Care Homes Are at Risk of Closure

Year Published: 2016

It is never far from headline news that care homes are struggling to make ends meet or that the care industry as a whole is underfunded and at the brink of crisis. Recent research conducted by BBC Radio 4 has made the headlines by stating that a quarter of care homes, registered with the Care Quality Commission, are at risk of closure. This is due to the fact that they are carrying significant debt and are struggling to meet their debt repayment terms.

Genevieve Powrie, Elderly, Care & Mental Capacity Soliciotr at SAS DanielsThere is no doubt that care homes face unique challenges in the market place. It is not easy for them to evict their residents for not paying care fees. They have high staffing costs to pay and will often have a proportion of their residents who are funded by the local authority at rates below the actual cost of providing care to those particular residents. Furthermore, a care home can find itself morally obliged to finance a resident in the short term if that resident has lost their mental capacity and is unable to access their bank accounts or the equity in their home in order to settle their immediate debts. In these circumstances, social services have a legal duty to ensure that the needs of the resident are met. This includes funding the resident’s care on a loan basis until a financial deputy is appointed by the court and given the power to access the resident’s bank accounts and settle any debts. However, it can often take a matter of weeks to ascertain whether the resident has capacity to manage their own affairs or not and to formulate a plan in terms of who will be managing their affairs for them and on what basis. There also has to be discussions around how much the resident ought to be paying towards their fees. In the meantime, the care home can be left with a duty to provide care and either no contribution from social services or a fixed local authority rate being offered at below the cost of care.

How are care homes funded?

Sometimes, a resident will be funded by the NHS if they are entitled to Continuing Health Care Funding. The process of establishing NHS Continuing Health Care Funding can be complex and drawn-out. Although the NHS is supposed to continue to fund a hospital patient whom they have discharged into a care home whilst their claim for Continuing Health Care Funding is resolved, this information is often not shared with families at the point of discharge from hospital. Families make arrangements to pay privately for the care and would only receive a refund of the fees paid if their claim was later successful. The NHS funding for care home fees is also capped at a level which often does not fully cover the cost of providing care. Care homes particularly struggle with NHS patients because they are not entitled to ask for a top up fee in these circumstances, unless it is a small “hotel costs” to cover luxuries e.g. a nicer brand of shampoo or a room with a better view.

The murky water of care fee funding is often further muddled when top up fees are requested by a care home to supplement the basic fee paid by the local authority, in cases where a resident is eligible for local authority support. These are to be paid by family members so that a local authority funded resident can stay in a home which is more pleasant than one which the local authority would ordinarily agree to fund. Care homes often try to plug some of their funding shortfall by charging top up fees, which can amount to a substantial percentage of the overall fee. For example, an additional 40% of the cost which is already being paid. This places the care home at risk of the additional funding drying up if the family member is no longer able or willing to pay. The top up fees may also be affected if a family member goes through a divorce or passes away.

The various streams of funding from different parties can be complex for a care home to administer and costly too. Furthermore, it places them at greater financial risk of having to plug the funding gap if one of those sources of funding fails. No care home wants the bad publicity of evicting a resident onto the streets and so they can often be placed in a very difficult position covering the shortfall in funding of their residents, albeit on a short term basis.

The new National Living Wage, introduced in April, has also had a disproportionate effect on care homes when compared to other industries. This is because the provision of care is very labour intensive and the care sector had a large proportion of their workforce being paid the minimum wage before the National Living Wage came into force. After all, there are no technology developments or efficiency savings which can be made on the human contact required with good care, such as time to have a conversation, bring residents cups of tea, change their sheets, washing clothes, dressing and feeding residents etc.

It remains to be seen how the sector will cope with the extra demand which is likely to be placed upon it in the next few years as the demographic changes to an increasingly elderly population.

For more information on care homes or NHS Continuing Health Care Funding, please contact Genevieve Powrie in our Elderly, Care & Mental Capacity team on 01625 422146.

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