Analysing the true cost of care

Adam Hartrick and Philippa Doyle report on the settlement of a recent dispute between care home providers and councils in Yorkshire over what constituted a fair price for the provision of care.

A group of residential and nursing homes together with the Independent Care Group (ICG), their representative, challenged the decision of North Yorkshire County Council on 24 February 2012 to set the fees for council placements at residential and nursing homes for 2012/13.

The claimants asserted that the council had mistaken the law by failing to consider the actual cost of care when setting the fees for residential and nursing home placements. The council argued they had consulted with the providers, but the providers claimed they had not been given sufficient information to enable them to properly engage. They also suggested that the alleged failure to calculate the actual costs of care meant the council had been unable to comply with its public sector equality duty.

ICG and its members had strong concerns about the levels of the council’s fees for a number of years and had raised the issue year on year. In 2004 the ICG and the council worked together on the Joseph Rowntree Foundation model, (Laing & Buisson) Fair Price for Care, but the work was unfortunately not taken forward. Fee increases also reduced year by year, culminating in a 0% increase for 2010/11, at a time when costs were increasing significantly.

ICG and its members - being mindful of success in judicial reviews in other areas of the country [1] - issued judicial review proceedings against North Yorkshire County Council in May 2012, shortly after our instruction that March. The council came to the negotiating table almost immediately and an extensive mediation led to a detailed settlement agreement, whereby both parties secured an independent sector provider to carry out a formal cost of care exercise, which resulted in significant uplifts in fees for providers.

The process involved issuing judicial review proceedings, a full day mediation, an independently commissioned cost of care exercise and extensive negotiations, resulting in the recent implementation of a new contract, coupled with new rates which more fairly reflect the significant costs faced by providers in delivering care to this ever-increasing market. The need to actually take the case to a Court hearing was avoided, but the agreement reached between the parties was endorsed by the Court by way of a settlement agreement.

With the new contract now in place, the working relationship between the parties has benefitted from the candid discussions that have taken place, as well as the increased levels of engagement. Discussions are anticipated in the very near future regarding the cost of care exercise for the next three-year period.

Our advice to local authorities when going through the process of setting fees, is to have regard to the guidance issued in 2004 to local authorities, one element of which describes: “this cost should be set….to be sufficient to meet the assessed care needs of supported residents in residential accommodation.”

It also states: “In setting and reviewing their usual costs, councils should have due regard to the actual costs of providing care….” A local authority can only depart from the 2004 guidance for good reason and it cannot be said to have had due regard to the actual costs in providing care when setting its rates, if it has not considered what the actual cost of providing care is.

Key to determining the actual cost of care, is the level of engagement with providers. Working together to identify an independent third party to carry out the cost of care exercise, and the ICG encouraging the involvement of providers to submit the necessary data, made the results worthwhile. All too often, the lack of participation by a true cross section of providers within an area can skew the data resulting in unworkable figures. The ICG and providers were also willing to accept a stepped increase in rates, rather than an unrealistic expectation of an overnight increase. Working in partnership, being open and transparent and not simply relying on budgetary constraints are key to avoiding challenges.

Whilst it is understood that councils are facing constant pressure to make savings, these cannot be relied upon in isolation. Providers are facing increased regulation, and increases in pensions costs and the National Minimum Wage but are still entitled to make a profit. Whilst undoubtedly every effort is made to permit individuals to remain in their own homes with appropriate support, care home provision is a necessary and expensive part of the adult social care budget which councils must tackle head on to ensure their local market is a settled and sustainable one with sufficient choice for individuals and a sufficiently high quality of provision.

Driving down costs runs the risk of providers exiting the market place and only accepting private placements, leaving reduced council provision. It is important to ensure a cross section of provision and in fact the new Care Act provisions require councils to ensure they have a range of providers offering a choice of high quality appropriate services. The Care Act also places obligations on councils to manage market oversight and provider failure, to ensure that everyone who receives care and support is protected if the company in charge of their care is no longer able to operate. Whilst this does not place a direct obligation on a council to pay a fair price for care, if they do not, and providers go out of business, then the council is left with an obligation to source care not just for council funded residents but for all residents of that provider – a distress purchase will inevitably be more expensive than a well managed and well costed purchase. Market oversight will be led by the CQC with an aim to ensure financial sustainability.

Since there have now been sufficient judicial reviews, there is no longer the requirement to take such issues to court as the position is now established but the advent of the Care Act may change the playing field once again. Time will tell.

Adam Hartrick and Philippa Doyle both work for Hempsons Solicitors, specialising in the care sector. Adam is a Partner and Philippa an Associate.

[1] A number of judicial reviews in recent years (R (Forest Care Home Ltd) v Pembrokeshire County Council [2010]; R (on the application of) the Sefton Care Association and Others v Sefton Council [2011]; R (East Midlands Care Ltd) v Leicestershire County Council [2011]; R (Mavalon Care Ltd and 6 others) v Pembrokeshire County Council and R (Bevan and Clarke LLP) v Port Neath Talbot Borough Council [2012]) have seen challenges to local authorities on their decision making processes, citing poor evidence and a failure to properly consider the true cost of care.