January 6, 2020

What will 2020 hold for care providers?

care home size

Here are the five things the Social Care sector will need to grapple with in 2020:

Deprivation of liberty

2020 will see the adoption of the controversial Deprivation of Liberty Safeguards regime.  It is likely to be challenging, potentially creating headaches for care providers, says Mei-Ling Huang, Partner in the Social Care team at RWK Goodman.

“There will be a whole new regime to get to grips with, as well as the possibility that local authorities will try to impose new responsibilities and contractual requirements on providers.  Providers should try to start to understand the new regime now before any contractual requirements are foisted upon them.  There may be cost implications and providers need to avoid sleep-walking into additional contractual terms without having considered the ramifications for their services.”

A workforce crisis

The workforce crisis will continue to be one of the biggest challenges for care providers in 2020, says James Sage, Partner and Head of Social Care at RWK Goodman.

“Care providers are facing significant staff shortages with over 100,000 vacancies unfilled.  Add to that poor retention rates of around 30%, compared to just 15% outside of the sector, care providers will struggle to grow existing and develop new services.  Some providers may also see the workforce shortages having an adverse impact on CQC compliance and ratings.”

“The new Conservative government’s proposed immigration reforms with exacerbate this crisis, with the loss of a European workforce, the inability to recruit overseas, and with care providers and the NHS competing for staff. In the absence of any workable plan to recruit more UK staff it is essential that Government relaxes planned visa requirements for the care sector.”

National Living Wage and the Good Work Plan

In April the National Living Wage will increase by 6.2% to £8.72 per hour. Whilst care staff are undoubtedly deserving of a significant pay rise, it has to be accompanied by sufficient increases in local authority fee rates. Care providers should be gearing up for fee negotiations before fee rates are set to take account of their increased staffing costs.

James Sage says: “From 6 April care providers will also be required to meet new laws arising from the Good Work Plan.  This will include a requirement to give all workers, not just employees, an employment contract on their first day of employment and extending the reference period for calculating holiday pay from 12 to 52 weeks.”

The government has pledged a National Living Wage of £10.50 for those aged over 21.  James adds: “This equates to a 27% increase over the five-year term of government.  Care providers will be unable to meet these rising costs without a proper funding solution for social care.”

Corporate activity

Post-election and with a promise of political stability, we expect to see more of the activity that has shaped 2019: a continued focus on development and new build projects, investment from REITs and private equity houses, growth of regional providers looking to secure the next project, and exits of those operators who are disenchanted with the sector and have been waiting for the right moment to sell.

Hazel Phillips, a Corporate Partner in the Social Care team says: “Unsurprisingly 2019 has shown there is significant competition between new entrants, existing operators and investors for well-managed homes with potential to improve profit.  We expect to see more of the same as retiring operators come to the market.  Asking prices and quick completions will be achieved by sellers coming to the market, who can demonstrate they are compliant and fully prepared with complete due diligence information at their fingertips.”

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