Social care contracts and commissioning – market study update

The CMA recognises that the sector “performs a vital public service that benefits many people”[1] and the good news is that overall (despite public awareness of malpractice) residents and relatives receive good care. However, the CMA has identified areas where both service provision and commissioning can be improved.

Making informed choices

The move into residential care comes at a time when individuals, their friends and family are often overwhelmed, unprepared and under pressure to make significant choices in a very short time. More needs to be done to provide individuals with information in advance, so that they are aware of the trust cost of social care and what the state is able to offer in support.

Local Authorities currently have a statutory obligation to provide information and advice about the types of care available, the choice of providers in the area and how to access independent financial advice for meeting care and support needs[2]. However, the CMA has focussed on the information that care providers can make available to consumers. This includes making contract terms available to consider before moving into the care home (particularly as individuals do not realise that terms can vary from home to home), ensuring that terms and conditions are easy to read and are clear about when additional fees might be incurred.

Top-ups and guarantor arrangements are flagged once again as an area of confusion for many: there remains huge inconsistency between Local Authorities when considering whether a top-up is appropriate.

The CMA is keen for consumers to be able to understand the likely cost of their care, although it does recognise that needs are person-specific and the cost of care can vary hugely from person to person. The market update report makes no reference to the value of seeking independent financial advice, although the CMA does recognise that there is a large amount of information publicly available – if individuals seek it out. Interestingly, the CMA notes that it has seen little evidence of providers taking advantage of Local Authorities by increasing charges to residents once they have moved in[3]. We are likely to see the development of a ‘care calculator’ that consumers can use to estimate their future care costs and the publication of an average weekly care fee for each Local Authority area (which could in turn be compared against providers’ average fees): whether this will be categorised by reference to a scale of low, medium or high-level needs remains to be seen.

It is clear that Local Authorities need to engage with individuals much earlier about their plans for care and to provide them with detailed information as to how their future needs might be met.

Commissioning to encourage and reward diversity

The CMA study found that, provided there is a choice of affordable care options, customers are more driven by quality than price. This will come as no surprise to providers who are aware that “poor inspection results have a significant impact on care homes’ ability to attract residents”[4]. We are pleased to see the CMA recognise that dynamic purchase systems give a disproportionate weight to cost and fail to demonstrate how the Local Authority assesses the quality of care when commissioning services.

Although the cross-subsidy is mentioned only once in the report, it was the primary reason the CMA conducted this market study and private-paying consumers are increasingly concerned about how they are contributing to the costs of state-funded residents. The CMA doesn’t believe that a cross-subsidy is in itself unfair but has recognised that price differences have the potential to disadvantage particular groups. This directly contrasts with the CMA’s attitude to investors where it “would not expect the private sector investors themselves to make the required levels of investments in the local authority funded segment based on current margins and future challenges”[5].

Meeting future demand

The CMA believes that, on the whole, Local Authority fees are meeting providers’ operational costs but at rates that do not allow for investment[6]; despite the obligation on Local Authorities to commission in a way that encourages innovation, investment and continuous improvement[7]. This should be seen in the context that the number of people aged 85 and over is due to double to 3.6 million by 2039[8] and the level of care will also increase as people become frail and move from their own home to residential care. In addition, property developments are a long-term investment and both equipment and staffing costs will increase as needs become more complex. As demand grows for a greater number of care home places and a greater number of providers who can accommodate increasingly complex needs, the CMA recognises that the current commissioning environment means “there is a significant risk that further capacity will not be there when it is needed”[9].

The CMA has drawn a direct link between the uncertainty in funding and the lack of developments in the public sector as Local Authorities look to meet immediate needs rather than plan for the future. As a result of current procurement practices, “local authority funders have been exposed to severe financial strain”[10] and “providers focused on local-authority funded residents are likely to be impacted the most by future challenges”[11].

Responding to the CMA’s proposals

The market study is narrow in scope and it is disappointing that Learning Disability services do not feature as part of this review. In relation to elderly residential care, some of the changes proposed by the CMA include:

• introducing top-ups for individuals receiving Continuing Heath Care;
• removing regulatory barriers to staffing;
• improving incentives for investment (in both privately and publicly funded facilities);
• introducing an independent body to determine reasonable fee rates, including a reasonable return on investment;
• clamping down on unreasonable fee increases, large up-front fees or unsecured deposits, particularly where fees are paid monthly in advance.

Notwithstanding the initial reluctance to engage with the issue of Local Authority fees, the CMA has had to start looking at the cross-subsidy issue as this received overwhelming coverage in the responses to the first half of the consultation. There is a strong case to be made to impose an objective basis for fee setting which would bring Local Authority fee rates up to a level which removes the need for cross-subsidy and providers need to be alert to how the situation might unfold and would do well to engage with the consultation as vocally as possible on this issue, more so than any of the others.

The CMA is now halfway through its market study and you are invited to respond to their initial findings by 5 July 2017. The full report with recommendations is due December 2017.

Further information regarding legal and professional support

We have significant experience supporting providers where questions arise around quality and we continue to demonstrate to commissioners that excellent services require investment.

For more information on how to ensure your consumer contracts are up to date contact Emma Watt.

If you want some support responding to an adverse CQC rating or questions around quality contact Sarah Knight.

For a discussion around future-proofing and ensuring your business structure is fit for purpose contact John Wearing.

Our article from December can be viewed on Newsroom, and the CMA’s update can be viewed here.

[1] Paragraph 2.8 of the market study update

[2] Section 4 of Care Act 2014 and section 3 of the accompanying Statutory Guidance

[3] Paragraph 3.24 of the market study update

[4] Paragraph 3.22 of the market study update

[5] Paragraph 8.16 of the market study update

[6] Section 8 of the market study update

[7] Section 4 of the Care Act 2014 Statutory Guidance – Market shaping and commissioning of adult care and support

[8] https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationprojections/bulletins/nationalpopulationprojections/2015-10-29#older-people

[9] Paragraph 7.16 of the market study update

[10] Paragraph 8.7 of the market study update

[11] Paragraph 8.16 of the market study update

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