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Laing & Buisson release latest in-depth analysis of care home sector


Laing & Buisson have this week released their latest report -Care of Elderly People UK Market Survey 2012/13.

The report outlines that the funding profile of older residents entering private-sector care homes continues to shift towards self-funders rather than state-funded bedspaces, according to the latest research from healthcare intelligence provider Laing & Buisson.

Data shows that 175,000 older residents (43.4%) paid the full costs of their long term care fees in 2012. A further 56,000 (14%), while being supported by councils, also relied on ‘top-ups’ from family or friends.  In total 231,000 older residents were paying in full or in part from their own or their families’ resources – this marks a record high of 57% of all (403,000) older residents of independent sector care homes in the UK.  The remaining 43% of residents either had their fees paid in full by councils (143,000) or by the NHS under the continuing healthcare programme (29,000).

The author’s commentary and analysis by Laing & Buisson chief executive William Laing predicts a further shift towards increased numbers of self-funders in the future. Mr Laing said:

The private payers’ share is projected to continue growing in the future as the rate of owner occupation continues to expand among the very old population at risk of entering care homes. Meanwhile, the quasi-private, top-up market will be reinforced by the minimal or zero local authority fee uplifts which look likely to continue in the medium term.’

The analysis does not generalise the information presented, and outlines different figures for different geographic regions of the UK.

Also of significant within the report was the news that the funding gap is widening at a faster rate.  With the per week fees being paid by councils either frozen or subject to very minor uplifts, the gap between what councils pay and what private payers are being asked to pay is opening up to an alarming extent.

On average, according to the report, English councils are paying just £480 per week for residential care in 2012/13, approximately £50 – £140 less than the ‘fair market price’ range of £528 – £623 calculated by Laing & Buisson (with nursing care fees being about £150 per week higher).

Mr Laing commented:

The reality is that independent care home providers are having to rely more and more on cross subsidies from private payers. Without these subsidies, large numbers of care homes would be literally bust. It is understandable that cash-strapped councils are seeking to pay care homes as little as they can, since this is now the biggest single cost that councils have to bear, but it needs to be recognised that this amounts to a ‘hidden tax’ on private payers, who are in effect bearing the brunt of austerity measures.’

Addressing the long term funding debate, the report says that implementation of the Dilnot proposals would certainly reduce the burden on private payers and their families, but it will by no means remove it, because the proposal is that only ‘care’ costs will be paid by the state once an (as yet undecided) cap is reached, leaving the individual to pay for ‘hotel’ and other costs which are included in care home fees.

For the first time, Laing & Buisson has split care home costs into their component parts (see table below) for a care home meeting all the latest physical and other standards:

Breakdown of care home fees £ per resident per week, England average

Care Costs Accommodation
Ancilliary Support Operator’s Profit Total Costs & Profit
Residential care, frail elderly £197 £151 £205 £44 £596
Residential care, dementia £221 £151 £205 £47 £623
Nursing care, frail elderly £347 £153 £205 £59 £764
Nursing care, demenita £356 £153 £205 £160 £774




On these figures, residents and their families would under the Dilnot proposals still have to pay £399 – £418 per week in care home fees on average, even after the state picks up the full cost of ‘care’. And in affluent parts of the country the costs to the individual will much higher. It would still be necessary post-Dilnot, therefore, for most private payers entering care homes to sell any house they own to pay for fees – either at the outset, or at death for those benefiting from deferred payment arrangements.

There are also hidden dangers from Dilnot for care home operators, according to the report. In particular, moving the upper limit of the asset threshold from £23,250 to £100,000 would mean that large numbers of care home residents who are presently private payers would be drawn within the ambit of local authority payment, meaning that a significant proportion of the premium fee rates which are presently needed to cross subsidise inadequate local authority fee rates may gravitate towards the low fee regime of councils.

Looking at the financial health of care home operators, and with one eye on government proposals to instigate some form of financial regulation on the largest corporate providers, the report highlights the very different fortunes of providers across the ‘north/south’ or ‘affluent/non-affluent’ divide. Those facing the toughest market, and bearing the brunt of council expenditure cuts, are operators with large slices of their care home portfolio in the North and the Midlands. Providers with a portfolio concentrated in more affluent areas are performing comparatively well, subject to the debt overhangs from pre-crisis days that still affect some healthcare providers.

Mr Laing added:

Market polarisation means that three of the four largest groups, including the market leader Four Seasons Health Care, are becoming increasingly unrepresentative of the market as a whole – and this is reflected in operating margins. Four Seasons, Bupa Care Homes and HC-One all have significantly higher than average exposure to publicly paid residents, and each has reported a significant decline in EBITDAR as a percentage of revenue since the austerity measures began. Meanwhile, the operating profitability of private-pay focused Barchester Healthcare remained above 30%. The 2012 results of the largest groups will be awaited with great interest.’

Elsewhere the report once again shows that, despite public policy which seeks to divert elderly care away from residential settings, the overall number of people being supported in their older age in care homes is on the up. In 2012 there were 432,000 older or physically people in all residential settings (independent and public supply combined), compared to 422,000 in the previous year, representing growth of 2.2%.

This fuelled an occupancy rate growth in the year taking it to an average 89.9% in 2012, compared to 88.5% in 2011.

Of the total capacity of 487,800 care beds currently operating in the country, those owned and run by the state dropped by a further 11% in the year to 38,800. Independent providers took advantage of this fall, adding 8,300 beds to its market share (now at 449,000).

The final conclusions within the report are quite positive.   The rate of new private-sector home registrations appears to be steady, with bed creation at double the rate of beds being lost as local authority care homes close.

Source: Economic Voice

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