Social Care – Don’t Get Old, Don’t Get Sick

What market presents the biggest single challenge in public sector procurement? It has to be Social Care.

A spend category worth some £20 billion a year in terms of local authority third-party spend. A category almost totally outsourced now, where funding is being cut by local authorities as their grants from central government are slashed. That is causing a reduction in supply, which in turn is driving severe problems for the NHS as record numbers of ”bed-blockers” are stuck in hospitals because of the lack of a social care-supported  alternative at home. A market where major providers have gone bust and more are teetering on the brink, with the vultures of private equity waiting in the wings. Here is the FT.

“Britain’s care home capacity has shrunk for the first time in a decade, intensifying fears of mass closures next year ... More than 1,500 beds were lost in the year to September, reducing the total to 451,400, according to industry analysts LaingBuisson. Capacity is starting to fall even though Britain faces a surge in demand for residential care ... Britain’s care homes, 90% of which are privately owned, have been squeezed by a 6 per cent real-terms reduction in council fee rates since 2011, at a time of rising energy bills and rents”.

That’s before we even consider the effect of the increase in the minimum wage, coming soon, which will drive costs in the sector significantly higher. Then we have to mention the amazing, jaw-dropping hypocrisy of Guy Hands, whose firm owns Four Seasons, the biggest operator of care homes in the UK. He spoke recently about how councils need to pay a fair price for places in the homes. Fair enough, yet clearly more tax might be needed to fund this, and he is a Guernsey-based tax exile, who doesn’t want to pay his share of that tax and feels it is worth living away from friends and family to avoid doing so, despite his great wealth.

Anyway, enough about him; but I wonder whether actually, we need some owners who are even more ruthless and more value-focused to shake the public sector into action? Private customers of care homes pay far more than councils, so state-funded residents are subsidised by self-payers, which is not exactly fair either. But if councils really aren’t paying a market rate, why do the providers keep accepting the work? How about if a major provider simply said “we need £x per week and if the council won’t pay that, I’m afraid we will have to ask for those residents to be removed at the end of the month”. Beds in the car park and so on.

I’m not saying this is a desirable option, but maybe it has to happen if rates are going to be sustainable. Or maybe a raft of providers pulling out or going out of business will tip the supply / demand balance to the point where fees do rise significantly. But that may just mean fewer council funded places (unless the total money available also increases), and yet more people stuck in hospitals, causing an even greater NHS crisis.

We can’t go on like this though, with standards falling, providers gradually pulling out of the market or going bust, property being sold off to developers, and the NHS taking up the slack. Perhaps this is a market that needs a big shock to change the power balance between the local authorities and the providers, which seems to have got somewhat out of line. The alternatives? Personally, Dignitas is looking like a decent option rather than the prospect of spending my final days in an under-funded, over-crowded, under-staffed, low-cost care home. Or maybe the robots will save us.

Voices (8)

  1. Insider:

    Re: “commissioners, accountants, senior council executives come up WAY short of the skills, understanding and wisdom required to get the best out of this (possibly) soon to be broken supply market”

    Couldn’t agree more. I’d add procurement staff to that list too.

    1. Mark Lainchbury:

      Sitting through Bravo’s – How to move from good to great
      http://more.bravosolution.com/10-steps-to-unlock-the-power-of-procurement-ondemand-webinar-lp

      Thinking Commissioning would be one of the (perhaps few) areas where this
      “Your suppliers must be at the center of your procurement process”
      kind of approach, could really benefit the NHS

      1. Secret Squirrel:

        Thanks for the link. Very interesting view.

        1. Mark Lainchbury:

          Yep
          Slide 9: working with Suppliers post-award was eye-opening.

          Always seems a shame that we (NHS) have a
          “Phew that’s it, on to the next one !!” attitude with tendering.
          Instead of taking the 6–months of learning about a product/market and moving that across into post-award contract/supplier management and staying involved.

  2. Dan:

    I have to admit, I don’t feel particularly concerned by the choice between Dignitas and social care – the retirement age and pensions will have changed so much by the time I get there that there is a good possibility that I’m going to die at my desk.

    Having said that, there could be grounds for an interesting case study of the impact on a power imbalance on classical economic theory. According to Adam Smith this situation (high demand/low supply with low prices) shouldn’t happen, and yet here we are.

  3. David Atkinson:

    I’ve never been one to trumpet collaboration and partnership when seeking maximum value for key provider relationships, but the social care industry is in crisis, and no mistake.

    Amongst the wealthy care home owners, there are businesses and charities desperate to hold on to staff (who the local authorities expect to be on minimum wage – at least for now) facing those authorities who have scant knowledge about how to manage external providers. Sure, the professional procurement folks understand the variety of approaches, but commissioners, accountants, senior council executives come up WAY short of the skills, understanding and wisdom required to get the best out of this (possibly) soon to be broken supply market.

    A prevailing attitude that the providers are out to ‘do over’ the commissioning authorities, the latter applying aggressive leverage, not paying invoices on time, and internal organisations where stakeholders are locked into professional silos where cooperation is optional, and where no one ‘owns’ the key relationships (cont. p.94)

  4. Dan2:

    Not sure if the Dignitas comment was flippant or not. However, I’ve often thought that given another generation or two, the Dignitas approach will become more and more socially acceptable. Earlier this year a healthy ex-nurse ended her own life because ‘old age is awful’ (http://www.telegraph.co.uk/news/health/11778859/Healthy-retired-nurse-ends-her-life-because-old-age-is-awful.html).

    I found that a bit shocking, but I think as people live longer and longer and people see elderly relatives in the grips of palliative care (as not everyone has); they will come to terms with ending their own life themselves.

    1. Peter Smith:

      Dan
      Wasn’t flippant- there would definitely be a point beyond which I would not want to go on.I think you are right, it will become more acceptable and yes, there are risks, but ultimately it will be seen as the individual’s decision to make.

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