Care homes must prepare to negotiate as funding tightens

How is the funding crisis impacting vulnerable individuals?

The lack of funding uplift for local authorities from central Government is having a domino effect on care providers. Amid significant cost increases from high inflation and the ongoing cost of living crisis, local authorities have significant financial challenges to manage when considering increases in funding for 2024-25. As a result, many residential care homes and other adult and children’s social care providers are feeling the financial squeeze and with many now operating at a loss.

Typically, care homes rely on indirect or direct funding from local authorities or the integrated care board (ICB) to meet the cost of care for vulnerable individuals unable to fund it themselves. However, following the removal of the planned cap on care costs in England by Chancellor Rachel Reeves, care homes have no choice but to increase fees to remain viable. This will likely increase the cost of personal care packages for vulnerable people in care homes and individuals supported by adult social care services. Whilst fees are usually set annually, the lack of funding uplift for care homes has also led to cases where people are being asked to pay top-up fees.

How can care homes secure a sustainable and fair funding agreement?

Many care homes are reluctant to request more funding from the commissioning authority for fear of getting fewer placements and the financially difficult position of local authorities themselves. Despite these barriers, care homes must continue aiming to provide good quality services, based on a sustainable funding plan.

To improve the chances of securing a sustainable funding agreement, care homes should prepare a strong business case. This must:

• Be arranged prior to the local authority’s annual review.
• Outline the required uplift to maintain a sustainable placement.
• Provide full and transparent information, adhering to the procedures and timelines specified by the commissioning authority.

To support their case, care homes can also carry out a benchmarking exercise to determine the fees being paid to comparable providers in their local area.

Care homes that aren’t satisfied with funding uplift should be prepared to meet with the commissioning authority. Meeting the cost of adult social care for vulnerable people is a statutory obligation for local authorities, so across-the-table negotiations could help care homes to secure the funding needed whilst maintaining healthy relationships.  

In extreme cases, care providers can escalate matters if the uplift offered doesn’t meet their requirements. This option should not be taken lightly and includes raising funding issues with the Local Government and Social Care Ombudsman or, as a last resort, through the court system. This latter measure in particular is time-consuming and costly and should therefore only be used when all other alternatives have been explored.

Key takeaways  

With local authorities urgently in need of more funding from Government, systemic reform is desperately needed as growing needs and high costs place greater demand on public funding. Care homes must strike a balance between continuing to provide high-quality services and remaining financially sustainable – a challenge that’s easier said than done.

Here are some key considerations for securing a better funding deal:

• Prepare a strong business case backed by full and transparent information.
• Assess the fees being paid to comparable providers. Can this add weight to the business case?
• Negotiate with the commissioning authorities in-person to secure a funding uplift. Consider if this can be achieved without damaging the relationship.

For more information, contact Liam Fitzgerald.  

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