The Government is sleepwalking towards a situation in residential elderly care where available rooms will all but vanish for local authority funded people in some parts of the country.
The biggest operators are scrambling to get LA-funded residents off their books, and replace them with private fee paying residents.
Care UK announced in its most recent quarterly results that it is well on the way to achieving its target of a 50/50 split between council and privately funded residents by 2020.
In the first three months of 2015, 32% of its customers paid their own fees. This has risen to 37% this year.
Healthcare REIT Welltower, which has over £400 million invested in the construction of care homes in the UK this year, is building all of those homes for private payers.
The public sector provides only 34,000 care home beds out of a total of 487,800 in the UK, so is in no position to solve its supply problem.
This means private operators are rapidly improving their negotiating hand when it comes to the fees they can demand from local authorities who have a duty of care to find places for people who cannot fund themselves.
Karen Knight, managing director of NorseCare, a large operator owned by Norfolk County Council, says it is becoming an operators’ market: private operators can demand much higher fees in parts of the country where authorities have not secured access to beds.
The mid-term trend is unlikely to change. Operators like Avery, Hallmark, Care UK, Country Court Care, Gracewell, Signature and Sunrise are adding homes and beds in affluent parts of the country, but they have no incentive to accommodate LA-funded residents paying less than half the rate of self-funders.
In the past, local authorities at least offered block contracts that gave operators the comfort of large and secure volumes of business as a trade off for lower fees. These sorts of deals have all but disappeared.
In 2015, Laing Buisson research found that 61.4% of all care home residents were publicly funded. That means they need around 300,000 out of 487,800 beds in the UK available to them.
The private sector will not provide this number of beds for much longer, leaving the government with two choices: add publicly-owned beds at enormous cost to the taxpayer, or offer the private sector fair fees for the beds they are providing.
Only increasing fees makes sense, so local authorities need to accept that they must spend every penny of the money they raise from charging the 2% precept on adult social care. Failure to increase fees will land them with a far more expensive problem to solve in the future.
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