Market sustainability and cost of care

As part of the Government’s adult social care reform agenda, the Council was required to complete cost of care exercises to arrive at a shared understanding with providers of the local cost of providing care.

To assist with this, the Council received grant funding from the Market Sustainability and Fair Cost of Care Fund in 2022/23. The original purpose of this grant was to support the Council to prepare care markets for reform of the adult social care system and to support the Council to start to move towards paying providers a fair cost of care, prior to the introduction of charging reforms in October 2023.

In November 2022, the Government made the difficult decision to delay the national rollout of these reforms from October 2023 to October 2025. However, funding for implementation has been maintained within local government to enable local authorities to address current adult social care pressures.

The Council has conducted two cost of care exercises covering the Care Home and Home Care markets and has prepared a Market Sustainability Plan. These documents have been submitted to the Department of Health and Social Care and published below:

Provider Engagement

The cost of care reports were informed by submissions from providers about the cost of care delivery. This was supported by the Council through Provider Forums, special events, and training sessions facilitated by the Care Providers Alliance. We also disseminated information and guidance to providers and engaged external consultants to support the completion of the exercises with providers. The Market Sustainability Plan was informed by the data captured in the cost of care exercises.

We would like to thank all those providers who took part in the exercises, despite the many challenges it presented. These challenges are specified in further detail below.

Next steps

Following publication of the cost of care exercises and the Market Sustainability Plan, we will continue to engage and work closely with providers.

The outcome of the cost of care exercises is not intended to be a replacement for the fee-setting element of local authority commissioning processes or individual contract negotiation. However, we will use the insight gained from the data gathered from the cost of care exercises to feed into our fee negotiation process for 2023/24.

If you are a provider and have any questions, or would like to discuss this further, please email Alison Rogers, Acting Director for Integrated Commissioning, London Borough of Bexley and NHS South East London Integrated Care Board (Bexley).

Challenges with the cost of care exercises

Engaging with the whole care market

The cost is derived from a sample of the care market that chose to provide data; therefore, it risks not being fully representative of all of our care market. This is particularly true in London where small care markets are common, and where out-of-borough care home placements and use of homecare providers across boundaries are also common.

Costs varied significantly from provider to provider

This was impacted by factors that include the size of the organisation, staff pay rates, staffing levels and use of agency staff. Costs varied around Employers' National Insurance contributions, profit margins and accommodation costs in care homes.

Calculation Method

This was based on the median actual operating costs for providing care in the local area following completion of a cost of care exercise for a series of care categories. However, the median calculation method produced results that did not reliably reflect market costs.

Guidance

Government guidance did not provide clear criteria for moderation (e.g., adjusting for Return on Operations/Return on Capital). Government guidance recommended querying outliers with providers, however there was no clear line between a cost being inefficient or an outlier. This made it difficult within the time available to determine which costs were due to inefficiency or the business model of the provider.

Disproportionate impact of reforms on the Council

The London Borough of Bexley has a higher proportion of older people’s care homes and a high proportion of self-funders – any funding needs to be closely correlated to fully match the budgetary impact on the local authority.

Impact of the Home Care rate

The Home Care rate, identified in the cost of care exercise, will impact on the Council’s Direct Payment rates, which are based on price points for care available in the market. Our view is that this must also be considered by the Government in their funding allocations.

Rising inflation, living, and running costs

The snapshot of the cost of care was taken in April 2022, meaning that the data is not reflective of the current cost pressures on the care market.

Further information