Hazlewoods Health and Care team has again requested various data on the home care market from local authorities in England with social services responsibilities.
This article looks at domiciliary care services for the over 65s.
News from providers
In our article last autumn, there had been a number of acquisitions and investments to highlight within the domiciliary care market.
There has been a marked slow-down in M&A activity in the sector this year, despite a backdrop of high levels of M&A activity in the year across the health and care sector generally. Domiciliary care and supported living providers remain particularly exposed to continued austerity measures and the increasing impact on margins from national living wage (NLW) growth.
Nonetheless, a number of larger providers continue to seek strong businesses to acquire and consolidate their market share, with a strong emphasis on quality of care, sustainability of earnings and the potential for growth.
Of greater concern to domiciliary care operators will be the situation at Allied Healthcare. The circumstances behind the very public announcements relating to financial security and sustainability go to the very heart of the sector. The situation seems likely to bring greater focus on the sustainability of earnings and potentially greater financial scrutiny from CQC.
Support from local authorities
Wage increase pressures, recruitment and retention of good quality staff and the uncertainties of Brexit that we discussed in our last article have continued to run as common themes over the last 12 months.
In order to assess whether local authorities have been supporting home care providers with increasing fees, we have once again reviewed the average hourly rates and regional fee increases across England, with domiciliary care rates for the over 65s.
| North East | £14.05 (4.0%) |
| North West | £14.98 (5.5%) |
| Yorkshire & The Humbler | £16.36 (4.2%) |
| West Midlands | £15.21 (2.8%) |
| East Midlands | £16.00 (5.3%) |
| South West | £18.29 (4.6%) |
| South East | £18.70 (2.8%) |
| East of England | £17.92 (3.4%) |
| Greater London | £16.15 (3.2%) |
Percentages noted above reflect the increase in average weekly fee rate 2017/18 to 2018/19 for respondent authorities, weighted by the number of hours provided.
Whilst the apparent increases are welcome, it is important to view these within the context of cost growth. The graphs below illustrate the cumulative percentage increases in average fee rates across each of the regions, compared to the minimum hourly care cost:
The minimum hourly care cost has been calculated based on the NLW applicable for each period, with uplifts applied for on-costs including holiday pay, training, sick leave, employer’s NI and employer’s pension contributions.
As shown within the above graphs, the vast majority of regions are failing to keep pace with the cost increases suffered by providers over the last four years, with only the North West increasing fees at a rate consistent with the levels of cost inflation (albeit from a lower starting point than most other regions).
We further note that the responses from certain local authorities somewhat flatter other local authorities within their region. In the East of England, for example, the average reported increase across the respondent local authorities was 3.4%, however Peterborough City Council reported a 0% increase for the year. The same is true for certain local authorities in almost all of the other regions, with only East Midlands, North East and South West reporting increases across all local authorities who responded to our information request.
Conclusion
Staff cost inflation continues to be fundamental to the longer term sustainability of the domiciliary care sector. The recently announced increase to NLW of 4.9% (from April 2019) brings local authority fee rate decisions into ever starker focus.
Of course, staff costs are not the only consideration in a domiciliary care business, with non-care staff and overhead costs also subject to inflationary pressures. However, with gross margins continuing to erode, overall profitability is likely to be impacted even where overheads remain flat. In a country with an ageing population, domiciliary care services are a vital part of our social care network, not only for the individuals who require the support but also for the dedicated employees who provide such a valuable service.
How can we help?
The data we have collated may help you to understand the local authorities you provide services to and perhaps benchmark your business against others in your area, or even in discussion with the local authorities. Please do not hesitate to contact a member of the Health and Care team to find out how the data we hold can be used to the benefit of your business.