13.04.17
The shortcomings of privatised adult social care – why has it failed?
Source: PSE Apr/May 17
Vivek Kotecha, research officer at the Centre for Health and the Public Interest (CHPI), looks at the challenges facing privatised social care.
Patients were assured that they would have more choice and a better quality of care when adult social care was gradually privatised in the 1990s. However, more than two decades on, the policy of privatisation appears to have failed, with examples such as: the collapse of Southern Cross care homes in 2011; ‘inadequate’ or ‘requires improvement’ care quality ratings for 41% of residential social care services; and warnings of a £3.5bn funding gap in the sector. Why has the privatisation of adult social care not worked?
Funding issues
Firstly, there is the issue of funding. Between 2009-10 and 2014-15 the amount that local authorities have spent on adult social care fell (in real terms) by 10% from £16.3bn to £14.6bn, leading to a 26% fall (400,000 people) in the number of elderly people receiving council-funded care, despite a 27% rise in the number of people aged 65 or over in England in the same period.
A shift has occurred, with 41% of the elderly paying wholly for their social care compared to 37% fully paid for by local authorities, 10% by the NHS, and 12% who pay ‘top-up’ fees. Evidence suggests that the self-funding residents are paying, on average, 43% more than state-funded patients for the same care. The adult social care market appears unsustainable without the self-funding residents’ fees cross-subsidising the state-supported residents.
Poor working conditions
Secondly, there are poor working conditions. The majority of the cost in providing care is the frontline staff cost, and so private providers looking to maintain a profit margin often need to cut down on this area. The focus on reducing staff costs has led to more residents per member of staff and the existing workforce being worked harder by restricting annual leave, removing sick pay, removing paid breaks and moving to unpaid online training.
The Public Accounts Committee in 2015 found that the median pay of care workers was £7.90 per hour, with 220,000 workers being paid below the statutory minimum wage, a third on zero hour contracts, and many not paid for travel time incurred on the job.
Unsurprisingly with these conditions, the staff turnover rate is over 24%, leaving social care worker vacancy rates of 4.1% in residential care and 8.8% in domiciliary care. High vacancy rates and turnover affect the quality of care patients receive with less outings, entertainment and reduced care time per client with slots as small as 15 minutes.
The poor working conditions are less acute in the public sector where the median hourly wage for residential care staff is £14.19, compared to £7.23 in the private sector. The staff retention rates are a lot higher, with the average number of months of continuous service for residential care workers being 96 months in the public sector as opposed to 29 months in the private sector.
Not a normal market
Adult social care does not represent a normal market. Consumers in a market are expected to be informed and make rational choices. But adult social care is more akin to a ‘distress purchase’ given that it is often unplanned, purchased during a crisis and there are low rates of switching between providers.
Competition between providers is limited with, for example, a single care home provider being responsible for over 25% of the places available in eight English local authorities. This undermines the availability of patient choice and thus blunts the quality and cost benefit that competitive markets would supposedly bring.
Finally, care home operators in the market are often operating with unsustainable business models. Small local care home operators are gradually being replaced by large chains which own 50 or more homes, with the largest 10 providing 20% of the total number of care home beds. These large providers can obtain economies of scale through building care homes using a ‘Travelodge’ model of two to three-storey blocks, which are designed to minimise the number of staff needed in order to maximise profits rather than meet the needs of patients.
Furthermore, many of these large providers are using fragile ‘quick win’ financial models. A report by the Centre for Research on Socio-Cultural Change found that some large providers were extracting excessive profit margins (i.e. returns on capital of 12%) compared to a benchmark 5% for a low-risk industry such as care homes. The levels of debt owed by the large providers make them financially vulnerable to tight funding or changes in market sentiment as befell Southern Cross, which had 9% of the residential care market.
The collapse of a large provider, and its subsequent impact, is more likely to occur as large care home chains with highly indebted financial models gradually dominate the market. A recent survey of almost half of local authorities found that 77% had experienced a provider failure in 2015-16 and 74% considered another failure likely in the following year. This is already being felt with plans by two of the largest five providers to leave the market.
In recent years, the crisis in privatised adult social care has brought the financial interests of private companies directly in conflict with the need to provide a safe and continuous service to highly vulnerable people. The tension highlights the limit to services that markets can safely provide whilst meeting societal expectations.
FOR MORE INFORMATION
This is a summary of a CHPI report titled 'The failure of adult privatised social care in England: what is to be done?', written by Professor Bob Hudson. A full version of the CHPI report can be found at:
W: www.chpi.org.uk/wp/wp-content/uploads/2016/11/CHPI-SocialCare-Oct16-Proof01a.pdf