Andrew Parfery, Care Sourcer CEO and Co-Founder | 3 June 2020
The care industry in the UK was badly broken before the coronavirus pandemic – now, it finds itself shattered. However, we have the opportunity to start planning to rebuild it into a stronger industry than ever before.
This article focuses on:
- The sustainability of care home businesses
- Hospital delayed discharges
- Zero hours contracts for care workers
- Recruitment into the care sector
and we’ll look at how this crisis could bring about changes that have long been needed.
25% of care homes could go out of business in 2020 without a government bailout
Despite a growing older demographic in the UK (the 65+ population is set to grow 51% by 20411), care homes continue to struggle. Last year 600 care homes opened in England but over 900 closed, leading to a total loss of 23,452 beds, according to data commissioned by The Telegraph newspaper from the Care Quality Commission 2.
While a certain level of turnover is to be expected in any competitive sector, a combination of the pressure of low-paying local authority contracts and a turbulent employment market has resulted in a time bomb that the coronavirus crisis will surely detonate this year.
Occupancy levels falling
The squeezed budgets of local authorities means that they are always looking to drive down the price they pay for care on behalf of people in need. But the result is that the fees care homes charge to attract local authorities do not cover the costs of running the care homes. Instead, care homes are forced to increase fees for self-funding clients, meaning a financial reliance on a high occupancy rate of these self-funding clients.
This is important to note because business income from occupancy levels has been falling throughout the coronavirus crisis, for multiple reasons:
- care home residents have sadly passed away
- many care homes shut their doors to any new intake of clients – both because they do not want to risk infection but also because lower staffing levels means that wouldn’t have the correct staff to client ratio
- families refuse to let family members move to a care home
- worried families have taken people out of care homes, either temporarily or permanently
- While hospitals have a statutory responsibility to discharge patients into an appropriate care setting, a drop in numbers of hospital admissions for non-covid related cases has resulted in less people accessing a care service for the first time.
Normally care homes have around 88% occupancy and high fixed operating costs of over 50%, such as catering, utilities, building maintenance and wages. These costs don’t change greatly with a diminished occupancy rate.
Accounting for natural loss of clients outside of any coronavirus deaths and without being able to take on new clients, average occupancy rate would already drop to around 75% by August, which is the point at which the average care home business becomes loss making.
High staff costs
The care industry has also long suffered from high turnover of staff. There were already around 120,000 vacancies in the sector and during peak weeks of the crisis up to 25% of employees were off work while self-isolating 3. This has left some care homes relying on more expensive agency staff, rocketed wage costs from £30-£35 to almost £90 an hour, another drain on already tight or non-existent profit margins.
The government has pledged £600m to support care homes with costs for PPE, sick pay, overtime and reducing staff from needing to work across multiple homes. This equates to giving around £30k per care home in the UK – which is approximately the revenue made by the home by filling one bed for nine months. It’s a start, but will barely make a dent in care homes’ spiralling revenue.
Given care homes have been subject to significant cost pressure over the last decade, to the point where it is acknowledged that self-funding clients are offsetting the loss from local authority clients, it is easy to see that if occupancy drops to 75% then many care homes will just not have the financial reserves to ride out the pandemic.
By our analysis and calculations, I would not be surprised if we see 25% of care homes shut their doors in 2020, with far reaching consequences, unless there is more done (and quickly) to help this industry get through this crisis.
Hospital delayed discharges become a thing of the past
In February, just before the pandemic took hold in the UK, the daily cost of delayed discharge to the NHS (combining England and Scotland) equated to £2,417,132 per day (£346 per bed4), impacting 48,902 people on average each week.
During the coronavirus crisis, we’ve seen discharge times slashed to a maximum of three hours, due to funding of new care placements from a hospital setting, moving from private payers, CCGs and local authorities to NHS England. This means the whole of the provider market in many instances has been approached to find care availability, rather than just a limited number of contracted providers (accounting for less than 30% of the whole market).
Before the crisis residents of England, for example, qualified for full payment by their local authority if they owned less than £14,250 in savings and assets. If they had between £14,250 and £23,250 in capital, they needed to contribute £1 for every £250 of their savings between that amount, on a weekly basis, towards care home expenses. Finally, if they had capital of more than £23,250, they were required to use this to pay the entire cost of the care. People in this final category are known as ‘self-funders’, and they represent two in five people in care homes.
As the coronavirus hit, and it became vital to get people out of hospital and into a care setting as fast as possible, £1.3 billion was provided by the government for the NHS and local authorities to work together to fund the additional needs of people leaving hospital during the pandemic. NHS England began to also pay for self-funders in order to speed up the process.
This meant that the often difficult process of understanding, finding and funding care was taken out of the hands of many families which made the process significantly faster but removed choice.
To maintain this speed and give back choice and control to individuals we need to help people to understand what options are available at the earliest convenience, which is where hospitals signposting to a marketplace like www.caresourcer.com.
After receiving increased government funding over this period, we’d expect to see NHS and local authorities refusing to put up with the previous sky high cost and long waiting times of the previous discharge process.
They will look to continue to source from the whole of the UK care market, rather than just the 30% of care providers they or the local authority were previously contracted to.
Not only will this expedite the hospital discharge process and save lives in the process, but we will see an overall rise in the quality of care as care providers are no longer forced to compete for local authority business by offering unsustainable, low cost care packages, with corresponding pressures on staff and care quality.
Zero hours contracts for care workers abolished
There are almost 2 million care workers in the UK, contributing to one of the largest workforces, and caring for some of the most vulnerable people in our society.
In 2018/19, 35% of all care workers and 58% of home care workers in England were estimated to be on a zero hours contract5, meaning they have significantly less financial security, and are therefore more vulnerable.
During the pandemic the government allowed the payment of Statutory Sick Pay from the first day of sickness or isolation, and increased Universal Credit and Working Tax Credit by £20 a week for one year from the 6th April 2020, meaning claimants will be up to £1040 better off. While this rightly gave some extra protection to care workers, the financial hardship often suffered by those in the sector is not going to be eliminated by this gesture alone.
The Care Workers’ Charity, which supports current and former care workers with one-off crisis grants, awarded over £150,000 in grants to almost 400 care workers in 2018 – nearly four times as many people as the previous year.
We share the Care Workers’ Charity’s vision to live in a UK where no care worker faces financial hardship. Only by adequately and sustainably funding the care sector can the rising demand to abolish zero hours contracts be put into place by care providers – perhaps this crisis will finally push the government into taking action on this contentious topic.
Care sector recruitment rises – but by nowhere near enough
Right now, the UK needs more people working in social care to cover for those who are not in work, and to relieve the pressure on those that are. Data published by independent job board CV-Library revealed social care job applications fell by 17.8% year on year during the first quarter of 2020, despite the number of advertised jobs rising by 20.7%6.
The profile of caring as a profession has been boosted by the government’s designation of the role as key work, plus the outpouring of gratitude from the country as a whole. The government has unveiled that it needs more people to work in social care and says that this is not only a short-term ambition to help steer the UK through the pandemic – it is also a long-term ambition to meet the needs of our society in the future.
The government’s aim is to attract 20,000 people into social care over the next three months via a national recruitment campaign. However, 20,000 jobs (less than one carer per care home or care at home agency) is just not enough to help effectively support this industry.
1.5 million people in the UK work in social care. Before coronavirus, Brexit threatened to cut this by over 100,000 if EU nationals were no longer able to work in care in the UK, and an additional 130,000 new care workers were already needed each year just to replace turnover and cope with current levels of demand7.
We expect to see a boost in social care recruitment numbers from people who have lost their jobs in other sectors. Coupled with the rise in the profile of caring roles, we could easily see the government reach its target. However, this would only represent a 1.5% rise in the number of care workers which is significantly below what the sector needs – more must be done to accelerate recruitment in this industry to prevent this drain
It’s clear that social care funding and recruitment are the long-standing critical issues that have been painfully surfaced through this pandemic.
The pressures of the coronavirus crisis, combined with the increased scrutiny on the previously under-reported sector, has brought into focus just how badly the care industry needs financial support from the government. Without a clear political commitment to give the care sector what it needs to be able to survive, the effects will be catastrophic.
About the author
In 2016 Andrew Parfery co-founded Care Sourcer, one of Scotland’s fastest-growing tech businesses. Care Sourcer is an online comparison and matching site that connects people who need care with businesses who can help.
Andrew’s inspiration came from running a successful care company, but he was frustrated that so many people had to wait months in hospital to find care, while care businesses around him went bankrupt.
Care Sourcer has already seen great success, reducing discharge delays in pilot NHS hospitals by a huge 40%, and helping thousands of people find the care they need within days, not weeks or months.
Andrew’s mission is to tackle one of the UK’s biggest societal issues by growing Care Sourcer to be the trusted brand for finding care. Thanks to a record-breaking Series A investment of £8.5m from Legal & General and ADV, Andrew and the team at Care Sourcer are rapidly expanding this groundbreaking technology UK-wide.
Let us know what you think
It is time for action and we’re keen to reflect other voices. Let us know what you think in the comments below, and we’d be interested to hear about any other areas that you believe the coronavirus will help to redefine within the care sector. With your help, we’ll continue to monitor and report on the most pressing concerns in the care industry today.