Care home fees on the rise, but how best to maximise?

It takes just an additional £7.50 per week in fee income per bedspace across a 60-bed care home to pay for the staff costs for one bed for the whole year. This statistic shows just how important fee setting can be, and how much impact it can have on a business.

The issues of funding and workforce remain at the forefront of an elderly care home operator’s mind. These issues also feature at the top of the individual manifestos prepared by the National Care Forum and Care England, these associations supporting not-for-profit and independent providers, respectively. 2019 has been another year of rising costs, mainly across staff wages, utilities and food, three of the biggest costs facing any care home operator. The only way to defend against, and perhaps offset some of these costs, is to look at the weekly fees being charged, if you are able to attract self-funded residents.

At Carterwood, we have assessed fee rates at over 500 care homes this year, across proposed new developments and existing assets. This research has provided us with insight into the difficulties experienced by operators in setting and optimising their weekly private fees. We often find that the data commonly used to underpin such decisions can be inconsistent, or that the “comparable” data gathered may be for homes not providing the same level of asset quality, or even the same categories of care. Sometimes, the home or regional management are unwilling or unable to undertake this assessment based on their competition, and the head office team are forced to apply a blanket percentage increases across a portfolio in the absence of any actual data. This can result in a substantial gulf in fees charged between homes located within a few hundred metres that offer the same accommodation and categories of care. We have found private weekly fee variations of as much as £300 during our enquiries this year.

Our research, presented at the Care England annual conference and annual Care Homes & Retirement Conference in November, identified that care home fees are on the rise. Over the last 12 months, residential care home fees have increased by 9% and nursing fees by 11%. However, we also know that these national averages don’t tell the whole story. Variance between regions, counties and even towns is extreme, and our evidence shows that what’s happening in your catchment area is more important than what’s happening anywhere else. Knowledge of the demand and supply balance in your catchment is crucial to determine whether the area can sustain any increases at all, and, crucially, accurate information into competitor fee rates will help to benchmark your market position.

In benchmarking exercises undertaken over the course of 2019, we have recommended fee rate increases in excess of 12% in some instances. Furthermore, in contrast to those homes that may have fallen behind the market over a period of years, many of our clients are operating as market leaders, and are setting the bar with fee rates based on the quality of their offering.

We would love to hear from you if you are looking at how best to set fees in 2020; please email tom.hartley@carterwood.co.uk or call 08458 690777 for more information.

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