.
October 2010
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