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A recent report by the Sheffield City Council Communities Commissioning Service, ‘Fees and Market Analysis: Care Homes 2015/16’, highlights some interesting statistics that all regional care owners need to be aware of.

The report sets out key demographics and performance-related indicators for Sheffield region homes. Linking to research from leading market analysts, Laing & Buisson, the document also sets out key demographics and performance-related indicators for care homes across the UK.

You can find our 2016/17 care home fees and market analysis here.

In summary (Sheffield):

  • The numbers of older people living in Sheffield is projected to increase year on year.
  • Occupancy levels in Sheffield have generally risen as a result of the reduction in supply (5 care home closed last year – the closures this year have cancelled out increases from the previous three years)
  • There has been no increase in the care home fees for the last two years; the main cost increases are staffing (minimum wage rose in October 2014 and is set to rise again later this year)
  • “We” should therefore raise the fees by at least the impact of wage and CPI inflation

In summary (The national picture):

  • The number of people aged 74-84 in the UK is projected to grow by over 800,000 and the over-85s by 400,000 between now and 2021.
  • Over the last 18 months capacity in the market rose by 3,600 beds to an estimated 487,800 residential beds nationally. However, demand over the same period rose by 10,000 to an estimated 432,000 beds.
  • Average fee levels are approximately 4.8% down in real terms over the last 3 years.
  • The big four national care providers account for 18.4% of the national market and in localised areas this can be more than 25% of the market.
  • Single or widowed women over 85 are most likely to become residents in homes. However, as residents are entering care homes at an older age, the average length of stay is falling.

In more detail

Occupancy:

The report revealed that average occupancy  in Sheffield remains on a similar level to other regions. The overall trend has risen from 88.3% to 88.57% since 2012/13.

In the consultation with providers, it was noted that the impact of low occupancy is experienced differently by different sized homes. As high levels of occupancy remain a key challenge for smaller care homes, who need a consistently high level to survive, many are considering taking residents with increased care needs. Although this is likely to have a positive impact on occupancy levels, the home must also take into account the potential impact on increased staffing costs and the risks associated with residents with increased care needs.

Medium and larger homes, on the other hand, are proportionally more secure and are often better equipped to manage reduced occupancy levels.

Costs:

Both staff and non-staff costs are rising for care homes in line with national levels of inflation.

Non-payroll costs have risen in all care variants, with continued increases in utility and food costs being key factors in the reported rises.

Payroll costs for nursing care continue to remain largely unchanged, with a marginal decrease to 56% from 56.3%. Going forward we expect another increase in the National Minimum Wage to increase (effective from 1 October 2015) to impact on a high number of operators, together with additional pension costs following the implementation of Auto Enrolment.

Although wage inflation in the UK is currently only running at 1.1%, as many of the staff who work within care & nursing homes are working at the National Minimum Wage level the increases to staffing costs have been more significant.

NWM increases against fee increases

Source: Sheffield City Council Communities Commissioning Service, ‘Fees and Market Analysis: Care Homes 2015/16’

Fees:

As the tables below show, residential fees in Sheffield are amongst the lowest in the region and in comparison with other core cities in the UK. Nursing fee levels compare more favourably, however.

Care home fees compared to other regions

Source: Sheffield City Council Communities Commissioning Service, ‘Fees and Market Analysis: Care Homes 2015/16’

Care home fees compared to other core cities

Source: Sheffield City Council Communities Commissioning Service, ‘Fees and Market Analysis: Care Homes 2015/16’

In fact, when looking at Sheffield care fees on a nationwide basis, Sheffield again falls amongst the lowest in the UK.

The below table excludes London and only shows the bottom quartile.

Care home fees compared nationwide

Source Laing  & Buisson “UK Local Authority Baseline Fee rates 2013/14″

A welcome rise in residential care home fees

Following the report, there is a draft recommendation for a rise in residential care home fees.

“There has been a ‘freeze’ in Care Home fees for the last two years, during this time we know that costs and, in particular, staff costs for care homes have continued to rise. Inflation and the National Minimum Wage rise have a direct impact on care home staffing costs. This year inflation has risen by 1.2% and the National Minimum Wage by 3%. Together these would equate to an estimated 2.33% cost increase for Providers.

“In previous years we were confident that the Market was continuing to develop and that there was no need to increase our fee level. This year though has seen some unplanned closures. Following consultation with providers it was acknowledged that Nursing home staffing  costs were a particular issue for this sector.”

The report concluded: “Therefore the recommendation this year is for a fees rise of 2.33 % to recognise the impact on inflation and minimum wage costs for all providers with an additional 0.18% (2.45%) to recognise the increased staffing costs for Nursing Home Providers.”

For more information on the rise in fees for Sheffield care homes, please click here.

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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