Ridouts managing director Paul Ridout sets out a strategy that providers can take to assist them in their negotiations requesting fee increases with commissioners and what evidence they ought to be providing to demonstrate any argument on inadequacy of funding.
The government has been strong on the rhetoric that increased cash will be made available to social care. The snag is that they propose to make these funds available to local authorities without strings that require the cash to be spent at the front line. Local authorities (and to a lesser extent the NHS) have a poor record in cascading down government funding to where it is needed – paying the carers who provide the care. Without that cascade carers will rightly feel undervalued and will seek alternative jobs. All providers want to support their carers but they cannot do so without increased revenues from which to increase employment targets.
For those whose services are fortunate enough to support privately funded clients, the task is routine and simple. The fees to clients will increase as with all service provision revenue. The client will value the service and accept increased fees as a necessary balance to maintain service standards.
For those with all or a significant number of their clients unable to meet fees without public support, that simple process of increasing revenue to meet cost, has not been possible. Local authorities and NHS commissioners simply refuse constructively to negotiate in the real world of the need to demonstrate value of carers releasing funds which enables providers to demonstrate the value placed on carers – the backbone of the care service sector – by reflecting that value in remuneration.
Now is the time for providers to act. This is the time of year when public service care commissioning rates are ‘negotiated’. That process needs to be complete so as to enable public bodies to set their budgets for the coming financial year 2022/2023. By the end of January the opportunity will be spent. It is vital at this time to use the negotiating process clearly to identify the issues and, where commissioners decline to act reasonably and rationally, to lay the evidential grounds for challenge of inadequate fee levels. Simply exchanging views on perceived difficulties will not be sufficient. Providers need to be ready with clear and significant evidence to demonstrate the flaws in local authority meanness which can only harm carers and service users.
Here I will set out a strategy to address this important process and hopefully set the backdrop, against which to press for success.
Understand the legal basis for the generation of fees. It is always from contract. These contracts will usually be in place. Understand the contract. Most contracts will have provisions for review, including arbitration/dispute resolution procedures. Understand these procedures and be ready to make it clear in negotiation that you are seeing the possibility that those procedures may be used if agreement satisfactory to you as a provider is not reached. Using a contractual process to review fee income or other contract dispute is always better than falling back on judicial review of public decisions.
Assemble your evidence as to the reasons why fees need to increase to sustain viability. Public authorities are required to meet the needs for care of vulnerable people in need. There is precedent which makes clear that in setting fees such authorities must pay at a rate which enables service providers to meet user need. To underpay is both unreasonable and irrational. However no one will accept assumptions. Prove the narrowing gap on viability. Be ready to produce EBITDA calculations for current service and future year projections. EBITDA is a term used to denote the profitability of business before providing for finance and taxation and should include property costs. These can be supported by accountants and can be produced so as to show the average and median levels of profitability. How profits are used is none of the commissioners business but, it is very much the business of commissioners to be sure that what they pay will meet proper delivery of the needs of those for who they are responsible. This evidence is vital to establish any argument on inadequacy of funding. Cases in the past have failed because credible evidence has not been produced. Armed with this information providers should not shrink from firm negotiating with a view to challenge if agreement is declined.
Much has come from government about funding to support social care.
Demand to know the current government funding and the increased levels for the following year.
Demand to be shown now that extra funding will be cascaded down to the front line. Commissioners may refuse disclosure but this refusal will be seen as unreasonable in subsequent proceedings
Increases in national minimum wage (NMW) should be fully reflected in increases in fees and the opportunity may be taken to claw back underfunded increases in previous years. This should be across all staff as pay differentials will need to be maintained. So 6.6% should be a minimum to reflect staff costs. NMW is not a matter of choice it is a statutory obligation.
Ensure that contracts are adjusted to ensure that individual’s cases can be reviewed within a year on suitable evidence. Dependency is growing there is no excuse for underfunding individuals need. Why should the providers subsidise?
Do not hesitate to use evidence of rates paid by other public bodies or by private clients. There is no reason why a public body’s duties should be subsidised by private clients or other authorities. The fee paid should be demonstrably sufficient to meet addressed need. CQC will never accept underfunding as an excuse for unmet need.
Do not waste the negotiating process. Do not just exchange views on underfunding. Make it clear that you will challenge if reasonable and rational arguments are not met.
Assume for your team that the negotiations will not succeed so be ready to move to the challenge in good time. Local authority budgets are important. Once set it will be difficult to achieve improvements for a year.
Have your evidence collated and ready, to go in a form which has been seen by the authority.
Disputes cost money. Work out how you will fund the challenge. This will be a very short window to move. Do not find yourself scrambling to gather evidence and raise funds at the last minute.
Be ready to issue pre-action demands by mid-January at the latest. There will be process time, and, if you choose litigation you will need to give 3 weeks for a response.
The right course is to take this vital process very seriously and work in the expectation that you will need credible evidence to back your arguments and these may need to withstand external scrutiny. This is a complex negotiation which must be conducted firmly and with a clear determination to do what is required to achieve a positive result.
We at Ridouts, can help in the whole or part of the process or by discrete advice from time to time.