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With the introduction of the new National Living Wage just around the corner this year’s Sheffield care home fee review brings welcome news and some much needed support for care homes in the city.

Sheffield City Council have recommended that fees in 2016/17 will rise by 4.32% for residential care homes and by 4.80% for nursing homes, almost double the respective 2.33% and 2.45% increases that were made last year, but at a time when operators are facing significant cost pressures.

The tables below show the proposed increased Sheffield City Council fee bandings.

Sheffield care home fees 201617

Source: Sheffield City Council Communities Commissioning Service, ‘Fees and Market Analysis: Care Homes 2016/17’

Care home fee review and market analysis 2016/17 in summary

One year on from the 2015/16 care home fee review and market analysis and we now look at the latest figures – in a report by the Sheffield City Council Communities Commissioning Service – to review each of the core key performance areas for care homes, to look at the stability and sustainability of the care home market and analyse the recommendations for 2016/17 Sheffield care homes fees. We also provide a look at the national picture, highlighting some interesting statistics that all regional care owners need to be aware of.

This year’s care home fees review and market analysis follows (and provides a more in-depth look at the care home market) our recent performance benchmarking report for smaller care homes, which found that although there were positive signs moving forward, many care home operators still face an uncertain and challenging future.

Sheffield care home fee review and market analysis 2016/17

This year’s care home review highlights some very interesting stats, which we have summarised here:

  • Fees in 2016/17 to rise by 4.32% for residential care homes and by 4.80% for nursing homes
  • The number of people aged over 65 is set to rise from 92,000 to 97,000 in 2020 and 115,000 in 2030
  • Care homes are facing major financial pressures, largely in relation to rising staffing costs

Care performance benchmarking

In detail – Sheffield and the national picture

Occupancy:

Perhaps one of the biggest difficulties in the care sector is the UK’s ageing population and improving life expectancy, in conjunction with a falling supply of beds. During the same period in which the number of over 65s is set to rise in the UK (between 5% and 10% over the next 5 years) the number of beds in care homes is forecast to fall.

Very high levels of occupancy, on the face of it, are of course good news….but with a looming care home beds crisis, high demand is putting increased pressures on already strained resources. The domiciliary care market impacts this statistic with many service users choosing to remain in their own homes for longer, but this should not detract from an inevitable bed shortage in future years.

Unsurprisingly, the average occupancy levels for care homes in the UK has been on an upward trend since 2013.

The table below shows the average occupancy levels for care homes across the UK.

Average occupancy levels 2015 care

High levels of occupancy are particularly important for smaller care homes, who need a consistently high level to survive and cover their costs. Medium and larger homes, on the other hand, are proportionally more secure and are often better equipped to manage reduced occupancy levels.

Costs:

Both payroll costs and non-payroll costs are bringing major challenges for cares homes across the UK.

Payroll costs continue to rise. The year-on-year increases in the National Minimum Wage and the introduction of the new National Living Wage (from 6 April 2016) will undoubtedly bring more financial challenges for care homes up and down the country. The care sector is going to be one of the hardest hit sectors by the introduction of the new National Living Wage, particularly as salary structures in care homes are often set retaliative to the National Minimum Wage i.e. those paid above the National Living Wage may also expect to be given an hourly pay rise when the new rates come into force.

Recruitment and retention also remain key challenges for care homes in Sheffield and across the UK as a whole. Difficulties in finding qualified nursing staff and skilled care employees is leading to an increased reliance on recruitment agencies, which in turn is increasing the cost of recruiting new members of staff. Reducing staff turnover and retaining well-trained, qualified and competent staff is becoming ever more important.

With continued increases in utility and food costs, non-payroll costs also remain a significant financial cost in running a care home. The recent NatWest care home performance benchmarking report highlighted what many care home operators already knew: they are spending too much money on lighting, heating and other utilities.

Fees:

Last year’s 2015/16 care home fee review and market analysis highlighted that care home fees in Sheffield were amongst the lowest in the region and in comparison with other core cities in the UK. The 2016/17 care home fee review finds similar results.

The table below shows the average weekly fees for care homes across the UK.

Average weekly fees 2015 care

As the table below shows (figures are estimated and rounded down which is why it only equals 99%), care home operators are heavily dependent on Sheffield City Council’s fee levels. Those care homes in less well-off areas of the city that have very small numbers of self-funded private residents are even more dependent on the council’s care home fee levels.

Care home purchasers Sheffield

Source: Sheffield City Council Communities Commissioning Service, ‘Fees and Market Analysis: Care Homes 2016/17’

2016/17 Sheffield care home fees rise…but is it enough?

Scott Sanderson, Healthcare Partner at Hawsons, commented: “The proposed increases to Sheffield City Council’s fee levels for both residential care homes and nursing homes is undoubtedly positive news and will be welcomed by the local Sheffield care home community. We have commented on numerous occasions about the growing financial pressures for care homes – including rises in payroll costs and non-payroll costs – and what it may mean for the sustainability of good quality care in Sheffield and across the UK. Let’s make no mistake about it, the 2016/17 care home fee increase for Sheffield care homes will be a relief to many operators in the city and provide some much needed financial support.”

“Having said that though, the care home fee review and subsequent recommended 2016/17 Sheffield council fee rises still raise a number of major financial concerns. The whole care home sector is feeling the strain of financial pressures; costs in care homes are growing at a rate faster than any before, leaving a large number of care homes unable to cover their costs. That, in conjunction with an ageing population and the looming care home bed shortage, means that the care sector is still on an uncertain course. Local councils must do everything they can to ensure that residents have access to a service which provides safe, effective and sustainable care.”

“There is no denying that local councils are also struggling; public budgets are being cut and councils must be even tighter with their spending. However, neighbouring council Barnsley have announced that 2016/17 care home fee levels will rise by 6.45%, so perhaps Sheffield City Council can do even more to help fill the funding gap.”

More from our care sector experts

You can also find all of our latest care sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.

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