Welcome to our latest performance benchmarking for small care homes analysis.
All care home managers and owners ought to know how their business is performing against its competitors. We recognise that each care home is different and that specific challenges can vary from region to region, but an analysis of financial and non-financial indicators against the competition, including payroll costs and occupancy levels, can help highlight areas of concern or opportunities and, of course, highlight where your home is performing well.
The financial performance of any business is a key focus and recent changes in the care sector have put further pressure on operators to ensure financial viability and sustainability.
This is why, while average weekly fees continue to be a challenge for many care home operators, it is good to see price increases in all care variants.
The majority of care home operators will have seen payroll costs rise in the last 12 months, with increases in National Minimum Wage (NMW) in October 2014 and again in October 2015. Going forward with the introduction of the National Living Wage (NLW) – effective April 2016 – and continued implementation of auto enrolment to impact a high number of operators.
Over the last 5 years the above inflation wage increases have had a significant financial impact on the care sector, where many staff work at the NMW rate. Non-payroll costs have once again risen in all care variants, with sustained increases in utility (particularly lighting and heat) and food costs being key factors in the reported rise.
In most cases, light and heat costs count for the second biggest care home expenditure.
Our last (Oct 2014) care home performance benchmarking analysis saw occupancy rates continue to rise, with residential homes, nursing homes and specialist homes all achieving over 90% for the first time since 2011. That trend continues in 2015, with occupancy rates rising across the board. Once again specialist care homes continue to lead the way.
Commenting on the results Scott Sanderson, Healthcare Partner at Hawsons, said: “Generally speaking, small care home operators are performing well. Even though it is pleasing to see average weekly fees rise in all care variants, a nationwide outlook shows that Sheffield City Region care fees are amongst the lowest in the UK. With the increased financial focus on care home operators from CQC it is important that providers review their financial processors, monitor financial sustainability and look to improve cost efficiencies wherever possible. Improving energy efficiency, in particular, is something many homes should be looking at.”
“Following on from that, it is important that providers continue to attract more private clients. Occupancy rates once again stay above 90% in all care variants, but there are further opportunities through tax-efficient renovations and shrewd marketing, such as a well-designed website, which could see occupancy rise even more. We have details on both of those opportunities on our website.“
Positive signs, but an uncertain future?
Although this latest performance benchmarking shows positive signs for the smaller care home operators in the UK, the future is arguably a lot more uncertain. With the recent introduction of the National Living Wage and the ongoing funding pressures, the marginal increase in average weekly fees will not be enough.
George Osborne failed to deliver the additional funding for care homes in the 2015 Autumn Statement, which leaves the care sector in a state of uncertainty. You can read our full care home Autumn Statement 2015 review here.
It will be interesting to see how the sector develops over the next 12 months, that’s for sure.
More from our care sector experts
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If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.
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