CMA produces financial analysis working paper in the ongoing investigations into the care home sector
First published by Admin on October 27, 2017 in the following categories: Investigations and tagged with cma
There are reportedly over 21,000 care homes in the U.K., and most of these are operated privately with over half of all residents receiving funding from local authorities or through the NHS.
Worth around £15.9 billion a year, there is an incredible amount of money going into providing care for the elderly and infirm residents, so it’s certainly an industry to keep an eye on.
The CMA (Competition and Markets Authority) was made aware that certain practises may appear to result in the restriction of competition which is having an adverse effect on the quality of care and value for money in the care home industry. The CMA therefore launched a market study on 2nd December 2016 to analyse the trends in investments, costs and if there is enough money being generated.
Care home providers, industry analysts and regulators have all raised concerns over “the current financial performance and future sustainability of the industry.” Providers have also disclosed to the CMA that local authority fee rates cover less than half of the full cost of providing care for residents.
This is apparently a trend that has been going on for the past seven years, and means that new care homes are reportedly having to self-fund and then charge local authorities for the losses. Without adequate funding in some areas, providers are reportedly more inclined to build new homes in places where there are self-funding residents, therefore potentially providing less choice for state-funded residents.
During the CMA’s investigations, providers admitted they reduced costs for state-funded residents by only spending the minimum amount of money to make basic required refurbishments or to meet minimum care standards. The CMA therefore began an in-depth analysis of the financial data involved in the multi-billion pound industry.
In September, the CMA produced a financial analysis working paper to show what they’ve found from reviewing the financial statements of 7,421 companies registered in the U.K. who run care homes. However, the CMA’s report and investigations are incomplete and the authority calls upon local authorities, investors and operators to provide crucial information about costs with accompanying explanations.
The CMA’s investigation is vital to find out exactly how much money is being put into care homes by the public and private sector, what costs are involved, and the revenue being produced to ensure that there is enough money being put back into the care homes so residents can enjoy affordable quality care.
Andrea Coscelli, CMA’s acting Chief Executive, outlines the importance of well-controlled finances to ensure all residents have access to care:
“Demand for care home places is expected to surge over the next two decades. To make sure the additional capacity this requires is available, it needs to be built in good time. At present, short term funding pressures and uncertainty mean that the sector is not attracting investment.”
Without this investment, there continues to be a limited number of care homes being built, refurbished and generally being invested in. This is a cause for concern in terms of consumer rights and competition law as those who require care home spaces may not have the choice of affordable care homes that have the money to provide more than just rudimentary care.
We’ll continue to keep a close eye on this investigation.