Kelly OBE, Residential Forum Trustee, gives his take on the state of the care
home market survey
In a week in which the FT has
reported the sale of HC-One (the largest care home provider in the UK) by its
consortium owners for £1 bn. it may seem slightly odd to be making reference to
‘cautious optimism’ as a headline conclusion from the most recent annual care
sector survey report from Barclays. However, Barclays (together with Caring
Times, Knight Frank and Pinsent Masons) in producing their annual review of the
care sector reflect a continuing interest by investors driven primarily by
demand and demographics. This survey was first undertaken seven years ago and
so offers a useful indication of trends and developments in the care sector. It
is rich in data and offers a valuable provider perspective on the state of the
sector and the challenges it currently faces.
Interestingly the analysis
highlights how, over the seven years of the survey, the profile of provision
has changed – services are become both more specialised and more diverse:
provide respite care
There appears to be a consensus
by providers on the biggest challenges (and no particular surprises):
costs and issues with recruitment
authority fee rates (and with 83% of providers reporting the percentage of
self-pay residents had risen it is clear this is now a firm strategy)
However, it is interesting that
only 42% of providers now regard maintaining a good reputation as one of their
more serious concerns. In addition, there appears to be a more positive account
of the regulatory landscape and relations with CQC. A sign of a maturing sector
This survey report also
challenges some popular preconceptions about the sector such as the average
length of stay in care homes. The data underpinning the survey found that less
than 3% of responders reported length of stay less than six months while over a
third said the average stay was longer than 2 years.
The sector appears to be undecided
on the impact of the National Living Wage as just under half of responders felt
it was not a threat to viability.
Nevertheless, recruitment and
retention are identified as the key challenges by most care providers, especially
for nurses. Not surprisingly future funding is emphasised as commissioners,
regulators and providers alike with various ‘think tanks’ lining up to describe
the social care as at a ‘tipping point’.
Within the report is a view from
property specialists, Knight Frank, on care home performance and profitability.
Their summary is always an interesting take on the state of the sector.
Headline results show that for 2016/17 occupancy rates rose for the 5th
consecutive year and average fee rates outstripped RPI inflation for the fourth
year running. Two key indicators that analysts will consider when evaluating a
sector – and a good time therefore for the HC-One sale?
Average occupancy (all care) is
shown as 89.2% (although regional variations range from around 83% to 93%).
Average weekly fee rates in this survey are shown as £746, reflecting a shift
towards private pay especially in the south of England. Finally, profitability
is averaging 25.2% of income (EBITDARM) – a fall from the 32.8% high of 2006/07
in line with much of the economy.
One of the more interesting bits
of information, I think, is profitability as determined by the age of the
property. The Knight Frank data shows profitability at 18% for care homes that
are pre-2000; 28% profitability for care homes built between 2000 and 2009 and
32% for care homes opened after 2010. This is a pretty significant difference
which would impact on viability and sustainability and appears to suggest an
emerging market for better quality of accommodation. It is to be hoped that discerning
consumers will look equally at the quality of care when making decisions
between care providers.