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@colintwangel@ukhca The professional association for homecare providers Sustaining the market for homecare Colin Angel, Policy and Campaigns Director 2 nd October 2015
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@colintwangel@ukhca Introduction to UKHCA Promoting high quality, sustainable care services so that people can continue to live at home 25 years history Membership > 2,200 Longstanding work with: Department of Health; CQC ADASS; Care Provider Alliance Care and Support Alliance Low Pay Commission National media
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@colintwangel@ukhca Outline for the next 50 minutes The operating environment Commercial issues for providers National Minimum / Living Wage Cost of care Market stability Market shaping Market stability Suggestions for commissioners and procurement leads Questions and answers
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@colintwangel@ukhca The operating enviornment
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@colintwangel@ukhca Future demand for adult social care for people aged 65 years 33 per cent of men and 15 per cent of women will never need formal care 19 per cent of men and 34 per cent of women will need residential care 48 per cent of men and 51 per cent of women will need domiciliary care only
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@colintwangel@ukhca Public perceptions of homecare through the Media Rushed and undignified care: Short visits; theft and poor care captured on CCTV Workers’ terms & conditions: NMW compliance, including new case-law Need for ethical use of zero-hours contracts Worker recruitment: Ability to recruit sufficient workers with the right values Impact of the benefits system on workers’ availability Market instability: Large provider on market & written down to zero value
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@colintwangel@ukhca What we also know Relationships with regular careworkers highly valued by people who use services Over 880,000 people use homecare in the UK last year Homecare supplies regular, flexible, work for over 500,000 people
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@colintwangel@ukhca Public preference for care at home 9 in 10 people aged 50 years or above would prefer their care needs to be met in their own home (Saga / Populus 2014) 9 in 10 people aged 50 years or above would prefer their care needs to be met in their own home (Saga / Populus 2014) 7 in 10 of British adults wish to die at home (Dying Matters / ComRes 2014) 7 in 10 of British adults wish to die at home (Dying Matters / ComRes 2014)
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@colintwangel@ukhca Some thoughts as a provider representative No provider wants to deliver inappropriate, rushed or undignified care No provider is paying careworkers low hourly rates to make excessive profits No provider is using zero hours contracts without good reason No self-funding service user requests 15-minute visits for personal care
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@colintwangel@ukhca National Minimum Wage & National Living Wage
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@colintwangel@ukhca From the Low Pay Commission Report 2014 “4.61 The adult social care sector continues to be under severe financial pressures stemming from the reductions in local authority budgets and the related constraints on the level of fees paid to independent care providers… … In our judgement providers will be faced in such circumstances with either being NMW non-compliant or failing to meet some other duty…” “4.61 The adult social care sector continues to be under severe financial pressures stemming from the reductions in local authority budgets and the related constraints on the level of fees paid to independent care providers… … In our judgement providers will be faced in such circumstances with either being NMW non-compliant or failing to meet some other duty…” National Minimum Wage, Low Pay Commission Report 2014
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@colintwangel@ukhca Minimum Wage: What you need to know Providers cannot use low fees or payment solely for “contact time” as a defence for NMW non-compliance But all working time must be funded from fees charged Providers may have >80% of their business from councils Implications of non-compliance for providers: HMRC investigation is time consuming (diverts resources) Naming criteria (reputational risk) Increased fines and re-payment (financial exposure)
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@colintwangel@ukhca Total working time + Minimum Wage compliance (Highly simplified) Basic rate(s) of pay are used. Providers can not rely on unsocial hours premiums or enhancements for short visits to achieve compliance with NMW Average pay over reference period of up to 1 month Total pay before enhancements Total contact timeTravel time + Training >= £6.70 Time spent providing care in the service user’s home Includes: Travel between visits and time spent on training approved by the employer Excludes: Journeys to and from worker’s home and other ‘non-working’ time
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@colintwangel@ukhca Understand “working time” for the Minimum Wage (Highly simplified) Working time includes time when the worker is: Delivering care (“contact time”) Travelling in connection with their work (by whatever means of transport) Waiting to begin a journey, or begin an assignment on arrival Undertaking training or supervision Working time excludes: Authorised rest breaks Time spent travelling between home and a worker's normal place of work (or training) and back home again (Despite the recent “Tyco” ruling by ECJ)
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@colintwangel@ukhca Payment of travel costs HMRC can deduct travel costs from total pay if they aren’t reimbursed by the employer Unfortunately, travel costs which are reimbursed don’t increase total pay for NMW purposes Recommendations for pricing: Providers must make a reasonable contribution towards mileage (cover at least petrol costs) Pay standard class tickets/fares at face value Don’t rely on mileage rates to achieve NMW-compliance
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@colintwangel@ukhca Minimum wage non-compliance: The risk factors Low pay rates: Basic rates around £6.70/hour Relying on enhancements for short visits/unsocial hours Not changing rates for younger workers on their birthday Payment for “contact time” only, especially with: Large amount of travel time, relative to “contact time” Use of very short visits and/or long gaps between them Other issues: Insufficient record-keeping (eg. travel time) Deductions for uniforms or accommodation provided
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@colintwangel@ukhca UKHCA’s NMW Toolkit A free resource for the homecare sector Based on HMRC documents Includes guidance on: How NMW works in complexity of homecare services How to audit compliance Suggested actions to achieve/improve compliance Download from www.ukhca.co.uk/nmwtoolkit
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@colintwangel@ukhca What should homecare cost? For an authority… What the authority has paid historically? What the authority can afford to pay now? What the authority can afford given anticipated budget cuts? The price needed for a sufficient local market? For providers… The sum of staff costs, running the business, profit/surplus The amount that is commercially sustainable?
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@colintwangel@ukhca From the Statutory Guidance to The Care Act 2014 for England Councils should have contract terms, conditions and fee levels which are: Appropriate Support and promote the wellbeing Allow providers to pay at least the National Minimum Wage Provide effective staff training, development and retention Encourage innovation and improvement Councils should have regard to minimum fee level guidance Department of Health (2014) Care and Support Statutory Guidance, paragraph 4.31
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@colintwangel@ukhca Using UKHCA’s Costing Model Do… Enter into open-book dialogue with providers Find common ground for assumptions of gross margin and profit/surplus Don’t… Design alternative models which change the calculation method Argue the price down to what the council wants to pay UKHCA’s free on-line costing model is available from: www.ukhca.co.uk/CostingModel
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@colintwangel@ukhca From the Association of Directors of Adult Social Services (ADASS) “We're strongly recommending that people use the UKHCA model to work through with providers alongside looking at all local conditions that would then determine what is a reasonable price for care.” Sandie Keene, President of ADASS quoted by BBC News, February 2014BBC News, February 2014
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@colintwangel@ukhca UKHCA’s Minimum Price for Homecare First published February 2014 New updated rates: £16.16/hr for new National Minimum Wage from October 2015 £16.70/hr following introduction of National Living Wage in April 2016
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@colintwangel@ukhca Factors to consider in the minimum price for care Workers receive legally compliant Ts&Cs: At least National Minimum Wage (or National Living Wage) Travel & training time; travel costs, holiday pay, etc Where a living wage is required by councils they must fund Providers must cover costs of running their business: Legal, regulatory and quality costs Providers must be able to make a profit or surplus: Should be in-line with reasonable market expectations Commercial businesses need a profit to repay investors Charities need a surplus to re-invest in services
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@colintwangel@ukhca Minimum Price for Homecare £16.70/hour (from April 2016) Contact time at NMW or NLW£7.13 11.4 mins travel/contact hour£1.35 4 miles at £0.35p/mile£1.40 Employers' NI (9.5%)£0.81 Holiday pay (12.07%)£1.02 Training time (1.73%)£0.15 Pension contributions (1%)£0.08 Running the business (25.5% of total price) £4.26 Profit/surplus (3% of total price) £0.50 See: www.ukhca.co.uk/downloads.aspx?ID=434
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@colintwangel@ukhca From the Association of Directors of Adult Social Services (ADASS) “Each local authority should work with providers to establish between themselves the costs of care. This must take into account the local economic environment, so that fees are consistent with the expectations of an improving social care market.” David Pearson, President of ADASS, March 2015
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@colintwangel@ukhca From the Statutory Guidance to the Care Act 2014 “[Fee levels should] allow the service provider ability to meet statutory obligations to pay at least the national minimum wage… Local authorities should have regard to guidance on minimum fee levels necessary to provide this assurance, taking account of the local economic environment. 51 ” 51. UKHCA Minimum Price for Homecare tool “[Fee levels should] allow the service provider ability to meet statutory obligations to pay at least the national minimum wage… Local authorities should have regard to guidance on minimum fee levels necessary to provide this assurance, taking account of the local economic environment. 51 ” 51. UKHCA Minimum Price for Homecare tool Paragraph 4.31
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@colintwangel@ukhca Market shaping
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@colintwangel@ukhca Market shaping: a definition To engage with stakeholders to develop an understanding of supply and demand and to articulate likely trends that reflect people’s evolving needs and aspirations, and (based on evidence) to signal to the market the types of services needed now and in the future to meet them, encourage innovation, investment and continuous improvement Department of Health (2014) Care and Support Statutory Guidance To engage with stakeholders to develop an understanding of supply and demand and to articulate likely trends that reflect people’s evolving needs and aspirations, and (based on evidence) to signal to the market the types of services needed now and in the future to meet them, encourage innovation, investment and continuous improvement Department of Health (2014) Care and Support Statutory Guidance
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@colintwangel@ukhca How can a local authority effectively “shape” a market? Direct impact on services it procures: Prices paid & commercially sustainable contracts Signalling commissioning intentions and future needs: Forward-looking market position statement and JSNA Supporting people using self-directed support: Genuine access to sufficiently-funded direct payments Information for people about the whole local market Identify and meet workforce training needs
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@colintwangel@ukhca How will market shaping affect providers? A win-win opportunity for closer working with local council Councils need to know more about local self-pay market Councils need to be better at advising/directing self-funders Councils may identify specific workforce development needs Training for independent/voluntary providers could be made available to meet identified needs Changes to eligibility, pressure on council budgets and increase in choice and control More people will be self-funding or receiving a direct payment Councils need to know where to direct them to
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@colintwangel@ukhca How stable are local care markets?
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@colintwangel@ukhca “The Homecare Deficit” Prices paid for homecare See: www.ukhca.co.uk/rates
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@colintwangel@ukhca Rates vs UKHCA’s Minimum Price Only 28 councils were paying above UKHCA’s Minimum Price 4 councils paying and average < £11.01
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@colintwangel@ukhca Current underfunding & impact of National Living Wage UKHCA estimate £514 million deficit in homecare sector in 2015-16 Age profile of homecare workforce means that 86% will receive National Living Wage from April 2016 NLW will add estimated £303 million to 2016-17 wage bill
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@colintwangel@ukhca Homecare provider survey (September 2015) Sample size: 10 large providers 398 locations 36 million hours per year 83% of hours from councils Examples: Two providers planning exit from 39% to 45% of current local authority business One provider stated 95% of all council business under review
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@colintwangel@ukhca EBITDA Margin as an indicator of homecare market stability Large providers’ market expectation: 7.5% Large providers consider closing unprofitable branches: 5.0% Large providers consider exit form state-funded care: 3.0% September 2015 Median: 4.1% April 2016 (Projected) Median: 1.3% EBITDA is a proxy for a company’s profitability, intended to allow a comparison of profitability between different organisations EBITDA Margin is EBITDA divided by total revenue Source: UKHCA Submission to HM Treasury, August 2015 1% 2% 3% 4% 5% 6% 7% 8%
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@colintwangel@ukhca Stark choices for homecare providers Fail to comply with NMW? (Illegal) Find additional cost savings (marginal?) Build volume through mergers or acquisitions Avoid any innovation which carries up-front costs or risk Reduce dependence on local authority work Exit from state-funded market
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@colintwangel@ukhca CQC Market Oversight for Provider Failure From April 2015, CQC operates a new regime to detect failure of large & “difficult to replace” providers Largest care home and homecare providers to be subject to additional financial scrutiny by CQC Ensure providers take remedial action to remain in business, or Exit market without risk to residents and service users Councils remain responsible for managing local failure
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@colintwangel@ukhca CQC Market Oversight for Provider Failure Homecare: a)>30,000 hours/week, or b)>2,000 people receiving care, or c)>800 people receiving an average of 30 hours/week Residential: a)>2,000 beds, or b)1,000 to 2,000 beds, and either: i.>16 local authority areas, or ii.>10% market share in 3+ authorities Special arrangements for very hard to replace providers who don’t meet above
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@colintwangel@ukhca Social care market shaping, sustainability & contingency planning Commissioning for Better Outcomes A framework for councils’ self-assessment & identify areas for further improvement Market Shaping Toolkit (IPC) Support for smaller care providers and local authorities to engage in market shaping Market Sustainability Guidance (Cordis Bright) A guide to light touch oversight of local care markets Social Care Provider Failure Guidance (LGiU) Contingency planning resources (publication date TBC)
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@colintwangel@ukhca Suggestions for commissioners & procurement leads
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@colintwangel@ukhca Preparing to let new contracts Better dialogue with providers before invitation to tender Remove pointless, disproportionate clauses which add cost but little benefit Honest & transparent costing exercises with providers Use UKHCA’s free Costing Model Test UKHCA’s Minimum Price for Homecare assumptions Use costing exercises for internal pressure within authority
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@colintwangel@ukhca What type of contract? Providers need volume business when rates are low Find the compromise between wide choice of providers and volume purchase Zoning geographic areas Reduces travel time / costs Reduces risk of NMW non-compliance Avoid subcontracting arrangements Convenient for authorities, but add costs for providers Plan for phased implementation TUPE transfers never go according to plan
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@colintwangel@ukhca Tendering exercises Don’t distort local market by imposing a “maximum” or “indicative” price, unless: It is based on a robust pricing exercise, and You are willing to state a minimum acceptable price Do ask providers to break-down their costs in tenders Will help discharge your Care Act responsibilities How does the price cover NMW/NLW, travel, training, etc? Don’t use ‘procurement law’ as an obstacle to dialogue
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@colintwangel@ukhca Self-funders and non- contracted providers Information and guidance for self-funders Need to support people to make choices from the whole market Relying on the council’s approved list inappropriate NHS Choices; Local e-market places Working with suppliers to self-funders Failure of one of these providers will trigger your temporary duty under the Care Act How will you incentivise these providers to cooperate?
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@colintwangel@ukhca Outcome-based commissioning Attempt to reduce demand by increasing independence Improved success where: Outcomes are defined which can be understood & measured Providers are committed to concept and process There is trust between provider and commissioner Potential risks: Monitoring arrangements can be onerous for provider & council Inappropriate payment-by-results could destabilise providers Recommended reading: Bolton, J (2015) Emerging practice in outcome-based commissioning for social care Bolton, J (2015) Emerging practice in outcome-based commissioning for social care
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@colintwangel@ukhca Individual Service Funds (ISFs) An alternative to direct payments for people who don’t want to manage money Potential benefits: Switch from prescriptive time & task to user control Provider and user agree best way to use personal budget Council’s role to contract and check money used properly Recommended reading: Tomlinson & Livesley (2013) Individual Service Funds for Homecare Tomlinson & Livesley (2013) Individual Service Funds for Homecare
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@colintwangel@ukhca NICE Homecare Guidance (Published 23 November 2015) Includes: No visits <30 mins (with minor exceptions) People know their careworkers & continuity of workers Better coordination between professionals “Named care co-ordinators” Non-statutory, but describes evidence-based practice Recommendations apply to commissioners & providers
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@colintwangel@ukhca What is UKHCA doing? Evidence to: Treasury / Spending Review 2015 Low Pay Commission Research: Operating environment Market stability Working with national media: ITV Tonight (Thurs, 8 th Oct) Direct approaches to councils Constructive Solutions forum
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@colintwangel@ukhca How to contact me Website: www.ukhca.co.uk E-mail: policy@ukhca.co.uk Telephone: 020 8661 8152 Twitter: @colintwangel and @ukhca
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