Post on 06-Jul-2020
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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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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
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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
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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
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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
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-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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Healthcare intelligence LaingBuisson
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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Healthcare intelligence LaingBuisson
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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