NOT UP STACKING

The financial pressures affecting homecare providers

The Homecare Association has published its minimum price for homecare for April 2023 to March 2024. Dr Jane Towson OBE, Chief Executive of the Homecare Association, explains how high inflation rates are impacting homecare providers and details the current challenges for the sector.

The average rate being paid by public organisations for homecare continues to be significantly below the cost of recruiting and retaining a skilled workforce and delivering high-quality, sustainable homecare services. To help providers to negotiate with local councils and NHS commissioners, every year we publish our Minimum Price for Homecare to explain what makes up the cost of delivering quality care. Not only does this set out what makes up the minimum amount needed to provide quality care, it also sets out how provider costs have increased over the year.

Sky-high prices

This year’s calculation for England is £25.95 for a National Living Wage Rate of £10.42, this represents a 12% increase on the rate for 2022-2023. The direct care worker costs are calculated at £17.97, with business costs such as the cost of the registered manager, recruitment and regulatory fees making up the rest.

High inflation rates are having an impact on all households and businesses. Indeed, the CPI inflation rate peaked at 11.1% for October 2022 and remains high. Homecare providers are no different from other businesses in experiencing inflationary increases in costs, from higher wage bills to the sky-high price of fuel to rising rent, rates and utilities – all impacting on this year’s Minimum Price for Homecare.

Staffing costs are by far the most significant driver of the cost of delivery of homecare. Increases in wage rates do not just impact on the rate for care workers’ contact time, but also result in rises to associated on-costs such as statutory pensions, National Insurance, holiday and sick pay. Moreover, there is a knock-on impact on salary differentials and wage rates for roles including office staff.

Recognising talent

The National Living Wage is set to increase by 9.7% to £10.42 in April 2023, the largest ever rise since its introduction. Combined, this has led to the significant increase in the costs of delivering care.

The costs of running a care service are heavily influenced by the requirement on registered providers to meet legal obligations to ensure the safety and wellbeing of the people they support. We, therefore, strongly caution state commissioners against underestimating costs in a bid to reduce the total hourly price paid for care.

The homecare workforce is highly skilled, responsible and committed. We strongly believe that care work should be fairly recognised and rewarded. To reflect this and encourage commissioners to think about the cost of delivering care when care workers pay is increased we calculate the minimum costs of delivering care at different wage rates ranging from the Real Living Wage Rate (£10.90) at £26.79 to a competitive labour market rate (£13.64) at £31.56.

Council complications

Earlier this year councils published the Cost of Care report, which explores the average costs for providers in their areas. The idea that public sector commissioners should pay rates for care that cover costs is a good one. Indeed, we believe it should be unlawful for public sector organisations to purchase care at rates below the costs of compliance with employment and care regulations and of running sustainable services.

The exercises looked at the costs many providers faced a year ago, without exploring what increases in cost might improve the quality of care delivered. Added to this, there is little done to examine how the volume of hours delivered might impact on provider costs, and commissioning small numbers of hours from a large number of providers could impact on the market sustainability and the overall costs.

While some exercises ended up at a rate that we believe barely covers the care worker costs last year, let alone the costs of running a care business, many councils published median rates above their current costs.

We have long argued that the cost of delivering care is also sensitive to length of visit, with short visits resulting in proportionately higher operating costs. This is due to the relative influence of travel time, which counts as working time for National Minimum Wage purposes and thus must be covered. State-commissioned homecare visits are typically 30 minutes in length. In some areas, the proportion of 15-minute calls are increasing, adding to costs.

We were pleased to see that a number of councils looked at the additional costs of the delivering care at 15, 30 and 45 minutes, acknowledging that the median rate for these visits would be higher.

Cost of care

We would encourage all providers to use both our minimum price and the councils’ cost of care exercise to negotiate their fee rates, remembering that the cost of care reflected costs last year, before rising inflation and the significant uplift in the National Living Wage.

Right now, there are insufficient care workers to support people to live well in their communities. Many factors, both long and short-term, influence retention and recruitment of homecare workers and thus workforce capacity. Inadequate Government investment in state-funded homecare and poor commissioning practices have led to low pay and substandard terms and conditions of employment.

The sector has also been adversely affected by tightening of labour markets, pressure on supply chains and rising energy costs all contributing towards increased inflation. This has led to a rapid rise in business costs and cost of living, placing further pressure on low-paid workers and their employers.

Inadequate capacity is contributing to greater burdens on the NHS, including more people with deteriorating health; longer ambulance waits; inability to respond fast to all emergencies; cancelled clinics; cancelled operations and difficulty in reducing waiting lists.

Demographic pressures of an ageing population, added to the impact of COVID-19 on population health means that we are going to need more care workers to support people, and that the gap between demand and supply will only get worse.

Our members tell us the ability to recruit and retain staff is the biggest constraint on their ability to increase capacity. It is low fee rates paid by councils and the NHS that prevent providers from increasing care worker pay and terms and conditions of employment.

Still work to do

The approach by too many commissioners has been a race to the bottom on the cost of delivering homecare. This cost-saving approach which effectively ‘salami-slices’ the different elements of providers’ operating costs is taking risks with the quality and safety of a regulated service. It also risks undermining the ability of providers to improve the working experience of care workers, thereby further destabilising the workforce.

In some areas, there is evidence that tendering contracts at unsustainable fee rates from the outset can lead to greater cost to commissioning bodies over the lifetime of a contract – particularly if this results in heavy reliance on spot-purchasing at higher fee rates, handing back work or entire contracts and provider failure.

The Homecare Association will continue to challenge central Government on the overall funding of social care. It is, however, councils, the NHS and Health and Social Care Trusts (in Northern Ireland) that are responsible for determining the prices they pay for homecare services at a local level.