adult specialist care market analysis and projectionsanalysis and projections . william laing...

Adult Specialist Care market analysis and projections

William LaingFounderLaingBuisson

LaingBuisson#LBSCC

Scope: all social care services for adults ages 18-64

• £10.1 billion market value in UK (nearly all public pay) £8.7 billion England onlyapproximately half a percent of GDP

• Service volumes (England only):- 70,000 adults in residential settings- 201,000 adults receiving social services support

• Independent sector share of provision Average cost per service user- Learning disabilities 85% (residential + non-residential)- Physical disabilities including ABI 93% £31,000 a year- Mental health needs 93% (England only)

The adult specialist care market in numbers (2016)

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Market value by client type (England) 2016

Learning Disabilities, £5,239m

Physical Disabilities (excluding ABI), £1,417m

Mental Health Needs,£911m

Cognitive Disabilities, £84m

Acquired Brain Injury (care homes only),

£220m

Substance Misuse (care homes and non-

residential support), £828m

TOTAL ENGLAND,£8.7 billion

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Healthcare intelligence LaingBuisson

Market value by service type (England) 2016

Residential settings fees / costs, £4,141m, 47%

Home care, £671m, 8%

Supported living, £1,065m, 12%

Direct payments, £1,014m, 12%

Other social care services, £1,808m, 21% TOTAL ENGLAND,

£8.7 billion

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Expenditure trends, (England only)

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017proj*

£ m

illio

n

Council overheads* Council provided non-residential (exc. Council overheads*)Council outsourced non-residential (exc. Council overheads*) Council provided non-residential (inc. Council overheads*)Council outsourced non-residential (inc. Council overheads*) Statutory providers residential costsIndependent care home fees NOMINAL SPENDING ENVELOPE (£ CURRENT)REAL TERMS SPENDING ENVELOPE (£ 2015/16)

DATA DISCON

TINU

ITY

DATA DISCON

TINU

ITY#LBSCC


Service users (18-64) in residential settings (England)

-

20,000

40,000

60,000

80,000

100,000

Occu

pied

Bed

s

NHS residential settings Local authority staffed homesIndependent residential (for-profit + not-for-profit) Independent nursing (for-profit + not-for-profit)Shared Lives

DATA D

ISCON

TINU

ITY

DATA D

ISCON

TINU

ITY

Closure of NHS ‘bins’ drives Independent sector growth

Shift to supported living leads to exit of low needs residential capacity

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Decline of NHS in-patient capacity for learning disabilities (England)

0

2,000

4,000

6,000

8,000

10,000

12,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

BED

S

2001 Valuing People

2007 SecondMansell Report Autism

Act2009 2011Winterbourne View scandal breaks

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Occupancy rates in care homes for adults 18-64

82%

84%

86%

88%

90%

92%

94%

96%

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Council paid care home fees (England)

£0

£200

£400

£600

£800

£1,000

£1,200

£1,400

£ pe

r wee

k

Learning DisabilitiesResidential

Mental Health NeedsResidential

Physical DisabilitiesResidential

High fee inflation in 2000s partly attributable to 'churn'

Future prospects for fees – no return to the high spending Blair / Brown era. Council paid fees will struggle to keep up with National Living Wage

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Profitability of care homes for adults 18-64, EBITDAR as % revenue

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2004 2006 2008 2010 2012 2014 2016 2018

Priory Specialist Division(y/e Dec)

Voyage (y/e March)

CareTech (y/e Nov)

Care Management Group(y/e Feb)

Prime Life (y/e March)

Regard (y/e March)

Exemplar Healthcare (y/eMarch)

AGGREGATE

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• Austerity has thus far had little impact on profitability, despite downward pressure on real terms fees

• Providers must have been able to make cost savings in order to maintain margins

• Profitability may be under greater threat in the future, as cost saving opportunities rum out and as councils continue to put downward pressure on fees

Conclusions on care home profitability

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Council paid hourly home care rates (England) – proxy for supported living hourly rates

£0£2£4£6£8

£10£12£14£16£18£20

1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133 139 145 151

£ pe

r hou

r

Distribution of 151 English CASSRs

Individual authorities England average

A curate’s egg –good in parts

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Profitability of supported living and homecare

-15%

-10%

-5%

0%

5%

10%

15%

20%

2004 2006 2008 2010 2012 2014 2016 2018

MiHomecare, formerly Enara(y/e March)Lifeways (80% plus supportedliving, y/e Aug)*City & County Healthcare (y/eMarch)Mears Group Care Division(y/e Dec)Allied Healthcare (y/e Jan)

Westminster Homecare Ltd(y/e Dec)Helping Hands (y/e Sept)

Alternative Futures (y/eMarch)Dimensions (UK) Ltd

Turning Point

AGGREGATE HOMECARE

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• Aggregate profitability has been adversely affected by austerity

• The market leader, Lifeways (for-profit), consistently outperforms its peers in terms of profitability

• The two largest not-for-profits, Dimensions and Alternative Futures, appear to aim for just above break-even (this strategy requires substantial reserves)

• A major current threat is HMRC’s policy of enforcing National Living Wage for sleep-ins, and issuance of back-dated Notices of Underpayment

Conclusions on supported living / home care profitability

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• High staff turnover (must impact on quality)

• Nurse shortages

• National Living Wage

Staffing headwinds

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Pay indices – care homes for older people

LaingBuissonHealthcare intelligence

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

IND

EX 2

005/

06 =

1.0

0

Care home manager

salaries

Median full time earnings

(whole economy)

Pay Index for all hourly paid

staff in for-profit homes

National Minimum/Living

Wage adult rate

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Pay inflation projections – care homes for 18-64 adults


1.04 1.07

1.09 1.111.13 1.16

1.171.20

1.241.30

1.38

1.45

1.54

1.63

1.031.07 1.08 1.11 1.14

1.16 1.181.21

1.251.35

1.42

1.50

1.59

1.68

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70IN

DEX

200

6 =

100

Gross Pay Indexfor all hourly paidstaff in for-profithomes

NationalMinimum WageAdult Rate

National LivingWage (age 25plus)

April in each year from 2016

Projected increase in National Living Wage till 2020: 5.7% per annum

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Capacity ‘churn’ care homes for 18-64 adults


-7,000

-5,000

-3,000

-1,000

1,000

3,000

5,000CA

PACI

TY G

AIN

S /

LOSS

ES

YEAR ENDING MARCH 31

Capacity in Openings

Capacity in Closures

‘Churn’ is currently about 5% of capacity per year, with closures outweighing openings

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• Private pay portfolios more profitable than public pay

• Portfolios with high exposure to public pay have been his hard by austerity policies

• Public pay profitability bounced back in 2016 because of:

- hike in NHS Funded Nursing Contribution (NHS FNC)

- occupancy rate improvements

• But the welcome upturn in profitability could be eliminated by National Living Wage increases in two or three years if councils maintain pressure on prices

Profitability - conclusions

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Scale of care homes for younger adults (18-64) - homes for a) learning disabilities and b) other younger adults

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

<5 beds 5-9 beds 10-14 beds 15-19 beds 20-29 beds 30+ beds

Learning disabilities All other younger adult client types

Learning disability homes are typically small scale in line with providers’ and commissioners’ preference for ‘normalised’ living environments. Other younger adult homes are not similarly constrained.

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Age of care homes for younger adults (18-64)

0

5,000

10,000

15,000

20,000

25,000

30,000

Capa

city

by

hom

e ag

e ba

nd

Learning disabilities

Physical and sensorydisabilities

Mental health needs

Acquired brain injury

Substance misuse

Most capacity first registered pre-2000. Creates opportunities for purpose built care homes & supported housing

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Illustrative segmentation of adult specialist care marketServices catering for local demand for low intensity residential care services are highly vulnerable to monopoly purchasing power exercised by a single council (or handful of councils).

In contrast, services catering for high intensity, specialised demand drawing on a regional or even national catchment area are much less vulnerable: a) because reliance on referrals from any single council is small and b) alternative services from which commissioners can choose may be limited

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MIXED PROSPECTS

GOOD for providers at the specialised ‘high ticket’ end of the market, because:- Specialisation protects them from monopsony purchasing power of councils- Supported living is less of a threat and more of an opportunity

POOR for providers at the generic, low intensity end of the market, because:- They are fully exposed to monopsony purchasing power of councils- Supported living is a major threat to remaining low needs care homes

There is also a risk, at both ends of the market, that state-paid fees will fail to keep pace with cost inflation (NLW and other drivers). The risk will be mitigated if the post-election government prioritises a generous new financial settlement for social care

Medium term scenario

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adult specialist care market analysis and projectionsanalysis and projections . william laing...

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