National Care Homes Contract Fee Negotiations and Care Cost Increases

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1 1 National Care Homes Contract 2008 Fee Negotiations and Care Cost Increases Background The fee negotiations are a crucial part of the wider attempt by the Local Authorities and Providers to work in partnership to secure a stable sector of high quality provision for Scotland s most vulnerable citizens within the framework of the National Contract. Given the size and make up of the sector there is a clear need to ensure equality of standards and equality of funding. Table 1 Numbers of workplaces and employees in older people care home sector in Scotland by type of employer (i.e. local authority, private, voluntary) - Care Commission Figures Employer Number of workplaces Number employees* of % of total workplaces % of total employees Local Authority 180 6,051 19% 14% Voluntary 140 4,375 15% 10% Private ,678 66% 76% Total , % 100% We have a current capacity across the sector of approximately places with an average occupancy level of 93%. Despite the growth of care at home the demographic trends indicate a continued and potentially increased demand for Care Home places, particularly in relation to the very frail, those with chronic illness and dementia, and those requiring end of life care. Given the unlikelihood of any significant expansion of Local Authority run services, a long term partnership with Voluntary and even more so Private providers to secure the required levels of increasingly specialised care is absolutely essential. In this context, the Fee Negotiations need to address 3 key areas: 1. Sustained viability and stability of funding 2. Responding to inflation and new cost pressures 3. Service development and changing patterns of need As providers see it, the 2008 settlement has to be more than another 1 year deal. It needs to form an agreed basis for funding for the future with the shared objective of the partnership being to achieve the maximum level of funding necessary to meet the requirements of the sector. Chief Executive: Ranald Mair ranald.mair@scottishcare.org Web: President: The Lord Sutherland of Houndwood KT FBA FRSE

2 2 Stability of Funding The settlements sought to rectify the acknowledged underfunding of purchased care. Despite these gains the current fee levels in Scotland still fall far short of the true cost of care as estimated by independent bodies such as PWC or the Joseph Rowntree Trust, and well short of the cost of the Local Authorities own care provision. The elements of funding linked to FPNC have also remained static since their inception and this has in effect frozen the differential between Residential and Nursing Care at 65, the lowest in the UK. The additional Nursing Allowance in England was benchmarked this year by the Department of Health at a minimum of 101, with the expectation that in most cases the premium would need to be higher. Future funding in Scotland will similarly need to take proper account of the cost differential involved in providing Nursing and High Dependency Care services. The 2007 settlement was restricted to a 2% inflation increase. COSLA s stated position, however, was that the care homes sector would need to be in an above inflation category for funding increases from 2008 onwards if progress was to be sustained. Given the discretion and flexibility which Local Authorities have been given by government, care providers expect COSLA to honour this commitment in the 2008 settlement. The danger otherwise is that we return to a position of underfunding and non-viability. The 2007 settlement agreed rates of 435 and 501 linked to homes meeting certain preconditions and targets. The Quality Payment was paid up front from April - September to fund the meeting of the specific targets. It was also agreed that for homes who demonstrated that they had met the targets the 435 or 501 would become consolidated, and that homes who failed would be given a further opportunity to demonstrate the meeting of the target at the end of the financial year, in April 08. There was never any suggestion that the 2007 quality payment would become an item of recyclable funding and providers would resist this absolutely. It seems quite contrary to the spirit of partnership for COSLA and the Councils now to propose that the goal posts be shifted. As it is, maintaining the position of 40% of care being delivered by staff qualified to SVQ Level 2 or above + a further 10% by staff undergoing training will require providers to a) sustain a high level of training activity given the current turnover rate across the sector of around 18%, and b) have effective retention strategies in place to keep qualified staff from leaving in the direction of Local Authorities. Any new quality targets therefore need to be negotiated in their own right, with appropriate funding if they have cost implications.

3 3 The basic funding model developed by SLAMC has not been reviewed since it was introduced and may require amendment to adequately reflect current and future needs. The need for a fair, open and transparent price uplift mechanism as part of the National Contract has been acknowledged at various points but not pursued, leaving the year on year settlements exposed to short term expediency. Accordingly, whilst recognising the need at this stage to yet again progress a one year fee settlement for April 08, providers propose that the partnership should jointly commission an independent report on the real cost of care in Scotland and the structure of care home fees in order to have a clear and transparent reference point for future negotiations. Inflation and Cost Pressures As part of the 2007 negotiations, it was agreed that further work should be done on developing a model for Care Sector inflation in Scotland. Again this is work that has been undertaken by PWC in England and it would probably be reasonably easy for them to adapt their model to the Scottish context. The clear position of providers is that costs have risen, and are running, well above the basic 2% inflation figure used by Local Authorities in relation to the 2007 settlement: Staffing Costs - 5% overall ( 3% on Wages + an Additional 2% on meeting the cost of the first stage of the new Working Time Directive Holiday Entitlement) Food Costs - 9% Gas and Electricity - 15%-20% for the 2 nd year running Interest Rates % on the cost of borrowing Building and Refurbishment Costs - 8% In addition to inflation there are significant cost pressures linked to meeting Regulatory Requirements: Fire Regulations - Estimated cost of 10k per home Increased Staffing Levels and Training Requirements set by the Care Commission Registration Requirements set by the SSSC Having more Staff at the Qualified Rate as a result of the 2007 targets Meeting the needs of equipment costs: an increasingly frail population also adds to Chief Executive: Ranald Mair ranald.mair@scottishcare.org Web: President: The Lord Sutherland of Houndwood KT FBA FRSE

4 4 e.g. the cost of a Profile Bed ( to reduce risk of Pressure Sores) is 550 as opposed to 125 for an ordinary divan, the cost of an Air Mattress is 764 as opposed to 130 for a standard Pentaflex, and Bed Rails are about 125 a set. The PWC model of care-cost inflation, which is viewed as the most reliable calculation, would indicate overall increases in cost as currently running at: General Residential Care- 5.9% Residential Dementia Care % General Nursing Care % Dementia Nursing Care % Accordingly, even allowing for the tightness of the spending review, providers are clear that a fee increase in 2008 of at least 5.9% will be necessary just to stand still. Anything less will amount to a reduction in real terms and seriously impede the drive for quality improvement. The danger is too, that if public funding fails to keep pace then the pressure will be on providers to use Additional Charges to Residents or Third Parties, or increases for Self-Funders to meet the shortfall. Providers are happy to work with Local Authority partners on how the required increase can be achieved but are not prepared to see services for older people slip back in terms of core funding. Service Development If there is a genuine desire to promote continuous improvement and service development then purchasing policy and funding need to encourage, resource and incentivise providers to invest in quality provision for the future, not just in the short term. Providers are committed to both the quality agenda and developing a sector fit for purpose but need to know that there will be security of demand linked to realistic levels of funding. The development of the sector has to take account of: a) The changing needs of older people b) The agreed goal of driving up quality c) Service User expectations Whilst accepting that not everything can be achieved in one year, we need to make a start. Providers would therefore propose that for 2008 we concentrate on: a) Introducing a national system of dependency related payment for high dependency care including dementia. The variable practice across the country has led to confusion and dispute over what is covered by the National Contract rates for a standard

5 5 package of care and what is not. The Residential and Nursing rates as currently configured do not adequately resource providers to meet higher levels of need; they are a baseline for care rather than all encompassing. Introducing a dependency related payment for high dependency care would allow care packages to be more closely linked to the needs of the individual and also foster capacity in the Care Sector to meet current and future NHS and CHP objectives for keeping people out of acute settings. The dependency related payment would reflect higher staffing levels, training, equipment and specialist care inputs. b) Introducing a premium payment to Homes who achieve above average Gradings on the Care Commission scheme. The 2007 experience has shown that incentivising works and it would be good to link this to the Care Commission s Quality Grading Scheme. Providers accept the COSLA position that low grades (1&2) should potentially trigger a review by councils of their use and funding of homes which are underperforming. However, providers are clear that a far more effective way of driving up quality would be to reward those homes who achieve above average grades (5&6). Providers are also very happy with the emphasis being placed on the evidencing of service-user input. This is integral to the new Grading Scheme and it has been made clear that to achieve even average grades (3&4), homes will need to demonstrate strong service-user input within the triangulation of evidence. c) Allowing effective use of Additional Charges. The National Contract permits Additional Care Charges (payable by Local Authorities)and Service Charges (payable by Residents or Third Parties). In keeping with OFT recommendations and the 2007 quality preconditions there is a clear obligation on providers to demonstrate the transparency and appropriateness of any charges. However the goal was not to eradicate additional charges altogether or to reduce service-user choice in paying for higher levels of facility, service or care. Enabling providers to achieve some higher levels of income in response to serviceuser needs and expectations, particularly where this does not place an additional burden on the public purse seems entirely appropriate. However, the experience of providers is that some councils are reluctant to approve any additional charges. We need to arrive at a clear position nationally on the list of appropriate charges; determine which of these, such as higher room size, can be benchmarked nationally and which should be left to local negotiation; and Chief Executive: Ranald Mair ranald.mair@scottishcare.org Web: President: The Lord Sutherland of Houndwood KT FBA FRSE

6 6 also agree the scope of the Councils role in approving or not approving additional charges. It might even be desirable to explore whether there are circumstances where an Additional Locality Charge would be appropriate to respond to situations where local cost factors clearly exceed the national and there is a need to encourage local provision. Conclusion In keeping with the partnership approach, providers are not seeking increases which are either excessive or unreasonable. The package of measures outlined above is simply what is necessary to maintain the sustained delivery of service and the sustained development of the sector. Ranald Mair January 2008