How to determine care home fee rates

By Tom Hartley, associate director, Carterwood


When making a new care home investment decision, the expected fee rates and the length of the fill period will have a fundamental influence on the viability of the development and ultimately affect how much a site is worth.

This makes the early determination of fee rates and rate of fill vitally important.

When calculating care home fee rates, we take into consideration the following five key areas of market analysis: demand and supply; key competitors; high level staffing availability; private pay market assessment; and market benchmarking.

I explain each of these below to provide a better idea of how we determine care home fee rates:


1. Demand and supply analysis

Firstly, an analysis of local demographics and the existing supply of care homes (including new builds that are pending planning decision/granted permission) is essential.

Our new HMA report includes an analysis of wetroom and dedicated dementia provision as standard. This allows us to accurately determine the quality of the care home supply and the category of care provided. The greater the level of direct competition, particularly from those homes with wetrooms, the more difficult it is likely to be to achieve desired fee and fill rates.


2. Key competitor identification

As alluded to above, the level of direct competition in the catchment area will affect your fee and fill rates, so it’s essential when making investment decisions to know your competitors inside out.

This means going further than simply being aware of who they are and having the general gist of their overall quality. A deep analysis of the key direct competitors not only provides an accurate insight into the potential achievable fees, but also removes the need to invest time in reviewing homes than won’t actually compete with your new development.


3. High level staffing availability

Staffing is a national challenge for care operators. Operators have been known to spend millions developing a new home, only to be unable to afford to staff it.

Understanding the local staffing market is important for helping to determine what your operating costs will be – and in turn, what fee rates would allow an acceptable margin.

To help protect a new care home from suffering costly and disruptive staffing issues, our HMA report can now include our unique and innovative high-level staffing availability assessment. Using a heat map, the HMA highlights the availability of nurses and care assistants in the staffing catchment area, and indicates the market size of potential staff available to recruit from.


4. Private pay market assessment

Especially important for operators looking to target high private fees, an assessment of the private pay market looks at the likely depth of wealth in the market relative to the quality of competing homes.

A location demonstrating deep wealth and a fairly saturated market, for example, may be able to achieve the same fee rates but over a longer fill period. Our private pay market assessment is now an optional extra to not just our comprehensive market report but our HMA report too, allowing a more accurate insight into achievable fees and the viability of a top end care home.


5. Market benchmarking

Market benchmarking allows the characteristics of the subject site to be compared to two other markets specified by the client, such as other operational care homes within the portfolio. By comparing the likes of wealth, fees, supply quality and demand, clients gain a better – and often reassuring – understanding of how the development will fare compared to other successful schemes.


In response to the persistent external challenges faced by the sector, Carterwood’s new basic headline market analysis (HMA) report now includes fee rates and rate of fill recommendations as standard, as well as many optional extras.

If you would like more information about calculating fee rates or the HMA report, please telephone 08458 690777 or email

This article first appeared in Healthcare Business magazine, October 2018

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