bbc.co.uk
Home
Explore the BBC
You and Yours - Transcript
BBC Radio 4
Print This Page
TX: 17.01.08 - The Business of Care

PRESENTERS: WINIFRED ROBINSON AND PETER DAY


Downloaded from www.bbc.co.uk/radio4
THE ATTACHED TRANSCRIPT WAS TYPED FROM A RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT. BECAUSE OF THE RISK OF MISHEARING AND THE DIFFICULTY IN SOME CASES OF IDENTIFYING INDIVIDUAL SPEAKERS, THE BBC CANNOT VOUCH FOR ITS COMPLETE ACCURACY.


ROBINSON
The business of caring for people in their own houses and in residential homes is now contracted out to private companies by the vast majority of local councils. In our series on care we've been hearing how pressures on budgets inevitably feed through to these businesses and are passed on to their clients. Even so the industry is expanding rapidly to serve the needs of an ageing population. We asked Peter Day, of Radio 4's In Business, to examine the economics of care. He reports now on private care homes, an arm of the business which has sprung up from nothing in the past few decades.

DAY
A lunchtime rush in the kitchen at the Anchorage Residential Care Home in southern England. It's one of some 12,000 homes in Britain, set up 24 years ago by private investors, including the former banker John Wolfenden. He's still a hands on director, he describes what it's like there.

WOLFENDEN
This home we have 28 people, we'll building an extension which will take the numbers up to 35 and currently there are seven of the 28 in receipt of whole or partial funding.

DAY
From the local authority?

WOLFENDEN
From the local authority.

DAY
Do you feel under severe cost pressures or severe price pressures?

WOLFENDEN
Yes, the fee level is relatively speaking low, wages obviously have been on the increase, increase in minimum wage for example, increased number of holidays and so on. So there is pressure there. I think our increases over the last two years have averaged four per cent to fees. And the underlying inflation on our costs must be probably nearer seven and a half if I'm honest on the major costs.

DAY
The elderly care industry is very varied. Home care or domiciliary care, single care homes, companies and big groups. Some are charities, most are now profit making. Big changes in recent decades have been tracked by William Lang, of the social care market intelligence firm Lang and Wissant [phon. He says it all started 30 years ago with a great shift from public care to private provision.

LANG
Right, you can trace this back to 1975 when, as you may remember, the UK had to go cap in hand to the IMF, the International Monetary Fund, to borrow money. Now one of the requirements of the IMF was that there should be a block on capital funding of various public sector projects. What that meant was that local authorities no longer built old people's care homes and it was from that point that the private sector started to take off in care home delivery. And then at the end of the 1970s there was insufficient funding around and by accident, more or less, some voluntary sector providers found that they could take advantage of social security funding and were able to simply get money based not on assessment of need but simply on people's inability to pay for services themselves. Now the voluntary sector started this off but then the private sector very soon found this opportunity and started to build care homes. Now that caused the private sector to develop enormously over the 1980s and the very early '90s.

DAY
And these were fairly small scale, fairly local sort of little companies were they?

LANG
They were independent operators - mom and pops - not big companies.

DAY
Got a big house, find something to do with it?

LANG
Exactly, exactly. And then all this came to an end in 1993 when the government realised that the funding was - the spending was uncontrolled and then they brought in the community care reforms in 1993 which handed over the funding from social security to local authorities. And then they started to impose assessment of need. Now from that point on the number of people being placed in care homes started to decline and that's been taking place for a number of years since and that's the reason that even though the demography has been pushing up underlying demand, nevertheless the number of people placed in care homes is actually lower now than it was 15 years ago.

DAY
An observation for the economist William Lang that surprised me greatly - Britain is ageing rapidly yet fewer people are being admitted to care homes. At the Anchorage and its associated nursing home John Wolfenden has experienced this trend.

WOLFENDEN
In 1984 we used to see people coming into the home aged 60 - mid 60s, now you don't see people until late 70s. The period of time spent used to be up to 10 years, now five years is a very long time, three years is much closer than normal and in a nursing home it's probably 18 months.

DAY
The privatising pace has quickened, says Sarah Pickup, she's director of adult care services for Hertfordshire County Council.

PICKUP
The beginnings of this really were in the Community Care Act and when the government introduced the Community Care Act in the early '90s there were specifications attached to some of the money we got to do that that a certain proportion of the care had to be provided in the independent sector and not just by councils. And really that was to get away from councils being monopoly providers of care, the only people you could get it from was the council, having a kind of fixed wage rate for those types of care.

DAY
There was new building of the sector, local homes became national chains. But lots of recent business interest in care homes can't disguise some basic facts, says the expert William Lang.

LANG
Now certainly in the case of costs the operation of the private sector is more efficient, the costs are much lower running a care home than they would be in the public sector. Now the reason for that though is something which would cause other criticism which is that the fundamental reason is that the private sector pays wage rates which are close to the minimum wage level. And the local authorities, who would provide public sector care homes, do not. So that's the fundamental reason why the private sector is less expensive is because they're paying lower pay rates. But at the same time the other thing that the private sector can point to is an improvement in the physical quality of the care homes that they operate and there's no doubt that the physical quality is better in the sense of more single rooms and so on.

DAY
What about the quality of the care itself - is that measurable?

LANG
The quality of the care is more difficult to measure, what evidence there is suggests that there's probably not very much to choose between public sector, voluntary sector and private sector.

DAY
I got more details of the difference between private and local authority costs from Colin Angel of the United Kingdom Home Care Association. It represents almost a third of the total home care industry.

ANGEL
To give you an idea - a local authority home care might cost £20.60 per hour but if they put that work out to the independent sector it might only cost them £12.20 an hour.

DAY
As big a cut as that?

ANGEL
Absolutely.

DAY
And that's to do with almost entirely with wages?

ANGEL
It's the single largest component. And if I can give you an example: I looked at a local authority in the North East of England earlier this week and they were paying independent sector providers £10.10 an hour and their in-house team cost £30 an hour. So the difference is astronomic.

DAY
Who sets the fees charged by domiciliary agencies and the care homes? A question for Sarah Pickup in Hertfordshire, who's also co-chair of the Resources Network of ADASS - the association representing directors of adult social services.

PICKUP
It's a bit of mix, I mean obviously care homes have a view about the price at which they can sustain their business but we also have a view about the price we can afford to pay and obviously there's a fine line somewhere between the two. There are some care homes with whom local authorities don't do business because the prices are simply too expensive - these are kind of very upmarket kind of homes ...

DAY
And they can only go on existing if they attract enough private customers.

PICKUP
Exactly, exactly yes and there are some of those, particularly in the South East I would say, in Hertfordshire the local authority purchases around 50% of the places that are available.

DAY
Rigorous shift work, coping with old people who may be difficult, it does seem extraordinary that low pay is such a part of this business. What does the UK Home Care Association think about this - Colin Angel?

ANGEL
At the moment we're looking at a turnover of around 25% in the home care sector. Workforce monitoring organisation Skills for Care quite rightly described that as unsustainable for the future. To solve this problem we must reward people for the work that they do.

DAY
So you then argue we can't do anything about it, it's up to the local authority - the amount of money we get from local authorities?

ANGEL
Absolutely, the link is really clear.

DAY
If this is an industry where revenue flows are so controlled why have the controversial and very picky private equity investors in the City of London got interested in it in recent years? Oh, says William Lang, remember that part of the care home story is property.

LANG
What they've really benefited from in recent years is an increase in the value of the property in which services are delivered.

DAY
So this has become a property company with a care service attached to it?

LANG
Well the most recent trend has been to split the operation of the property side of the business from the service side of the business. Now it just so happens that in the last five years or so there has been a growing appetite from property investors for the rental streams from care homes. So what often happens now is that a care home group will sell off its property to an investor and then pay rent to that investor and then operate the business from premises which it no longer owns and this overall adds value to the totality of the operation.

DAY
One of the other recent industry trends is the growth of care home groups - companies with dozens of homes all over the country. The second largest of these is the not-for-profit health group BUPA. Twenty seven thousand staff work for Mark Ellerby, managing director of BUPA Care Services. What are the advantages of big groups when elderly care is delivered on such an intimate one-to-one basis?

ELLERBY
The way I look at it there's two advantages of scale. Firstly there's an advantage of scale of size of home. The average size of home in this country is tiny and if you look elsewhere and go overseas it just doesn't bear comparison in terms of size. The average size, I think, in this country is about 21 beds, the average size of our portfolio is about 72 beds. There is economies of scale. That means you only have to have one kitchen - a big kitchen to look after a hundred people. The second part - what can a larger organisation do? - a larger organisation has the financial wherewithal to invest in new facilities.

ACTUALITY
Hello everybody. Today we're having chicken curry with rice. Cornish pasties, mashed potato, peas, gravy.

DAY
Sounds nice. Lunchtime at the Anchorage Care Home. I asked the director, John Wolfenden, about developments in the business since he first invested in it 24 years ago.

WOLFENDEN
I think what's changed is most obviously is that the 2000 legislation which has gradually grown in its effect has really caused our standards to be - I'll be honest - lifted, our costs to be lifted in line with that lift. I don't blame the government for it. It is perfectly sensible, reasonable, that salaries are increased and that training is of a higher level. However, none of it comes without money and I think sometimes the cost of achieving some of the targets is not necessarily recognised.

DAY
Like so many other things in Britain old age care is now a marketplace. What does this mean for the quality of care? Sarah Pickup of Hertfordshire Social Services.

PICKUP
There is now much more of a market in care, there are some very, very good care providers out there, there are some less good care providers and one of our jobs - and particularly my job as a director - is to make sure that I'm what I'm buying for people in my area is good quality care, to monitor it and make sure that we work with those independent providers to change services and develop them as we move forward.

DAY
But you had a lot of absolute control in the past which you've now lost, you're now the customer not the provider.

PICKUP
But we are not just the customer, we are the commissioner - there's a difference there because actually we're a big customer, aren't we, the ultimate customer is the person who uses the service and we're there to intervene on their behalf really as a big player in the market and we have a regulation and inspection system undertaken by the Commission for Social Care Inspection. So all social care, whether domiciliary - in people's own home - or care homes is inspected and regulated.

DAY
Still thinking about costs I wondered why private care home users often pay so much more - £100 or £200 more a week - than do local authorities for what's supposed to be the same care in the same home. Sarah Pick up again.

PICKUP
Well partly that's because what we offer care home providers is certainty of income. If they contract with us for a number of places clearly we've got to make sure that we are not trying to get care below the cost - the cost of that care. But we are buying a lot of places and we do offer a certainty of income and if you're a business and you know that 50% of your stock, so to speak, is sold that's worth quite a lot to you.

DAY
This means that local authorities have had a big impact on the growth and retreat of the industry over the past decade, says William Lang, the market intelligence specialist.

LANG
Now one of the problems for the sector in say - oh going back about 10 years is that local authorities at that time were being very, very tight in the upratings they were giving every year to care homes. And this was a time when there was a surplus of care home capacity because the local authorities were reducing that amount so there was a surplus and the local authorities took advantage of the situation to squeeze prices as low as they possibly could. And that gave rise to a reduction in margins in the care home industry and also to some financial failures.

DAY
Now it's changed.

LANG
Now it's changed because the market power position changed, there was less spare capacity than there had been in the past and from about 2002-2003 local authorities started to realign their fees they paid upwards. And at the same time of course you see that the margins that the care homes were receiving themselves started to recover. So over the period of about 2002-2005/6 care homes were a sector in which margins were improving, now they've more or less stabilised.

DAY
I can't get out of my head the fact that Britain as a nation is getting older and older. Does this mean much more care at home or an expansion of care homes? William Lang.

LANG
If you simply look at - if you make a projection on the basis of what we expect the population age profile to look like in the middle of the century coming and the number of people or the rate at which people enter care homes at the moment then such is the ageing population that on that basis alone you'd expect the number of people in care homes to double in the next 50 years, literally double, to reach about a million people in care homes.

DAY
It sounds like an enormous investment opportunity.

LANG
Huge. Now I don't - we don't think that the extent of the growth is going to be that great, we think that within that some people will be diverted into domiciliary care, some into a new form of provision that's being developed at the moment called extra care and then some into care homes.

DAY
You know we baby boomers have changed so many aspects of life as we've shouldered our way through the past 60 years but now we're getting old we're going to need a lot more care and it's still not clear where it's going to come from. Back to Mark Ellerby of BUPA Care Services.

ELLERBY
It takes a very long time to actually build new facilities - whether it's a hospital or a care home or a school or what have you. We have a small development programme ourselves and we estimate it takes five years from when we identify a need in an area and then find a location and then get planning, then build the home and then get it up and running, that it takes a good five years to go from sort of the thought to actually having it operationalised. And that's - you know five years is a long time.

DAY
Now you've seen this clearly and you've identified the need and you have the facilities to invest if you want to, but what about the business climate - is that what you're doing at the moment, are you being encouraged to do that, do you get signals from the government that that's what is needed or from local authorities or is this just you saying this must happen and waiting for somebody to do something about it?

ELLERBY
I think the business needs greater incentives to build the care homes of the future. I think that there are very few homes being built at the moment, predominantly the ones that we're looking at are specialist dementia predominantly for the private market, I think the government needs to realise that greater financing will be required over the next 5, 10, 15, 20 years in this sector.

ROBINSON
Mark Ellerby of BUPA ending that report by Peter Day.

Back to the You and Yours homepage

The BBC is not responsible for external websites

About the BBC | Help | Terms of Use | Privacy & Cookies Policy