The Future of the Business of Care (In the Wake of the Care Act 2014) Paul Ridout Ridouts LLP...

The Future of the Business of Care (In the Wake of the Care

Act 2014)Paul RidoutRidouts LLP

Suffolk Care ConferenceOctober 2014

ComplexBut will become more

complexOr maybe not.It’s up to you!

Nature of The Business

• The provision of care services with or without accommodation.

• A very simple service agreement.

Complexity (1)

• Continuing contract-most contracts are single unique transactions.

• Little real ability for provider termination.

• The need for simple workable fee increase clauses:

- Change of condition- Increase in cost base- General inflation

Complexity (2)

The Public Market• Local Authority Social Services• NHS (NHSE (who are they) and CCGs)• Framework and individual agreement• Block/spot• Service user contributions as opposed to

independent market

Complexity minimised

Complexity (3)

•Dominant purchasers abusing power.• Cash constraints.• Continuous improvement.• Fair price for care-there is no such thing.• Unacceptable risk of business removed at a whim.

The Care Act 2014

• After all the hype not much has changed.• The framework is just a skeleton.• The devil is in the detail of regulations,

which have yet to emerge.• This is a restatement of the law in one

code.• Compulsory Assessment of Need. 

Compulsory Assessment of Need

NB LA not NHS (NHS no contribution)

Identify need

Eligible needIneligible

needMeans testing

Adequate means

Inadequate means

Option for Provision

Advice

Not acceptedAdvice available

Accepted Provision at LA rates reimbursed

LA provides

LA provides subject to contribution according to

means

Questions

1.Why is Health/Social Care separation maintained?

2.How will integration work?3.What will be the capital and income

thresholds for the means test?4. Why would people with adequate means

choose SS assessment and SS selection of placement?

This is the generation that has championed consumer choice

Capping of Liability

• Very unclear.• Detail not likely until mid-late 2015.• The public are not understanding.- The cap will relate personal care only.- Accommodation, to normal food and

activities will be excluded.- Nursing care is covered by FNC

(hopelessly inadequate).If the care charge is £12k the user will

enjoy 6 years in a care home before a lap of £72k is reached.

Very Dangerous for Providers

• Fees will be broken into constituent elements.

• Will “top ups” be allowed?• For users, will top ups contribute to the

cap (probably not)?• A nightmare of contract drafting to be

effective where users have mixed funding.• All made more complex by direct

payments/personal budgets.

The Market (1)

1. Those with sufficient assets to meet all foreseeable need.

2. Those with some assets. Whether sufficient?

3. Those with no needs who may need a safety net.

NB clearly some of 2 will move to 3

The Market (2)

The Demographics• Social science thinking is based upon the historic premise that most users are in group 3 or likely to move from group 2 to group 3.•The “Daily Mail” approach is that the right of inheritance is superior to the right to use assets to support chosen care in later life.

Both premises are flawed

The Market (3)

Increasingly a large number of prospective users are:-

•In group 1 or•Prospectively in group 2 but perhaps not•Why would a user who is used to choice accept lower standard placement in order to protect potential beneficiaries?

The Market (4)

• The increase in group 1 is obvious following the growth in real estate values over the last fifty years AND

• Care homes are receiving users witha) Higher dependency andb) Shorter prospective lengths of stay• Real estate is likely to be mortgage free. Average

length of stay is said now to be 2 years. Even at a generous £60k per year, most householders will be able to comfortably fund the placement.

The Opportunity (1)

• Inevitably there will be a tiered provision of care (residential or domiciliary). Providers have real choices and real time to change. Providers need to select the nature of the business they wish to operate. Local authorities speak of shaping the market. However, markets are shaped by customers, not providers still less funders.

The Opportunity (2)

There will be broadly 3 markets

1.Wholly independently funded- no doubt subdivided as with hotels.2.Wholly publicly funded-very complex and needing tight management.3.A mix of the two- the current unsatisfactory model.

The Opportunity (3)

• This is a once in a generation opportunity for providers.

• Option 3 is really to be avoided.• It will continue cross subsidisation.• Nightmare of top ups.• What happens when funds run out?

And all that jazz!

The Opportunity (3)

The Opportunity (4)

• Option 2 is realistic and may be successful BUT

• Dominant purchasers• Overbearing one sided contracts• Big risks of no fault failure• Need for a very professional and

educated management running a very tight ship.

The Opportunity (5)

Option 1 will be very attractive-Infinite potential customers.-Content of contract.-Ability to control change.-Attractive to investors.-Built and managed to choice NOT to public sector constraints.

Conclusion• Providers do not have to operate in the public

funded arena.• Real choices can be made to focus a business

for success NOT survival.• Lesser facilities do not mean less than

“outstanding care” but facilities tailored to deliver care within the constraints of available funding.

• Feasibility studies, market research.• Business plans.• Marketing and business development. NOW is

the moment- seize it!