Care home sector trends

Carer helping old man walk with his frame with two people in background

(last updated July 2019)

The care home sector is a dynamic one, where changes to the funding and regulatory frameworks happen fairly often. The system of care funding is also highly political. It's very important when you plan your business to make sure that you keep up to date with the latest developments and that you're aware of the current politics around care funding.

How the industry has performed?

The residential and nursing care sectors enjoyed huge growth during the 1980s and much of the 1990s as the number of elderly people needing care rose. Growth was also encouraged by changes in the way residential and nursing care were provided. Public sector provision declined during this period, while the private sector expanded to meet demand.

As the care sector became big business it attracted some very large companies, which built, bought out or leased whole chains of homes across the country. Care homes got bigger as businesses sought ways to improve their economies of scale and increase their profits.

The number of elderly people continues to rise and demand for care is still on the increase, but this is itself becoming something of a problem for the industry. As local authorities' financial resources have become more stretched they have looked for ways of reducing the cost of care provision. Some have turned to domiciliary care (looking after people in their own homes), while most have imposed stringent limits on the amount they will pay for residential and nursing care. Privately funded individuals too are finding it more and more difficult to meet the cost of care.

The housing market slump which began in 2008 caused extra funding problems for care homes. Many elderly people fund their care home fees by selling their house. But falling house prices and a very flat market made this much harder during the late 2000s and early 2010s, limiting the amount they had to spend on fees. High inflation didn't help, forcing care homes to put up their fees to keep up with the rising cost of things like food and energy. The mid 2010s did see the housing market and the economy begin to pick up considerably, but local authorities continued to struggle to balance their books in the face of further large spending cuts and austerity measures.

During 2016 the care home sector warned that 40,000 residential and nursing home beds could be lost by 2020 because of local authority underfunding.

The market has become increasingly challenging for care home operators who are expected to provide a very high quality service for an inadequate local authority fee. The position was made worse from April 2016 with the introduction of the national living wage for workers aged 25 and over. This is set at a higher rate than the national minimum wage and pushed up the wages bill considerably.

Attracting and retaining good care staff has also become much more of a problem - and care operators fear that shortages will become worse when the UK leaves the EU.

Important events

The 1990s saw much criticism of the way in which some care home businesses seemed to put profit before the well-being of their residents. National Minimum Standards for Care Homes were phased in during the early 2000s with the aim of safeguarding residents' well-being and dignity, overseen by a government watchdog. However, these standards led to even higher costs for many care homes.

In the early 2000s the government reformed the provision of care for the elderly. The cost of nursing care required by residents in care homes is now met by the NHS up to certain set limits. The cost of personal care (for example help with washing and dressing) and 'hotel costs' (meals and accommodation) is still met by the individual if he or she does not qualify for means tested funding (except in Scotland, where the total cost of institutional care is met by the state up to a weekly limit). All elderly residents are allowed a fully funded 12 week stay in a care home before being means tested.

In 2005 the Office of Fair Trading (OFT - since replaced by the Competition and Markets Authority) published a report on the care home industry in which it said that care homes should give clearer information about their fees and avoid hidden charges. The report also called for the provision of more and better information about fees and charges for elderly people. The mid and late 2000s and early 2010s saw the industry receive further criticism of the quality of care it provides, particularly over the use and administration of medication, the quality of care staff and even, in a few high-profile cases, abuse by staff.

The 2000s and early 2010s saw several initiatives aimed at ensuring quality standards in care homes, including:

  • the introduction by the Commission for Social Care Inspection (CSCI) in 2007 of a compulsory annual quality self-assessment scheme for care providers like care homes in England
  • the phasing in of a requirement for care workers in England, Wales and Northern Ireland to be vetted by the Independent Safeguarding Authority (ISA) - now the Disclosure and Barring Service (DBS) - under the vetting and barring scheme (a separate but aligned scheme applies in Scotland)
  • the launch of the Care Quality Commission (CQC) in April 2009 to replace the CSCI
  • changes to the way in which care providers in England are regulated, which were introduced in October 2010. The changes saw the registration requirement change from applying to specific types of organisation to applying to specific regulated activities, and a new set of outcome-based 'essential standards' for care providers was also introduced
  • the introduction of a new rating scheme for care homes in England in 2014, followed by the introduction of a new legal requirement for care homes to display their latest inspection rating

In 2010 the government began considering options for funding long term care of the elderly in the future. The options under consideration included a voluntary (or compulsory) insurance scheme, new taxes, and a one-off compulsory levy, along with a cap on total care fees paid by the elderly. In 2013 the government finally announced that it would be introducing a lifetime cap on individuals' financial contributions towards their own care. Initially this new system was scheduled to start in April 2016, but due to funding constraints the government later postponed the introduction until 2020. However, in 2017 the government announced that the cap would not be introduced as planned. Instead the government pledged to set out new funding proposals in the summer of 2018. However these had still not been released at the beginning of 2019.

The early and mid 2010s saw several fresh scandals exposed in care homes where residents were bullied and abused, along with the disastrous collapse of major care home operator Southern Cross. These events prompted the government to announce the introduction of tougher regulatory measures for the industry, and the CQC subsequently introduced a new inspection regime along with special measures provisions for failing care homes.

In 2017 the Competition and Markets Authority (CMA) released the findings of their year-long review into care homes. The CMA found that care homes had been charging self-payers fees that were unfair and too high. The CMA also highlighted the fact that many care homes charged fees after a resident had died. The review also found that the care home sector as a whole was underfunded and would need more funding to be able to meet future demand.

Keeping up with developments

Joining a trade association is a good way of keeping up with developments in the industry. Organisations like the Registered Nursing Home Association (RNHA) and the National Care Association (NCA) represent independent residential care providers in the UK. You can find out more about membership of these organisations on their websites.

Subscribing to an industry journal or newsletter is another excellent way of staying up to date. Journals like Caring Times and Care Markets are full of useful topical articles and features for the care home industry. Industry specialists Laing Buisson, who publish Care Markets, also publish a range of detailed industry reports such as Care Homes for Older People.

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