A Fair Cost of Care Birmingham
Briefing Note - August 2016
Parklands Banqueting Suite
Chair – Les Latchman
Setting the scene:
Over the last 12 months a number of care home providers have met with representatives from Birmingham City Council (BCC) from across the Care Sector to discuss a fair cost of care. In addition to this KPMG was commissioned by BCC to relook at the Cost of Care report from 2013 in light of the National Minimum Wage that became effective in April 2016. The KPMG report was sent out to providers previously along with the cabinet report on the Birmingham Care Wage (BCW) decision.
Care providers do not object to the BCW in principle and we all recognise that care workers deserve more than the minimum wage for the hard work that they do. However, the flipside of that is the financial impact on the industry and that fees must reflect the financial changes in the market.
Experts from Laing & Buisson, KPMG, ADASS, National Care Association, Knight Frank, National UK Banks, Birmingham Care Consortium, West Midlands Care Association, and others haveagreed that the industry is in crisis right now and funding is the greatest threat to care providers at the present time. The UK is reliant on a good and effective social care system in order for the NHS to manage its pressures and deliver good quality care.
The fact is that the funding from Central Government has been cut year on year since at least 2010 and there is greater and greater demand for social care. At some point the system will break leaving vulnerable citizens at high risk. It is therefore important that Birmingham City Council conduct their duties with greater transparency about care costs for providers and commissioners.
This exercise is BCC delivering on their commitment to be more open and transparent and as required by the Care Act 2014, work ever closer with the market to deliver more effective and a more efficient care system for our region.
The Government’s 2% precept has helped only a little as it does not go far enough to relieve the pressure on the industry. The Government’s view is that they have rescued the care sector when in fact their solution is ineffective.
Our job is to consider what we understand the cost of care is today and how we move forward with that. This is in light of the fact that BCC has no new money but must honour its duty of care to citizens while paying a fair cost for care.
BCC elected to award a 7.8% fee increase for bed based care but set the floor too low so many care providers ended up with no fee increase for the eighth year in a row.
Home care was awarded £1.05 for home care packages but we are told there remains confusion about how one qualifies for the increased fee despite BCC advising that it would apply to all care packages.
It is recognised at forums meetings that it would not be possible to produce a single set of figures that accommodate every type of provider, every market variation and different local circumstances, so the following principles are suggestedto assist in moving forward with this work in a way which would enhance transparency, provide a useful framework for both providers and commissioners, and for the market to arrive at what is a fixed “Fair Price for care”.
On the other side of that is the principle that the price should not be fixed – do you agree?
If it is not fixed, how should BCC assess fairly the care package in the future?
KPMG identified 3 levels of costs in their 2013 report, Low, Median and High averages across Birmingham care Providers. The recommendation from the KPMG report in 2013 to Birmingham is the Median rates – Do we agree?
The rates in the 2015 KPMG report are flawed as the report is based on what BCC pay and not the cost of care in 2015. However, does it have any merit in its findings?
What formula (if any) is a fair way to move forward?
Hotel costs are approx. £231.00 as per DH data (ref: KPMG)
What percentage return do care providers expect?
We know that not all providers will be in favour of the outcome of this kind of group. However, a broad range of care providers has been invited to attend (several times) and they have elected not to attend.
Should this work include self-funders?
If we as the market are able to come up with a fair cost of care or to suggest a new way of doing business, what about the losers in that? Some providers at the low end and the high end of the pay scales are likely to feel that they have lost out. How should Birmingham deal with those providers?
Principles:
- Care and accommodation costs to be separated out
- Costs will be based on a set of (reasonable) assumptions which will be clearly defined – By each group
- In each contract negotiation there will be a need to take into account a range of factors and to consider the appropriateness of assumptions and whether these are appropriate in the area or for the service under discussion.
- Currently there can be no presumption that local authorities will be able to adjust prices if the model, even with varied assumptions, suggests that costs exceed price
-Does that need to change?
-If yes, how?
-Care Act 2014 amongst other legal requirements stipulate that Local Authorities (LA) cannot commission services that are unsafe and unsustainable
- Nor can there be any presumption that providers can change delivery models if individual needs and costs are not well reflected in pricing models
-Do we not do this on a regular basis?
-We change the service to meet the needs of individual’s
- Does or should market conditions in terms of supply and demand have a legitimate impact on price?
- Should there be circumstances where the value of high volumes of business from a commissioner warrants a discounted price?
-Note: Some providers only do business with one LA
-Should that immediately demand a discount?
- No model can reflect nor should attempt to reflect the range of provider operating models or local circumstances
-Care providers are responsible for their business model
-LA’s and CQC are given powers to monitor certain types of care businesses
- The cost matrix is intended to provide a transparent starting point for providers, commissioners and potentially, self-funders
- That this cost covers a limited amount of activity in the day (as per for older people's care) but not keeping people occupied full-time all day.
- That the additional costs of nursing care are covered by the NHS funded registered nursing home contribution or otherwise by direct NHS provision or additional NHS funding e.g. continuing care
- Please be mindful of that fact when agreeing the cost of care
that the cost of specific required therapies is in addition to the costs of care and agreement needs to be reached about how this should be provide and funded.
Using these principles the sector are looking to use the cost model that has been developed asa basis for discussion and negotiation for citizensthat needs accommodation and care.
The model is a tool for informing transparent negotiation locally regarding rates of pay for care. It is not intended to be prescriptive about the price but the market expects the council to consider the findings and give a full response as part of any negotiation going forward.
Please submit details for the weekly costs per resident for each of the criteria listed.Care costs / Residential / Nursing
Care assistant staff* (inc day activities)
Qualified nursing staff*
Management / admin / reception*
Training expenses
Registration fees and recruitment
Corporate overhead element (pro rata)
TOTAL Care costs
*staff costs include on-costs
Accommodation costs / Residential / Nursing
Food
Utilities (gas, oil, elec, water, phone)
Catering / cleaning and laundry staff*
Handyman / gardening*
Insurance
Non-food supplies and rentals
Repairs and maintenance
Rent / mortgage payments
Corporate overhead element (pro rata)
TOTAL Accommodation costs
Profit (10-12%)
* State what profit % is used
TOTAL weekly cost
Full Occupancy (number of residents)
Average % occupancy that above costs are based on
Average % of residents who 'Self Fund' all care costs
List of current assumptions
GENERAL ASSUMPTIONSCost / Residential Homes / Nursing Homes / Provider notes
Home size / beds / beds / Based on average size of homes in the city
Occupancy level / 94% / 94% / Based on current varying occupancy levels
Length of stay / Based on median stay of current residents (recognized that figure will be higher for residential care homes)
Commissioners / Self funders %
Other local authority %
Health %
Void % / Self Funders %
Other local authority %
Health %
Void % / Based on latest available figures
Client type
CARE COST ASSUMPTIONS
Cost / Residential Care / Nursing Care / Provider notes
Care Assistant Staffing ratio (day) / Adass assumption 1:6.5 for 12 hour shift
Will depend on assessed needs within the home but use average of homes represented
Care Assistant Staffing ratio (night) / Adass assumption 1:6.5 for 12 hour shift
Will depend on assessed needs within the home but use average of homes represented
Care staff pay rate / BCC assumption that a minimum of £7.50 per hour not inclusive of NI cont’s / BCC assumption that a minimum of £7.50 per hour not inclusive of NI cont’s / BCW increasing in line with NLW and increasing annually has implications for homes.
Further implications for staff who receive increments for additional duties such as supervisory, deputies etc.
Need to factor in costs of agency staff to cover unexpected absences
Staff On-costs / Adass assumption 25% + on-costs to cover NI, pension contribution, all planned leave, training backfill
New pension commitments may equate to £8,000 per annum / Adass assumption 25% + on-costs to cover NI, pension contribution, all planned leave, training backfill
New pension commitments may equate to £10,000 per annum / Assumes 20 days annual leave, 8 bank holidays, 5 annual training days, 5 days sick leave, and contribution to workplace pension for up to 80% of employees
Qualified nursing / N/A / Adass assumption that current rate for Free Nursing Care (FNC element) covers pay and on-costs for nursing staff.
Homes challenge this as they have to pay higher fees for agency staff and basic pay for nurses to attract them to the sector. / Current FNC rate is £156.25
Management, admin and reception / Adass assumptions
- Registered manager £32,000 per annum
- Deputy manager £22,000 per annum
- Admin staff £15,000 per annum
- Registered manager £40,000 per annum
- To be determined - salaries for deputy manager and admin staff
Excludes on-costs
Training fees / Sector assumption that minimum £300 per staff member / To be determined by the group / Cost of courses, travel and backfill
CQC registration and recruitment costs / Assumes CQC registration costs of
- 21-30 residents £
- 31-40 residents £
- 41-60 residents £
- 21-30 residents £
- 31-40 residents £
41-60 residents £
- per annum
What was the average size home used for this exercise?
Corporate overhead / Adass assumption of 10% of care costs / Sector assumption of 14% of care costs / This includes senior management, HR, Finance, Payroll, IT, publicity and promotion, and all other head office costs
ACCOMMODATION COST ASSUMPTIONS
Cost / Residential Care / Nursing Care / Provider notes
Food / What is the average cost of food between the group?
We have heard from £30.00 to £55.00 per week per head / What is the average cost of food between the group?
We have heard from £30.00 to £55.00 per week per head / Purchase of food stuffs
Utilities / A number of homes argue this is £20– £25 per week per head / A number of homes argue this is £20 – £25 per week per head / Includes gas, electricity, water, phone, business rates, TV license
Laundry / cleaning / cooks / Market assumption £55 per person per week / Market assumption £55 per person per week / Salaries and on-costs
Handyman and gardening / BCC assumption that as FTE be paid a minimum of £7.50 per hour / BCC assumption that as FTE be paid a minimum of £7.50 per hour / Salaries only
Plus on-costs similar to care staff above
Insurance / To be determined by the group / To be determined by the group / What are the averages across the group?
Non-NHS medical supplies and rentals / Market assumption range from £30.00 to £80.00 per week
To be determined by the group / To be determined by the group / Domestic and cleaning supplies, trade and clinical waste, handyman and gardening equipment, stationery and postage, non-food supplies and services.
Adass assumption of £1,000 per person per annum or £19 per person per week for 48 bed home, although figures may be higher where costs fixed for smaller homes
Repairs and maintenance / Adass assumption £40,000 per annum / To be determined by the group / Includes day to day repairing or replacement of internal fixtures and fittings, internal and external redecoration (non handyman), replacement of capital equipment e.g washing machines or boilers, and major maintenance work on property e.g. roofs, windows and utilities
Rent and Mortgage Payments / Cost for capital / Adass assumption 6% interest and 2% depreciation at £60,000 building costs per bed in the provinces / Analyst assumption 6% interest and 2% depreciation at £65,000 building costs per bed (Knight Frank) / Covers buildings costs only
Corporate overhead / Adass assumption 5% on accommodation costs / To be determined by the group / Covers buildings management
PROFIT
Costs / Residential Care / Nursing Care / Provider notes
Profit / surplus / contingency / Adass assumption 6-8% of total costs / To be determined by the group / Need to understand rationale for over 10%