Cost of Care Report: executive summary

Executive summary

Background

The Market Sustainability and Cost of Care Fund was established to enable local authorities to prepare their markets for Adult Social Care Reform. Councils are required to consider the median Cost of Care for the delivery of care and support services when setting their fees, as appropriate to the local care market.

The Government has delayed the national rollout of the adult social care charging reforms until 2025. The original purpose of the Cost of Care exercise was to establish a single median rate representing the cost of provision for each of the types of care in scope. In the context of charging reform the exercise was focused on preparing markets for reform and moving towards this to mitigate the impact of social care reforms. With the delay in the charging reform, it is even more important that the median is one in a range of tools the council uses to assess its fee rates. The median currently includes the rates paid by people funding their own care.

The council's duty for fee-setting, is not replaced by the Cost of Care exercise. Annual uplifts will be considered separately from the median cost of care rates.

The median rate is part of the evidence informing this process. It is not taken in isolation as the rate itself. The median cost was calculated on the total Cost of Care per hour for each type of care.

The Cost of Care exercise aimed to understand the cost of providing care services, and identify the median Cost of Care, as at 1 April 2022 from data supplied by care providers of:

• Age 65+ care homes, including residential and nursing care
• Age 18+ domiciliary care, excluding extra care and supported living

This executive summary sets out:

• The scope, considerations, conclusions, summary results and recommendations used in the mandated Cost of Care exercise for Oxfordshire.
• The assumptions found from the Cost of Care analysis, including the headline median outputs and additional analyses which support key conclusions on cost drivers within the care sector.
• Final recommendation on the outcome of the two Cost of Care exercises as at 1 April 2022. It should be noted that the council is in the process of preparing recommendations for the annual uplift in fees for 2023/24 which will take account of this work among other factors such as government grant conditions.

Approach

For the approach taken, the categories were:

1. Care provider submission of cost data for relevant care settings
2. Validation and cleansing of data
3. Engagement with providers to improve data quality
4. Analysis and modelling of costs, including scenarios on inflation, occupancy and profit
5. Submission of the government mandated Cost of Care template and report

Engagement with care providers

LaingBuisson was commissioned by Oxfordshire County Council to undertake the Cost of Care exercise on their behalf. LaingBuisson worked with the council over July and August 2022 to engage care providers through a variety of communication channels, the most important being intensive, direct telephone contact to encourage participation and completion of the toolkit. Over the course of the exercise, a total of 306 calls were made to care home providers in Oxfordshire, and validation of completed toolkits, including querying anomalies via CareCubed, took place in parallel.

The Cost of Care exercise report was based on validated submissions relating to individual, registered care home services within the council's boundaries which responded via the DHSC recommended CareCubed portal hosted by iESE. In the validation process, submissions were checked by LaingBuisson for sense and consistency and anomalies were amended as necessary with the agreement of providers.

Scope

There were 111 registered care homes in scope (mostly for older people, aged 65+) located within the Oxfordshire County boundary, after removing homes primarily for younger adults. DHSC guidance states that only older people’s care homes in contact with local authorities are in scope, but since nearly all older people’s care homes have at least one council-funded resident, most privately funded homes were interpreted as being in scope as well.

Considerations

The Council carefully reviewed the Cost of Care analysis undertaken and raised a number of concerns:

• The detailed Cost of Care report describes material flaws in the toolkit and the data received
• Fifty-six fully completed toolkits were validated, this is a return rate of 50% of care homes (55% for nursing homes and 42% for residential homes). This does not provide confidence that the medians derived are reasonable and reflective of the whole market
• One provider with multiple homes accounted for 29% of validated submissions
• Smaller providers are under-represented in the exercise
• There were no validated submissions from care homes located in South Oxfordshire
• Due to the wide variation in most cost lines among the sample of submissions, there are confidence limits related to the medians produced. The detail is set out in paragraph 2.11.3 of the full report
• The average cost of current placements quoted does not represent the price we are currently paying for new placements, which is higher
• The council has noted the median nursing and care hours are higher than seen in other areas where we have been able to benchmark and will require further investigation
• Occupancy is lower than expected in the sample group. This needs to be addressed to produce a more efficient local system

Conclusions

• The demanding toolkit and insufficient time to complete the toolkit may have been exacerbated by current staffing challenges
• Concern about confidentiality may have hindered the number of completed toolkit returns
• There may have been an assumption that the exercise would not lead to financial benefits for providers
• The difference between the Cost of care medians and the average fees currently paid to independent sector providers by Oxfordshire County Council, ranging from £223 to £290 per week
• The reported median differs from current rates, but it should be noted that there are several complicating factors which may have artificially inflated the median
• The Cost of care exercise has presented a gap between current fees and stated costs that we need to understand in greater detail
• Nationally, Oxfordshire is already amongst the highest-paying local authorities for residential care in the country.

Summary results

The following table provides the outcome of the cost of care exercise and a model based on 90% occupancy:

• New placements taken on their own result in a higher median rate
• Nursing rates include Funded Nursing Care (FNC) fee of £209.19
• Return on capital 6% pa applied to median freehold valuation per resident
• Return on operations has been benchmarked at 5% mark-up on the operating costs

Recommendations

• It is the council’s intention to take forward a median based on 90% occupancy minimum to inform the fee setting process and the actual cost of care
• The council will invite providers to help develop our approach to adjusting for fixed and variable costs
• The council will investigate the number of nursing hours which currently stands between 12-13 hours per resident per week in Oxfordshire. The nursing hours per resident per week calculated from LaingBuisson’s Care Cost Benchmark Subscription product is 8.4 hours per resident per week
• There is an apparent over supply of care home beds across the county which the council is seeking to address in the coming years. Achieving higher occupancy in the more viable homes is part of this approach
• On the balance of available evidence, Oxfordshire has confirmed the return on operations at a rate of 5%, which is the same as the median outcome from the cost of care exercise

Home care

The cost of care exercise report was based on validated submissions of CQC registered home care providers, using the toolkit developed by ARCC in partnership with the Local Government Association. In the validation process, submissions were checked by LaingBuisson for sense and consistency and anomalies were amended as necessary with the agreement of providers.

Scope

There were ninety-six home care services in scope, with a CQC registered address located within the boundaries of Oxfordshire County. In scope services included for-profit and not-for-profit providers which predominantly offer visiting domiciliary care to adults aged eighteen or over, funded by local authorities, the NHS or privately.

Those which mostly serve clusters of users at fixed ‘extra care’ or ‘supported living’ locations were not in scope. Out of scope services can usually be identified through their CQC registrations as those with an ‘extra care’ or ‘supported living’ service type, but without a ‘home care’ service type.

Considerations

The Council carefully reviewed the Cost of care analysis undertaken and raised a number of concerns:

• The Cost of care exercise undertaken by LaingBuisson on behalf of Oxfordshire County Council returned a median cost of care rate of £30.12. However, there were material flaws in the sample as follows:
• Low rate of response: only 21 toolkits were submitted and validated by LaingBuisson representing a return rate of just 22% of providers
• There was not a sufficiently broad geographical spread of providers
• There was a higher number of small and medium companies amongst those who completed returns, and there were no large corporate group services, this is likely to have skewed some cost areas
• Both those completing the return and those analysing the returns found it difficult to ascertain the exact cost of running the business directly linked to the delivery of home care, and this was seen in a number of the returns providing back-office costs which were significantly higher than anticipated when compared to other information available on these costs

Conclusions

• The report describes material flaws in the toolkit and the data received
• The return rate of 22% of home care providers does not provide adequate confidence that the medians derived are reasonable and reflective of the whole market
• There are significant anomalies in the submissions for business costs, which when tested with providers indicated variations in completing the toolkit; it is possible costs were included which did not directly relate to the cost of delivering home care
• There are no large corporate providers represented in the exercise although there is one currently working in Oxfordshire. It is likely that their economy of scale would have lowered the median
• The broader evidence indicates 5% is a reasonable rate of operating return
• There is a risk the providers who submitted returns are not representative of the wider market
• Over the past twelve months, the council has worked to develop an efficient home care model. A significant number of providers have joined the Live Well At Home framework at the rate of £25.20 (2022/23 rate).
• Oxfordshire has been viewed as a positive partnership and business environment for competitors in this market
• Nationally, Oxfordshire is already amongst the highest paying local authorities for home care in the country.

Summary results

• During the cost of care exercise, Oxfordshire learnt that the home care back-office costs were significantly higher compared to other areas, this is set out in detail in the full report
• Reported business costs were at a median of £9.99 compared to the Homecare Association’s national minimum pro forma cost structure which cited business costs as £5.95
• £5.95 is supported by Oxfordshire’s previous Cost of care exercise commissioned in 2020, which returned business costs at £5.94 per hour, which would rise to £6.20 when inflated to the 1 April 2022 prices.

The cost of care exercise calculated the cost as of 1 April 2022. The table below shows the current average hourly fee rates paid for home care for people aged 18+ and the median weekly rates arising from the Cost of care exercise.

18+ Domiciliary Care Rate per hour

• Current Average 2022/23 - £25.20
• Oxfordshire County Council - Median Cost of care rate from validated submissions - £26.15

Recommendations

• Building on the conclusions above, the median rate is calculated at £26.15
• Return on operations has been benchmarked at 5% mark-up on the operating costs
• The Council has confirmed it will accept business costs at £6.20 per hour. The considerations for this are set out in the full report in paragraph 2.9.2.