In need of medicine?

10 May 2016

 

Around 500,000 people across the UK receive domiciliary care each week but there is increasing doubt as to whether such services are sufficiently funded to be economically viable, and whether care workers are being properly rewarded for the valuable work they do.  As anxious chief executives gather at the bedside, this article asks what is wrong with the homecare sector and what can be done to restore it to good health.

 

Demographic and Social Changes

 

The UK population is aging.  The proportion of those aged 65 or over increased from 13.8% in 1974 to 17.7% in 2014. By 2039 it is projected that the over 65s will account for almost one in four of the population thanks to a decline in the birth rate and an increase in life expectancy.

 

Today’s 65 year olds can expect to live around two years longer than they did a decade ago.  They can also expect to spend longer in ‘not good’ health.  A 65 year old man has a life expectancy of 18.0 years, of which 7.3 years will be spent in ‘not good’ health, compared to 6.4 years a decade ago.  The situation is even bleaker for women.  A 65 year old woman can expect to live for another 20.7 years, of which 8.6 years will be spent in ‘not good’ health, that’s 0.4 years more years a decade ago.

 

When combined with social changes such as the breakdown of the extended family, this ought to mean the homecare sector is thriving, but it is not.  Facing a perfect storm of a real reduction in funding and mounting cost pressures, the homecare sector is in crisis, and there are a number of providers teetering on the edge of bankruptcy.

 

The Commissioning of Homecare

 

The majority of providers are commercial organisations.  They operate in a market dominated by state purchasers, primarily local authorities, who exercise (and at times exploit) their dominant purchasing power in order to drive down prices and balance their books.

 

It is estimated that 70% - 80% of all homecare is purchased by the state and four out of five service users are over 65. Yet, despite the aging population, there was an 18% decrease in the number of people receiving homecare funded by the state between 2009 - 2014.  It seems that in the face of increasingly tight budget constraints, many local authorities have chosen to raise eligibility criteria, only funding those with the most complex needs. 

England is the only home nation that collates statistics on the number of people receiving homecare funded by the state over the course of a year.  In 2013/14, a total 468,725 people received state funded homecare in England.  This is approximately 1.6 times the number of individuals receiving care at a given point in the year and reflects the short nature of some care packages and the early termination of others, which can often be due to a deterioration in the service user’s health (requiring more intensive support in a care or nursing home) or the service user passing away (after a short stay in hospital).   

 

Nationally the number of hours of homecare funded by the state has plateaued at around 4.7 million hours per week.  This supports the assertion that eligibility thresholds have risen, and that fewer people are receiving more intensive homecare.

Statistics on privately funded homecare are notoriously difficult to come by and it can be difficult for providers to distinguish between service users who are in receipt of direct payments from local authorities and those who are genuinely funding their own care. 

 

Direct payments are offered by local authorities as part of the government’s ‘personalisation’ agenda in order to give service users more flexibility over how their care is delivered.  Service users are given a personal budget by their local authority which will either arrange homecare (through one of their approved providers) or make a direct payment to the service user so that they can arrange their own care (which is not always delivered to the same standard or protected by the same stringent regulations as care arranged by the local authority). 

Some local authorities have also used direct payments as another way of driving down cost, putting even more pressure on providers.  Direct payments are often set at the rate charged by the cheapest homecare provider in the area, are not subject to annual review in the same way as the care arranged by the local authority itself, and do not take into account the additional risk and administrative burden of providers having to invoice and collect payments from many different individuals.

 

The growing number of direct payments (and short 15 minute visits) also makes it more difficult for providers to create densely packed rounds which maximise the ratio of contact to travel time, creating further inefficiencies.

 

The Price of Homecare

 

The UK Homecare Association (UKHCA) calculated that the weighted average price paid by local authorities for an hour of homecare for older people was as little as £11.35 in September 2014.  

 This stands in stark contrast to the UKHCA’s recommended minimum price for care of £16.70 per hour (April 2016) which is designed to allow providers to recover their costs and make a modest 3% profit.

 

The UKHCA’s calculation recognises that most local authorities pay for homecare services by reference to ‘contact time’ - i.e. the time spent delivering care in the service user’s home.  From this amount providers must pay their care workers and cover their overheads.

 

At the time of the UKHCA survey, only 28 of the 203 local authorities where the UKHCA could establish an average price were paying providers a rate which would enable them to pay care workers the prevailing National Minimum Wage and the run the service in a sustainable way.  Astonishingly, four local authorities had a price so low that it was unlikely to cover even the direct costs of employing care workers.  With subsequent increases in the National Minimum Wage, and the introduction of the National Living Wage earlier this year, it is likely that the situation is even more desperate today.  

 

The UKHCA has calculated that the state funded homecare sector will run at a deficit of £753 million in 2016/17.  Unless adequate funding is found, and local authorities adopt more responsible commissioning practices, we may see a large scale exit from the market and/or significant provider failure (as we saw with the collapse of Southern Cross in 2011).  This would impact most acutely upon the people who use the services and would transfer considerable demand onto the NHS.

 

Consolidating the commissioning of health and social care in each of the home nations (supported by a minimum price set by each of the devolved governments) would undoubtedly help.  A single commissioner weighing up the average cost of a hospital bed (circa £275 per day) versus the cost of an average homecare package (circa £30 per day) would be able to allocate resources more effectively than the 400 Clinical Commissioning Groups and the 152 local authorities with social care responsibilities there are in England alone. 

 

Care Worker Pay

 

Homecare care has been undervalued by successive governments.  The sector, which employs about 1.4 million people (mainly women) in the UK, has long been associated with low pay, making it difficult to attract and retain care workers.

 

Most employers recognise the difficult and challenging job care workers do in supporting the increas­ingly frail and disabled individuals who qualify for state-funded care.  However, given the financial crisis the sector is facing, many providers have been unable to award anything more than the statutory increase in the National Minimum Wage to their care workers for a number of years.

The National Minimum Wage (NMW), and more recently the introduction of the National Living Wage (NLW), which is expected to rise to £9 per hour by 2020, has placed significant upward pressure on care worker pay.  A growing number of care workers are being swept up in to the qualifying pay bands each year making it increasing expensive for employers to implement the annual award. 

 

The problem is compounded by the requirement to pay care workers travel time (which is not usually reimbursed by local authorities) and recent auto-enrolment legislation requiring providers to contribute to care workers’ pensions (adding to the existing burden of employers national insurance, statutory sick pay etc).

 

These costs have not been matched by an increase in the rates paid by local authorities.  Despite this, the best providers have chosen not to discriminate against their younger workers and have implemented the higher statutory pay rates for all of their care workers irrespective of age (the minimum pricing set by the UKHCA assumes a lower National Minimum Wage is paid to the under 25s).  They have also moved away from the traditional ‘rate per visit’ (which typically included a standard allowance for travel time) to a system of explicitly paying for travel time and mileage based on automated postcode to postcode calculations (which more fairly rewards those care workers who are required to travel long distances and guarantees compliance with the relevant legislation). 

 

As employers struggle to fund these statutory requirements (the increase in minimum wage alone has exceeded 21% over the last 5½ years) the premiums paid for working unsocial hours and the pay differentials for more skilled or experienced care workers have been eroded.  This is helping to fuel high employee turnover (which is estimated to be around 30% for the sector is a whole) as workers perceive there is less opportunity for career progression.

 

The difficulty of attracting and retaining care workers not only drives up the cost of recruitment and training for struggling homecare providers but it means the capacity to meet demand is diminishing.  This is having a negative impact on the NHS, as patients who could otherwise be discharged remain in hospital blocking desperately needed beds.  

 

Statistics from NHS England indicate that there has been a 65% increase in bed blocking over the last 5½ years by patients who are awaiting a place in a residential or nursing home or require care in their own homes.  Not only does this place an unnecessary strain on patients and their families (and put patients at risk of hospital acquired infections) but it is simply not cost effective to keep a person in hospital when the average cost of a hospital bed (circa £275 per day) is many times more than the average homecare package (circa £30 per day).

There is growing unease that some providers do not have sufficient capacity to schedule the visits (and the travel between them) that they are already committed to.  As a result some calls are rushed and undignified, and some calls are being missed altogether.

 

A number of commentators have suggested the prevalence of zero hours contracts has exasperated the difficulty of attracting and retaining care workers.  However, those companies which have offered guaranteed hours contracts to their workers have only seen a 20%-25% take-up.  It seems that existing care workers perceive there is little upside to a guaranteed hours contract when they can already command all the hours they desire whilst retaining the flexibility to vary those hours on a weekly basis around family and other commitments.  Indeed some providers have found it necessary to introduce a cap on the number of hours care workers (who have opted out of Working Time Regulations) can work in order to ensure they continue provide a safe and effective service.

 

Ultimately, without the proper funding, the homecare sector will continue to struggle to attract and retain care workers with the right disposition, training and qualifications; and there will be insufficient capacity to meet the needs of an aging population.

 

The Branch Network

 

Whilst many homecare providers are small single branch operations, some of the larger providers operate more than 100 branches across the country.

 

The branch structure typically reflects the way in which services are commissioned and regulated.  Many local authorities require homecare providers to have a physical presence in their area in order to be awarded a contract, whilst separate regulators in each of the four home nations (along with three separate government agencies for conducting criminal record checks) mean that there is little incentive to operate branches across national borders.

Companies which have sought to merge branches in order to reduce their operating costs have often struggled to manage the combined branches effectively due to their size and complexity - particularly when they are reliant on manual systems to plan and schedule thousands of visits per week, many of which are subject to change at short notice in order to take account of updated customer requirements (e.g. doctors appointment, admission or discharge from hospital) and staff availability (e.g. holidays and sickness).  The problem is compounded by the unique reporting and invoicing requirements of each local authority.

 

A recent report from the Care Quality Commission describes how Allied Healthcare, one of the UK’s biggest homecare providers, has organised one of their larger branches in to seven sub-teams, each responsible for a defined area, with a named individual responsible for the delivery of each customer’s care:

 

“There are several parts to the service; altogether approximately 900 people are supported by 350 [care workers]. Six teams provide domiciliary care to people in one south London borough. Each team is headed by a care delivery manager (team leader), supported by a care quality supervisor (responsible for assessment, care planning and review), a scheduler (responsible for organising care workers to visit people at agreed times) and an administrative assistant.  The seventh team supports four extra care housing schemes in two south London boroughs, as well as the night owl service...“

 

With the right investment, there is no reason why this model could not be extended to create regional or even national hubs supported by small local drop-in centres focused on recruitment, training and supervision - allowing providers to significantly reduce their operating costs.  However, technology which is common place in other industries to plan routes, communicate rosters and provide proof of delivery is rarely seen in the homecare sector which is drowning under the weight of paper based risk assessments, care plans, rotas and timesheets.

 

Paradoxically, many companies are unable or unwilling to invest in new technology when the long term viability of the homecare sector is in question, yet it is only by adopting new and more efficient ways of working (including standards for exchanging data with commissioners and other homecare providers) that cost can be driven out of the back office.

 

New and more efficient ways of working would also facilitate the consolidation of smaller ‘mom and pop’ businesses (where the value is in the trained workforce and the future revenue streams of the contracts the businesses hold) into larger entities able to exploit economies of scale and manage the increasingly complex regulatory burden.

 

Value Added Tax

 

The government could also help the sector by changing the VAT rules so that homecare services are ‘zero-rated’ rather than ‘exempt from VAT’.   This would enable local authorities and private individuals to continue to purchase homecare services without paying VAT but would enable providers to reclaim the VAT on purchases such as stationery, temporary labour, rent (where the landlord has opted to tax) and capital investments including computer equipment.  Something other sectors (providing far less vital services) take for granted.

 

Prescription for the Future

 

The future of the homecare sector hangs in the balance.  What happens next depends on the  government’s willingness to ensure the service is properly funded.  Consolidating the commissioning of health and social care would help to ensure a more rational allocation of resources; enable care workers to be more fairly rewarded; and enable providers to invest in new technology and earn a modest profit.   Ultimately, this will benefit all stakeholders, including the government, by driving down operating costs and encouraging consolidation across the sector, resulting in a more sustainable business model with sufficient capacity to deliver safe and effective care well in to the future.

 

Sources: A list of sources is available on request

 

 

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