At least 70% of homecare hours are purchased by local authorities and NHS Integrated Care Boards (previously Clinical Commissioning Groups). The decisions made by local authority and NHS commissioners shape the quality, delivery and financial viability of the market.
Effective management of supply and demand in homecare depends on various factors. These include, but are not limited to, the total volume of hours required; local geography, including population density and travel requirement; fee rates; type of contract; e.g., framework or block; number of providers willing to contract with councils; number of careworkers; hours worked per careworker; presence and capacity of council or NHS in-house teams; and number of self-funded clients.
Inadequate central government funding for homecare has resulted in too great a focus on price, with some public bodies encouraging a race to the bottom and some tenders now placing more weight on price than quality.
Under the Care Act 2014, local authorities also have a statutory duty to ‘shape’ the social care market, to ensure there are sufficient good quality care services to meet needs.
The cost of delivering homecare is highly sensitive to the volume of hours delivered. The higher the volume of hours delivered per registered location, the greater the economies of scale and lower the operational costs per hour. Not only do all registered homecare providers need to cover overheads such as a registered manager, back office staff, training, recruitment, PPE, CQC registration, insurance, IT, telephony, office rent, rates, utilities, but the volume of hours can also impact on the experience of careworkers.
With a lower volume of hours, careworkers are more likely to have significant gaps in their rotas and this can reduce the salary they receive each day. It can also lead to inefficient use of their time; for example, careworkers may be out on the road for 40 hours in total, but deliver only 20 hours of paid contact time. It is difficult for them to use the time in the gaps productively. Employment conditions like this exacerbate staff turnover.
We conducted a survey of Homecare Association members during July and August 2023, to investigate reports from our members of a change in the number of homecare hours available to them from local authorities. We received responses from 225 homecare providers, representing just over 23,282 careworkers supporting nearly 42,995 older and disabled people.
We found that 8 in 10 (80%) of respondents who are being commissioned by local authorities had experienced a reduction in the number of hours available to them to provide. Nearly half (48%) said they had seen a 25% or above reduction in the number of hours available to them from their local authority. Data from other sources, including the ADASS Spring Survey, suggests there has not been a reduction in the total number of hours of local authority commissioned homecare; if anything, it has increased. Instead, the number of hours are being fragmented across more providers.
In some areas the use of international recruits has enabled new and existing providers to increase their capacity to deliver. International recruits must be employed on full-time salaried contracts and thus typically work more hours per week than the sector average per careworker (c. 25 hours per week). In some places, there are not enough hours available for international recruits to work full-time.
Reduction in volume of hours available per provider appears to be a particular issue in local authority areas which rely heavily on framework contracts. Where local authorities commission to a limited number of lead providers in specific geographic zones, volume of hours has remained more constant. In some areas, local authorities have allowed so many providers to join their frameworks, that they are struggling to find adequate resource to monitor quality of provision.
Framework contracts make it difficult for providers to plan effectively. Providers who responded to local authority requests to increase capacity and recruited internationally, have taken on substantial liabilities without guarantee of income. Losing 25% or more hours creates substantial risk to the viability of homecare providers. In some local authority areas, many smaller providers are handing back packages or ceasing to trade. Local authorities then have to manage potential safeguarding risks and find alternative provision, which obviously has a negative impact on people drawing on services and careworkers.
Late payments can also have a significant impact on businesses, leading to cash flow difficulties, which can affect ability to pay bills and the business’s own suppliers. Without predictable payment terms, homecare providers find it difficult to invest and expand.
A majority (81%) of respondents that hold contracts with their local authority have experienced late payments. Over 8 in 10 (83%) that hold contracts with the NHS have experienced late payments. In some cases, payments have been outstanding for over a year. Individual small providers have told us they are owed as much as £350K by local authorities or ICBs. Some providers also commented on issues with inaccurate payments that may take months to resolve.
The definition of prompt payment for a small business supplier, contained in the voluntary Prompt Payment Code, is to pay 95 per cent of invoices within 30 days. We asked respondents about their average payment length with local authorities and the NHS. 21% said their average payment length was over 90 days from local authorities, and 7% said their average payment length was over 120 days. Nearly a quarter (23%) respondents said their average payment length was over 90 days from the NHS, and 9% said their average payment length was over 120 days.
Late payments can have an impact on availability and capacity in the homecare market. Some providers are choosing not to take on any work with their local authority or the NHS because of inadequate fee rates and unpredictability of payments for work delivered.
Recommendations
We call on:
- Local authority commissioners to appreciate the importance of volume of hours available per provider in ensuring staff retention and financial sustainability of services, and to balance more carefully supply and demand, particularly when using framework contracts.
- Local authority and NHS commissioners to abide by the Prompt Payment Code and ensure timely and accurate payment of invoices to homecare providers.
- Local authority and NHS commissioners to offer greater security of hours and income to trusted providers, so they are able to invest in their workforce and manage cash flow effectively. Ensuring an appropriate balance between block and spot purchase contracts combines certainty with flexibility. Offering payment in advance on planned commissioned hours, rather than in arrears on actual, is also helpful for maintaining provider stability.
- Local authority and NHS commissioners to move away from purchasing homecare ‘by-the minute’, with alternatively a focus on achieving the outcomes people want, enhanced by technology solutions.
- Central government to provide adequate funding for local authorities to enable them to move towards approaches to commissioning and purchase of homecare which encourage quality and sustainability of services. Ability to maintain and grow the workforce is central to this. Greater investment is needed to ensure that careworkers can receive wages at least equivalent to Band 3 healthcare assistants in the NHS with 2+ years’ experience. According to the Homecare Association’s Minimum Price for Homecare 2023-24, this would require an hourly fee rate of at least £28.44.
Read the full report
Late Payments and Volume of Hours Survey September 2023.pdf
