CMA: Urgent action needed across the UK care home market

The Competition and Markets Authority (CMA) has today published its final findings following an extensive review of whether the residential care homes sector is working well for older people and their families.

The year-long market study has found that:

• The current system for providing care is not sustainable without additional funding. The CMA’s financial analysis of the sector has identified a funding shortfall of £1 billion a year across the UK because councils are paying fee rates for the residents they fund which are below the costs care homes incur. This has led to care homes propping up their finances by charging higher prices to those who pay for their own care (self-funders). On average, self-funders’ fees (£44,000 per year) are around 40% higher than those paid by councils.
• Beyond the challenges of continuing to meet existing needs, the sector must grow substantially as the population ages. However, uncertainty about future funding, including whether council fees will cover the full costs of care, currently means that there is not enough investment in new accommodation for council-funded residents.
• Many people choose care homes during an emotionally traumatic time, but the basic information and support needed is often not available to help them navigate the system and make informed choices.
• There needs to be greater protection in place for people in care homes. Residents and their families often find it difficult to raise concerns or make complaints, and the systems for redress and feedback need to be improved. There is also too great a risk of residents being treated unfairly, and in breach of their rights under consumer law. Examples of the CMA’s concerns include where homes are not being clear enough up front about their prices or terms and conditions, do not protect residents’ deposits effectively against the risk of insolvency, are not fair when asking a resident to leave or when they ban visitors.

As a result, the CMA is taking direct action under consumer protection law, and has also made a range of recommendations to government and others. These include:

• Taking enforcement action and raising concerns with some care homes. This is to ensure they are complying with consumer protection law. The CMA is currently focusing on where homes are charging large upfront fees that are not fair or transparent, and charging families for extended periods of up to 4 weeks after a resident has died. It opened an investigation into these issues in June, and has now written to certain care home providers raising its concerns and requiring they make the necessary changes to their business practices and contract terms.
• The CMA will also be consulting on new guidance on fees charged after death, along with separate, wider guidance for care homes on the standards of behaviour that they should be meeting to comply with consumer law. It will expect all care homes to start reviewing their practices now in the light of our findings, and where necessary make changes. If we continue to find non-compliance, homes risk enforcement action.
• Better long-term planning and oversight. For sufficient new care homes to be built, planning and commissioning by councils must improve to give investors greater confidence in the funding environment. Without this, the sector will not be able to provide the extra capacity needed to meet the predicted increase in demand. The CMA is now calling for an independent body to oversee and support planning at a council level in England and Northern Ireland. In Scotland and Wales, the steps that have already been taken should be kept under close review.
• Better support for families and prospective residents. More support is needed to help people make informed choices. Care homes must systematically provide better information on key factors such as the costs of their services and clearly set out for people their entitlements and the choices involved. The relevant departments of all the national governments should work with the NHS, councils, care homes and the charitable sector to provide more support to prospective care home residents and their families.
• More effective consumer protections for residents and easier complaints processes. The vulnerability of residents means they are less able to challenge unfair contracts and practices. Regulators should therefore take a greater role in protecting them, helping to ensure care homes meet their consumer law obligations, and ensure they are held to account where necessary. It is essential that there are effective systems in place for people to complain and, where necessary, have concerns about charges and services acted upon.

CMA Chief Executive, Andrea Coscelli, said:

Care homes provide a vital service to some of the most vulnerable people in our society. However, the simple truth is that the system cannot continue to provide the essential care people need with the current levels of funding.

Without substantial reform to the way that councils plan and commission care, and greater confidence that the costs of providing care will be covered, the UK also won’t be able to meet the growing needs of its ageing population.

It is essential that residents and their families can make informed choices, understand how these services will be paid for, and be confident they will be fairly treated and able to complain effectively if they have concerns. We are now calling on care homes, councils and government bodies to help people navigate what can be a confusing system.

He added:

Of all people, it is especially important that care homes residents are treated fairly and have the full protections of consumer law. We will be taking steps to assist care homes in understanding their obligations, but we are also taking enforcement action now on some issues where we believe the law is being broken.

The CMA will continue to engage with governments, councils and the industry so that these recommendations can be used to inform future social care policies and consultations in England, Scotland, Wales and Northern Ireland. It will also work, as appropriate, with the independent experts commissioned by the government to inform the upcoming Green Paper on reforming care and support for older people in England.

Notes to editors

1. The CMA launched its market study into care homes (residential and nursing homes for the over-65s) on 2 December 2016.
2. The funding shortfall numbers above were calculated by the CMA based on an analysis of the financial performance of care homes in 2015/16.
3. Market studies are carried out using powers under section 5 of the Enterprise Act 2002 (EA02) which allows the CMA to obtain information and conduct research. They allow a market-wide consideration of both competition and consumer issues. Market studies take an overview of regulatory and other economic drivers in the market and consumer and business behaviour.
4. Further details of the CMA’s consumer law investigation can be found on the case page. The key pieces of consumer protection legislation relevant to the CMA’s investigation are the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and Part 2 of the Consumer Rights Act 2015 (CRA). As an enforcer under Part 8 of the EA02, the CMA can enforce the above legislation through the courts. Ultimately, only a court can decide whether a particular term or practice infringes the law. The CMA is not naming the parties under investigation at this stage.
5. The size of the UK care home market is estimated at £15.9 billion, and there are currently more than 430,000 elderly people in care or nursing homes across the UK (Source: LaingBuisson, ‘Care of Older People UK Market Report’, 27th edition, September 2014).
6. The CMA aims to consult on new guidance on fees charged after death in early 2018 and plans to consult on wider guidance in spring 2018 for care homes on the standards of behaviour that they should be meeting to comply with consumer law.