Lloyds TSB HealthCare

CARE BUSINESS SUCCESS IN A CHANGING

CLIMATE

Presentation by Mark Ellis ACIB

Head of Care Home Banking

Overview

• A changing sector• Opportunity or threat?• What do we know?• Financial implications• Average weekly fees• The growth dilemma• The downturn effect• Checklist• Engaging with Local Authorities• Premium pricing• Managing costs• Customer led culture• Your next business• Maximise your marketing• Lloyds TSB and you

A Changing Sector

Fundamentally, the dynamics of the healthcare market have not changed over the last 12 months, but the financial and economic conditions have altered

beyond all recognition.

A Changing Sector

1,000

1,500

2,000

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3,000

3,500

Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08

Care with Nursing Care only

A Changing Sector

• 2.8 million people in the UK receive some form of social care

• 1.5 million people work in social care

• Over 36,000 employers

• Bigger than the NHS

*Statistics from Social Care institute for Excellence

Opportunity or Threat?

• An ageing population set against available funding

• Private sector solution?

• Uncertain times

• How will the new coalition perform?

• £20bn spending cuts

What Do We Know?

• Unprecedented cuts needed

• Health sector already leaner in many areas

• Desire to protect ‘frontline’ services

• Improve key services such as cancer treatment, mental health and social care

• Coalition will want experience, expertise and availability when looking to private sector

• Desire for ‘cost effective quality’

Financial Implications

• Potential purchasers more cautious in value assessments as lending margins increase.

• Lenders are now looking more closely at loan serviceability than loan to value.

• Falls in the residential market impacted on the private fee market – halting above inflation annual fee increases

• Market set to continue in a healthy trading state as population demographics and the continued loss of elderly care beds means demand for places remains strong

Residential home regional average weekly fees

UK £485

2

Scotland £485

North £452

East Midlands £450

East Anglia £491

Northern Home Counties £591

Gtr. London £573

Southern Home Counties £550

Northern Ireland £422

West Midlands £448

Wales £421

South West £500

Yorkshire/Humberside £428North West £422

Nursing home regional average weekly fees

UK £678

2

Scotland £615

North £556

East Midlands £589

East Anglia £651

Northern Home Counties £883

Gtr. London £812

Southern Home Counties £785

Northern Ireland £558

West Midlands £623

Wales £592

South West £738

Yorkshire/Humberside £603North West £619

The Downturn Effect

• Sector not ‘recession-proof’

• Downturn has accelerated difficult decisions

• Diminishing public sector investment

• 15% of local authorities say closures have put pressure on supply of places*

• Residents and families responsible for higher proportion of care funding

• Higher expectations on care standards = higher cost to private owners

• Increasing regulation = higher cost to private owners

* LGA 2009

Lloyds TSB HealthCare

MOVING FORWARD

Checklist

• Are you prepared for change?

• Are you ready for CQC re-registration?

• Have you researched ASCOT (adult social care outcomes tool)?

• Can you outline your business plan clearly and concisely?

• Do you have the staff you need (volume & qualifications)?

• What is your competition doing?

The Growth Dilemma

Is it time to downsize or scale up?

Engaging with Local Authorities

Local Authorities still account for 62% of all placements

This figure WILL decline

• Do you have a strategy for engaging with your LA?

• What do they know about your business?

• How do you keep them up to date/communicate?

• Do you understand your LA’s purchasing strategy?

• What expectations does it have?

• Do you seek residents from outside your immediate LA?

• If buying a new business have you considered a different LA area?

• Would this be a challenge or a bonus?

* LGA 2009

Maximising Occupancy Levels

Levels should be around 90%

How can you achieve this?

Premium Pricing

• How often do you review fee levels?

• Is now the right time or not?

• Can you achieve ‘top ups’ from residents or families for extra facilities such as en suite rooms or services such as hairdressing?

• Can you seek extra income by investing in and altering your room layouts/facilities?

• Sliding structure based on dependency levels?

Revenue

Staff costs

Managing Costs

• How closely do you control costs?

• Staffing = largest single cost of any care home

• Usually accounts for between 44% and 56% of total revenues.

• That’s 12% of revenue

• Maximise efficiency of staff to costs vs number of residents and revenue within National Minimum Standards

• How do you think you can improve the efficiency of the number of staff working with the number of residents you have?

Revenue

Staff costs

Managing Costs

• Is someone responsible for carrying out a cost audit?

• Can you make economies in non staff costs?

• Non payroll costs tend to account for around 15% to 18% of revenue income.

• Consider daily food costs per resident. The trend of maintenance costs per bed.  Utilities costs (water, electricity etc) per bed.

• Has the business ever considered the costs of not doing something?

Managing Costs

Ensure:

• All staff are cost conscious

• You involve staff in coming up with ideas to reduce costs

• The benefit of cost savings are always communicated to the business

• Always analyse the benefit of what something will provide against its cost to the business.

• That cost reduction does not affect quality

• That you have accurate management information systems in place – if you can’t monitor costs you can’t manage them

Customer Led Culture

• Maintain excellent customer service

• Seek feedback from customers on quality of service

• Implement a ‘customer first’ culture throughout the business 

• Consider an employee reward scheme to recognise good customer service

• Ensure all staff understand the business’ policy on service standards

Your Next Business

Maximise your Marketing

• Marketing a business your size does not have to be costly

• Ensure you have an up to date web and printed presence and take professional advice on design, content and search engine optimisation

• Make sure brochures have a ‘shelf life’

• Talk to families. Personal interaction and word of mouth is the cheapest form of marketing available.

• Use PR. Microsoft’s Bill Gates once famously said: “If I was down to my last marketing dollar, I would spend it on public relations”. Visit the Public Relations Consultants’ Association website for further information (http://www.prca.org.uk/Whatispr)

• Network more. Thousands of opportunities exist to meet other business owners and sector influencers

Lloyds TSB and the Care Sector

•

Lloyds TSB and You

Our message to customers remains positive:

• We are a bank with a strong heritage and track record in working with customers. We are here for the long-term

• We are strongly positioned to weather the storm

• We have a prudent approach to liquidity management and a variety of funding sources

• We continue to support credit proposals that fulfil our usual criteria of risk / return and structure.

• Lloyds TSB has been ranked as one of the Top 10 Safest Banks in the World  by Global Finance based on the 'big three' credit ratings agencies

• We took on around 100,000 new commercial accounts in 2009

• Our lending to care home operators rose by 42% last year – higher than any other sector we lend to

Lloyds TSB HealthCare

Thank you for listening

Any Questions?

www.lloydstsb.com/healthcare

Disclaimer

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