Residential care contracts – the Competition and Markets Authority’s draft advice on consumer law

In addition to the final guidance on fees charged after the death of a resident, the Competition and Markets Authority (CMA) has published draft advice to help care homes understand their wider obligations to residents, and prospective residents, under consumer law.

The CMA’s original market study was initially prompted by increasing concerns with cross-subsidies[1], hidden charges, confusing requests for top-ups, and whether common practices and contract terms treated customers unfairly. The draft advice makes no real comment on cross-subsidies and disappointingly, makes no criticism of the standard practice where public authorities pay a ‘shortfall’ of the true cost of care.

Throughout the draft advice, the CMA emphasises that customers are in a very vulnerable position when searching for a suitable care home. As a result, providers will have to go “the extra mile” to show they are acting ‘reasonably’ as the ‘average customer’ may be “frail and in poor health, and under a lot of pressure and emotional stress.”[2]

The key principles outlined in the draft advice require providers to:

• provide sufficient information on their website, in welcome packs and ‘key facts’ documents so it can be considered in advance by a prospective resident;
• treat residents fairly, recognising that providers will often have a greater understanding of how the market operates in comparison with the average customer;
• deliver quality services; and
• handle complaints fairly and effectively.

Although these principles are commendable and we would expect to see them met in any quality service, the recommendations could significantly change the way many care homes operate in practice.

We know that most providers work tirelessly to provide quality services, in a market that is “on its knees”[3]. Despite this, the draft advice heaps additional pressure on care homes to fill both the gulf in terms of a lack of information, and the gap in financial support that exists between individual customers and public authorities. These changes have been proposed, despite statutory obligations which already oblige public authorities to provide such support. Some of the CMA’s most important points cover:

• not allowing a resident to move in until a needs assessment has been carried out;
• ensuring the resident has had sufficient time to consider which services they want and to visit alternative homes;
• fixing care costs for the duration of the residents’ stay or only allowing increases by reference to a fixed sum or a relevant, objective and verifiable published price index;
• passing cost savings on to residents  whether as a result of Funded Nursing Care, changes in the law or regulation or the resident’s reduced needs; and
• not terminating a placement until the customer has fallen into significant arrears (of 3 months or more).

The draft advice is lengthy but we recommend that you consider the impact the changes could have upon your own customer contracts and how you manage your admission processes. The guidance is available here and you have until 12 July 2018 to submit your comments before the advice is finalised.

Further information

If you would like us to review your contracts against the CMA’s proposals, or would be interested in purchasing a self-review tool to evaluate your compliance with consumer law, please contact Emma Watt or John Wearing.

[1] Where private payers are paying higher fees to subsidise the rates paid for publicly-funded residents when receiving the same services – equivalent to a ‘care tax’ of £8,000 a year per privately paying resident https://www.laingbuisson.com/wp-content/uploads/2017/01/LaingBuisson_Care_Cost_Benchmarks_8ed_PR.pdf

[2] Paragraph 1.2 of draft advice

[3] https://www.theguardian.com/society/2018/jun/12/adult-social-care-services-collapse-survey-england-council

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