Embargoed until: 00:01 Friday 27 December 2024
The Homecare Association today accused some NHS Integrated Care Boards (ICBs) of "unethical commissioning practices". Grossly inadequate fee rates and late payments risk quality, safety and sustainability of homecare provision. Without immediate intervention, the government's promises to reduce NHS waiting lists will fail because the social care services it depends on will fail.
A letter to NHS England's CEO, Amanda Pritchard, criticised some ICBs for failing to increase fees after the National Minimum Wage (NMW) increased by 9.8% in April 2024. Now providers face a further 10% rise in costs because of an increase in employment tax and a 6.7% increase in the NMW announced in the Autumn Budget. You can read the letter here.
Homecare Association research published in August 2024 revealed 75% of NHS bodies had failed to communicate with providers about fee uplifts by June 2024, three months after the minimum wage increase.
The letter comes amid warnings that the UK's care sector has reached a "tipping point," with evidence showing only 1% of public bodies are paying sustainable rates for care services. Industry analysis reveals that 80-85% of providers are small and medium enterprises which lack the financial resilience to absorb rising costs without corresponding fee increases.
Dr Jane Townson OBE, CEO of the Homecare Association, said:
"The approach of the NHS to commissioning homecare is nothing short of scandalous. Some ICBs haven't spoken to providers about fees since 2023, let alone offered increases to cover mandatory wage rises. They expect homecare providers to operate below cost, putting both care workers and older and disabled people at risk.
"When public bodies pay rates as low as £17 per hour for homecare – less than direct staff costs at the minimum wage with statutory on-costs – they increase risks of poor and unsafe care and create the conditions for labour exploitation. The NHS should be concerned about the safety and well-being of those receiving and giving care and support, but all they’re bothered about is saving money. Without urgent action, we face the very real prospect of widespread provider failures that will devastate care provision and pile even more pressure onto an already strained NHS."
The Homecare Association calculates that providers need a Minimum Price for Homecare of £32.14 per hour for 2025-26 to ensure sustainability and compliance with regulations.
This comes as recent market analysis shows homecare providers' average margins have fallen from 10.8% to just 7.6%. Many are operating on margins of 1-2% or at a loss.
We urge ICBs to engage with homecare providers to understand their costs and provide fee uplifts to cover them.
The Labour government claims to want fair pay for care workers. They must therefore ensure public bodies pay a fair price for care.
We call on the government to:
- Invest at least £2.8 billion in the care sector, of which £1.8 billion is needed in homecare, to mitigate the risks of failure. Evidence shows that every £1 invested saves £3 in longer-term costs across the health and care system.
- Exempt care providers from changes to employer's national insurance contributions.
- Ensure a multi-year funding settlement for social care to meet future demand and cover the full cost of care (estimated £18.4 billion needed by 2032/33)
- Implement a National Contract for Care service that sets a minimum price for care services. This will ensure public sector commissioners pay the full cost of quality care.
ENDS
Contacts
Jane Townson
Email: [email protected]
Notes to editors
1. The Homecare Association is the UK's membership body for homecare providers, with over 2,200 members nationally. Its mission is to ensure homecare receives the investment it deserves, so all of us can live well at home and flourish in our communities. The Homecare Association acts as a trusted voice, taking a lead in shaping homecare, in collaboration with partners across the care sector. It also provides hands-on support and practical tools for its members. The Homecare Association's members agree to abide by the Association's Code of Practice.
2. The care sector comprises 18,500 PAYE employers, 10,850 of those are non-residential and 7,650 are residential (Skills for Care 2024). Total market value is £35.3 billion (LaingBuisson 2024), contributing £68.1 billion to the economy.
3. Local authorities and the NHS buy 70-80% of all care services (LaingBuisson 2024).
- 96% of supported living,
- 89% of care homes for younger adults,
- 79% of homecare,
- 57% of older people's care homes.
4. NHS funding represents 25% (£1,692 million) of the total funding for homecare (£6,656 million). The rest comes from councils (50%; £3,348 million); direct payments (3%; £212 million); private-pay (21%; £1,375 million); and other (1%; £30 million) (LaingBuisson 2024).
5. The fee rates local authorities and the NHS pay now are too low to cover costs (Homecare Association). Only 1% meet our Minimum Price for Homecare of £28.53 per hour in 2024-25. This will rise to £32.14 per hour in 2025-2026, as detailed in our new Minimum Price for Homecare report.
6. Employment costs, representing 70-80% of providers' total costs, will surge by at least 10% in 2025-26. This is driven by increases in employers' national insurance contributions and minimum wage requirements. We provide detailed analysis in our Minimum Price for Homecare 2025-26 report.
7. Providers cannot pass on these increased costs as local authorities and NHS bodies, their primary customers, fix prices. Many councils cannot balance their books and directors of Adult Social Services must cut budgets by £1.4 billion.
8. Key findings from a recent Care Provider Alliance survey show that without immediate government intervention:
- 73% will have to refuse new care packages from local authorities or the NHS.
- 57% will hand back existing contracts to local authorities or the NHS.
- 77% will have to draw on reserves.
- 64% will have to make staff redundant.
- 92% of providers who also serve people who pay for their own care will be forced to increase rates for self-funders. Many self-funders will be unable to bear extra costs and may reduce care or rely more on family carers.
- 22% are planning to close their businesses entirely.
9. Profitability in the state-funded sector has plummeted over the past decade (LaingBuisson 2024).
- Homecare average EBITDA margins have fallen from 10.8% to a low of 5.2% in 2019, with some recovery to 7.6% in 2024
- Care homes for younger adults have seen EBITDA margins halve from 26% to 13%
- Older people's care homes serving mainly state-funded residents have seen margins fall by 50%
10. Despite some perceptions, private equity involvement in the care sector is limited. Just 12.2% of older people's care homes; 10.1% of younger adult care homes; and 12.2% of homecare/supported living services are private equity backed.
