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Report reveals polarising home-care market

The growth in the home-care market is revealing a split in the way services are provided by the independent sector.

17 July 2003

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According to a recent report, published by care analysts Laing & Buisson, large businesses are focusing on local-authority contracts while smaller businesses are concentrating on serving individual self-paying consumers.

Local authorities have increased the amount of home care they have commissioned from the independent sector, but they are increasingly purchasing this from big providers that have the resources to win and fulfil large contracts. Smaller providers, less able to compete for these contracts, are focusing on providing a good local service to self-paying, home-care consumers.

Emphasising that this trend is in its early stages, the report’s author, Philip Mickelborough, confirmed that both sectors of the market are growing. “In a 2002 survey, social services in England funded 2.98 million contact hours of home care, which is more than ever before and an increase of three per cent on the previous year. Growth in the self-pay sector is less easy to measure, but we have projected an 11 per cent increase over the same period.” Mickelborough went on to explain why local authorities are commissioning home care from the larger providers: “Social services recognise that the costs of spot-purchasing home care on a client-by-client basis are high, and providers cannot operate cost-effectively with uncoordinated purchasing.

Buying care on a bulk basis, using one of the various types of contract, saves councils’ costs and increases providers’ efficiencies. Whereas in the early days of community care, social services aimed to have a very broad spread of providers in order to maximise competition, many now look to contract with a limited number of home-care businesses. The result, however, is that it is mainly the large providers that have the financial and managerial resources to tender for, win and fulfil these large contracts.”

All home-care providers are having to meet the costs of regulation that was introduced in April 2003, and spreading the costs of compliance and training over relatively few paid contract hours is proving expensive for many smaller businesses. Some of these have responded by closing or seeking to merge with other providers, and this process of consolidation that has been apparent for some years is now accelerating. Other small providers are looking to the self-pay market, where higher fees can be charged but the personal service they can offer may be more highly valued.

“Local authorities are increasingly commissioning home care from independent providers rather than delivering it by in-house teams,” said Mickelborough. “The independent sector’s share of social-services funded home care has risen from two per cent in 1992 to 64 per cent in 2002. Independent businesses provided nearly two million hours per week to councils in 2002, an increase of ten per cent in one year. By contrast, local authorities’ in-house teams provided just over one million hours per week, down seven per cent on 2001 and representing 36 per cent of the total. The main reason for this outsourcing is the lower cost of purchasing home care compared with providing it directly. Across England, the price of a purchased home-care hour was approximately 64 per cent of the cost of one delivered by an in-house unit, with a range from 48 per cent in the Eastern region to 76 per cent in the North East.”

Mickelborough concluded: “One factor that affects all sectors, however, is the shortage of carers. We all hope that the investment that employers will make in the training of their carers to meet the new national minimum standards for home care, and the higher status that caring as a profession will gain as a result of this, will lead to an increase in carers’ wages and fewer difficulties in recruiting and retaining them.”

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