The success rate for private and public sector partnerships in the care sector is not high. But Suffolk County Council and Care UK are bucking the trend with a 10 home, £60 million, project that has been delivered on time and on budget. What’s gone so right? Care Home Professional caught up with Care UK managing director Andrew Knight to find out.
Care Home Professional: We are sitting in the final care home of 10 that you have opened in partnership with Suffolk County Council, replacing 16 older homes. Given the regularity with which partnerships between public and private organisations flounder, can you explain what has gone so right this time?
Andrew Knight: I think from the outset it was a pretty bold and brave thing for the Suffolk local authority to do. They recognised that the 16 homes they were running in Suffolk were reaching the end of their useful lives. They were having to spend a lot of money on maintenance and, because of the design of the old buildings, it was not easy to deliver the best care.
In terms of the new buildings themselves, and the programme, we are pretty experienced at doing new build. For this programme we had to think a little bit differently. Normally, our new builds would open in a green field site. We would open with a small number of residents and increase that slowly over two years. In this programme, one building had to be demolished to make room for another one. In some parts of the programme we had to build half a home at an existing site and then demolish the old home in order to complete the other half of the new build. So it was a hugely complex project on the construction side from start to finish.
Then you have got the resident moves, which is the most important part of any programme of this sort. When you are moving frail residents from one home to another home, there is an inherent risk in doing that. To move more than 360 residents safely from one home to another was a great achievement for us.
One of the most important and difficult things in the care home sector is that when you open a new home you have to ensure the right team is recruited and is given the right training. You have to deliver the right quality of care from day one. Moving people quickly makes things even harder.
So, after the early phase of the programme, we slowed things down. We still met the time lines for Suffolk County Council, but we went to them after the early phase and asked them for a pause so that we could reflect on how things were going and ensured we were doing things in the right way. We had to make sure that this led to future homes opening successfully.
CHP: It took just two and a half years from the first spade in the ground to the 10th home opening this year?
AK: It is a bit longer than that. It is two and a half years since I opened the first of the care homes, but more like four years since we first started building. We have had a strong operational team, great care home managers overseeing the movement of residents, a separate project team working with Castleoak, and another team getting the homes all up to specification for CQC regulations. It has been a very big project for the organisation.
CHP: I was speaking to Castleoak about how much inflation there has been in the construction business over the past few years in terms of labour costs and raw materials. How did you manage to stay on track?
AK: During the project we had a level of contingency within the budget and we only had one build where we saw costs inflated because of a delay. But within the whole programme that was absorbed. The way we structured the deal, the way we agreed everything up front, the fact that we agreed it a few years ago, probably helped us in that period of time. We have also experienced builders going bust elsewhere in our estate, so we are aware of the problem and what it feels like.
CHP: What is the deal with Suffolk County Council from this point onwards?
AK: If you take all of the beds within the contract, we have something like 650 beds and around half of those beds are contracted to Suffolk County Council for 25 years. Outside of that, the beds can be used either for private paying residents or we can do separate agreements with other local authorities in Suffolk, with clinical commissioning groups or with hospitals to use those beds in another way.
If you think about the structure of what we have done as a care provider investing £60 million we need to have long term security, and Suffolk delivered this with a 25 year contract. We need to have a balance between nursing and residential and also between contracted beds and non-contracted beds. That is the way that the deal was brought together. Plus we have the day clubs to integrate into the project.
CHP: Is the price of the contracted beds agreed in advance for 25 years?
AK: It is a bit more complicated than that. There is a base rate for the beds, and then there are different mechanics around inflators. It is not as simple as saying one rate. We have built a contract that will see us through 25 years rather than a contract for the short term to get the first homes open. We are very confident that we can deliver this contract for 25 years because we have put in the right provisions for us and for Suffolk County Council.
CHP: If you ended up with 100% of your beds contracted to Suffolk CC, could you make that work financially, or do the private beds subsidise the contracted beds?
AK: I don’t think I would describe it as a subsidy. We have a long term contract and we negotiated to make that sustainable for our business and our stakeholders. But it is important that we get the balance right in terms of the different care needs of residents and the different methods of payment, be that local authority, spot contracts, private or whatever. Our key responsibility is to the residents and ensuring that their care needs are met.
CHP: Do you feel you also have a responsibility to the tax payer to keep fees down?
AK: Yes, we do feel this in that we are responsible for making sure we did the right deal in the first place, and also that we are running the homes in the right way. Within the local communities, we are also happy to be providing some very good quality facilities for residents to move into, whether they have the money to pay for it themselves or the local authority is paying. Either way, they are getting a high standard of care and a high standard of environment.
This contract has also enabled us to deliver nursing beds, which they did not have had before in the 16 older homes. So the council has delivered a lot for their local citizens. From our side it is important for us and the way we are developing to create new models for new markets.
CHP: Do you accept that the private funders are subsidising the local authority-funded residents both in terms of their fees and in terms of the quality of the environment and the care? To give a specific example: LA-funded residents now have access to nursing care, which might not be possible were it not for private funders paying higher fees? I would see that as a positive, but you can see how it might be seen as controversial.
AK: It depends on your lens. One lens would be, if you are going into a care home and are in a financial position to pay your own fees, you would be asked to pay for that care, whether you are in Suffolk or anywhere else. That is determined by central government. As a Suffolk resident, you now have a choice of 10 lovely new homes to move into. You also have a choice of all our competitors to choose from. It comes down to choice.
Through the lens of somebody who does not have the funding to pay, they still have the choice of going into a new state-of-the-art facility that has nursing care as well as residential.
I am definitely in the glass half full camp when it comes to this story. From my lens, I could sit here and make the case that the way we fund social care is not right in the UK. But I think what Suffolk has done is say: ‘those rules exist, now what is the best way for us to provide the best care for people in our community by providing choice and also providing buildings that are fit to provide modern day care?’
CHP: I interviewed Andrea Sutcliffe, chief inspector for adult social care at the CQC, last week, and she gave me some very interesting insights into how inspectors are finding that larger care homes are achieving worse CQC ratings than smaller care homes. And yet, the modern trend is for larger homes. Is there a need to learn from what is being done best in the smaller properties and bring that into the larger modern homes?
AK: I have done my own analysis as well of the CQC ratings, and it shows that small residential homes with low care needs are more likely to get good ratings than others. There is logic to that; you have residents with low needs, you have not got many of them, and therefore you can be on top of their needs all the time.
If you then take nursing, there is a big difference between the CQC ratings for nursing homes compared to residential homes. They are grouped together, but I pull the results apart, and so does the CQC. If you look at nursing, by its very nature, is a higher risk service. The residents are more poorly than in a residential service so the risk is higher.
If, like Care UK, you are in the business of offering nursing care in two thirds of homes, then you are dealing with residents who have higher care needs and there is higher risk behind that.
Build on top of that the lack of availability of nurses in the UK and you get a position where it is much higher risk than a residential home. That is why some providers are only offering residential care in terms of their new investments. That is not our chosen route, but that is what some providers are doing.
If you then think about a small nursing home dealing with, say, 30 residents, that is going to be slightly lower risk than dealing with 80 residents. I don’t think there is anything particularly surprising to me that the CQC ratings are coming out as they are.
On top of that, if you are operating a residential home taking in people who are not that poorly, who might stay in a home for 2-3 years, you can see that you can deliver a consistent level of care over that longer period. If you are taking on residents that need end of life care, they might only be with you for a number of weeks or up to a year, so the level of risk there is high.
CHP: Are you saying that CQC ratings should be reported in a way that makes it easier to compare homes offering similar services?
AK: I think it should be, and if you speak to any of the major providers that is exactly what we will be doing, and I expect the CQC will also do that. We are all looking to learn. The fact that the residential care home sector might be achieving Good or better ratings in 70% of homes, and the nursing sector could be at 50% leads to the question of whether that is something we should worry about, or whether it is just a reflection of the level of risk and the more in depth care you have to provide with nursing.
CHP: Given that these ratings are there to see and compare on the CQC website and are simplified down almost to a traffic light system, this must be likely to feed through commercially. If half your homes have an orange flag saying that they Require Improvement, but your competitor down the road is rated as Good, that must put you at a disadvantage even if you are providing nursing care and they are not.
AK: Yes, I think that is right. I think that you could probably prove that with research. But what people will tend to do is always visit a home. Unlike other products and services that you might buy, a relative going into a care home is making a serious decision. They will do their research, speak to the local authority, speak to their doctor, but also come and see a home as well.
A Requires Improvement rating is not where any of us would want to be. Certainly within Care UK we want Good on every home. But there can be instances where something during a snapshot in a two day inspection leads to a Requires Improvement. However, we will always have action plans around these events, and will always look to improve.
CHP: As well as larger homes achieving, on average, worse ratings than smaller homes, Andrea Sutcliffe also made a point that a number of the larger luxury care home operators are spending so much time worrying about how a care home looks, that they are forgetting to focus on how it feels to residents. That sounds to me like a pretty clear message.
AK: Andrea is entitled to her opinions. I can only speak for Care UK, but I always say that the building is only one part of what we do. Whenever we go through a new build process, yes we focus on how the building looks and the facilities that we have. But as soon as we get close to opening we go straight into staff training, recruitment and development. Then as the residents come in we are focused on making sure that the quality of care is always a priority and always improving.
We are not just a company that does new builds. Whether you look at our apprenticeship programme, our training for nurses, our overseas nurse programme bringing people into the UK, whether it be our care practitioner programme, there are lots of things we do that are all about improving care across the organisation.
I can understand – ish – where Andrea is coming from. But from my perspective quality of care is paramount. I think if you were to ask any private provider whether quality of care is important, we would all say that it is absolutely fundamental. We put quality of care over environmental aspects any day of the week. Really, the sweet spot is to make sure you have the quality of care and the great environment.
CHP: There is considered to be a commercial sweet spot in terms of the size of homes at around the 60-65 bed property. Across the ten homes you have built for this project in Suffolk, you have two sizes: 60-bed and 80-bed, so you are around the recommended size across the estate. However, the CQC is finding that smaller homes – under 50 beds – are achieving better ratings. Is that a concern?
AK: We have some homes that are around 50 beds. Would I say that they are any better than 80-bed homes? It depends on the manager and their management of the home. What does become more necessary as occupancy grows and you are caring for larger numbers (I have some homes that are up to 120 beds) then you do have to make sure that you have the right leadership structure in place. It is no longer just a question of making sure you have the right home manager, you need the right clinical leader, you need the right unit managers.
CHP: I was looking at your financial results for Q1 and your annual results for 2015, and I was also looking at the Q1 2016 results for Four Seasons Health Care. It appears, particularly from the Four Seasons Q1 results, that this year may be better than last. Are you seeing the same thing? Is the precept likely to help? Are your contract fee rates with local authorities improving?
AK: It is too early to draw a conclusion around the spot contracts. We are still waiting for around 50% to reply. We have agreed very few for next year, we are still in discussions with local authorities and around 98% are still to be agreed. In terms of occupancy, we have achieved particularly strong occupancy in the most recent quarter, and I think Four Seasons is also seeing that. The lower death rate this year [compared to 2015] is improving occupancy.
The other thing that is improving the Four Seasons Q1 results is the much lower number of embargoes. That will make a big difference because during the period when a home is under embargo there will be no residents going in and, due to the nature of our business, there will be residents leaving. So the net fill drops over a period of time and yet, because you are working on an improvement plan, your fixed and variable costs stay fairly similar during the embargo. If we are ever in that position, we do not start laying off staff because we would be confident we would turn around the home.
That can have the impact in an average home of losing between £0.5 million and £1 million per embargo, so the number of embargoes is very important. Within Care UK we have one voluntary embargo and no imposed embargoes, which means that our business is operating as it should.
We are yet to know about the spot contract settlements [with local authorities]. We have had an inflation of our private pay fees of between 5-8%. This year our cost base has been hit because of the National Living Wage change and the CQC fees.
CHP: We are speaking today on April 28. When you describe ongoing negotiations for those spot contracts, can you compare how discussions feel to you this year compared to the same stage last year? Do you expect a more favourable outcome for the coming 12 months?
AK: I feel as if we have seen positive movement from some local authorities, which is great to see, but there are so many unanswered questions. The precept has been taken by, I think, 152 local authorities, something like 98% [this additional money has to be spent on adult social care]. And yet, what we are seeing at the moment is a lot of local authorities offering us rises of nothing, 1%, 2%, which doesn’t quite add up.