Market Oversight & Market Insight

Transcription

1 Market Oversight & Market Insight Stuart Dean 11 th May 2016 Community Care Live Birmingham 1

2 Stuart Dean Director, Corporate Provider & Market Oversight 2

3 Purpose Overview of CQC s Market Oversight Responsibility Market Insight Spending Review Future Considerations Questions 3

4 Team Structure Market Oversight Advisory Group Market Oversight Panel Stuart Dean Director, Corporate Provider and Market Oversight Howard Sereda Head of Market Oversight Peter Holton Head of Market Oversight Head of Inspection - Corporate Inspection Lucy Hamilton Market Oversight Manager Nick Gill Market Oversight Manager Corporate Provider Manager Corporate Provider Manager Margaret Guest MO Business Support Coordinating Officer Tricia Feltham MO Assistant Manager Corporate Provider Inspectors Corporate Provider Inspectors 4

5 Why Market Oversight? Clear relationship between quality of care and finances 5

6 Objectives Market Oversight aims to: Spot if a Southern Cross could happen again Protect people in vulnerable circumstances Monitor finances of difficult to replace providers Provide early warning to local authorities Assist in co-ordinating the system response if failure occurs Market Oversight is not there to: Protect providers from failure Pre-empt failure through disclosure of information 6

7 Overview Scheme went live on 6/4/15 and captures both residential and non-residential providers. Regulation only captures services provided in England. Currently 50 corporate providers included in the scheme. These cover around 400 registered providers which deliver services from about 4000 locations (30% of all care home beds in England). Inclusion in scheme is a reflection of size, not risk of failure. Specialist providers can be nominated via a DH panel held twice with no additional providers being proposed. 7

8 Providers Currently Included 50 corporate providers are in the scheme Accord Group Care UK Excelcare Holdings Maria Mallaband Care Group Royal Mencap Society Affinity Trust Carewatch Four Seasons Group Mears Care Runwood Agincare Caring Homes Gracewell Methodist Homes Sanctuary Care Limited Akari Choice Support HC-One Limited MiHomecare Limited Sevacare UK Limited Allied Healthcare Alternative Futures Group Anchor Trust Avery Barchester Healthcare BUPA Group City and County Healthcare Group Community Integrated Care Countywide Creative Support Limited Dimensions Embrace HF Trust Limited Minster Care Group Somerset Care Housing & Care 21 New Century Care Sunrise Senior Living Human Support Group Larchwood Leonard Cheshire Disability Lifeways Community Care Orchard Care Homes Orders of St. John Care Trust Priory Group Radis Community Care Thera Group United Response Voyage Westminster Homecare Limited 8

9 Market Oversight Operating Model Step Activity Entry to scheme Regular monitoring Further risk analysis Provider engagement on risk Regulatory action & engagement Formal notification to LAs If concerns identified and addressed Key: Assessment of risk to financial sustainability (all provisional) no cause for concern/very low risk possible risk/medium risk likely risk/high risk risk clearly identified very high risk 9

10 Entry Criteria Residential care providers will qualify if they provide: 1. More than 2,000 beds; or 2. Between 1,000 and 2,000 beds and with at least 1 bed in 16 or more local authority areas; or 3. Between 1,000 and 2,000 beds and where capacity in at least three local authority areas is more than 10 per cent of the total capacity in these areas. Non-residential care providers will qualify if they provide: 1. Over 30,000 hours of care in a week in England; or 2. Over 2,000 people with care in a week in England; or 3. Over 800 people with care in a week in England and the average hours of care delivered per person is 30 hours or more 10

11 B. Financial Indicators introduction To provide a regular update of financial performance, which will be analysed in conjunction with quality data, in order to identify elevated business failure risk factors Financial analysis will act as an early warning system and enable proactive identification and management of risk Information is provided quarterly Additional and more frequent information submissions may be required if concerns over business failure are identified 11

12 B. Financial indicators information and assessment Regular financial returns Template based submissions 1. Profit and loss 2. Trading KPIs 3. Balance sheet 4. Cash flow (Inc. Capex) 5. Qualitative risk questions Initial risk assessment Standard financial benchmarks Used as a prompt for further detailed, bespoke analysis Any issues identified will be followed up with the Provider Not prescriptive tests will not prohibit market behaviour 12

13 Steps 4-6: Tools Available to CQC If elevated risks are identified from financial and quality indicators, CQC will use tools to obtain further information before assessing if failure is likely Activity Provider engagement on risk Regulatory action and engagement Formal notification to LAs Tools a Risk assessment meeting b c Additional financial information requests More frequent quality inspections e f Independent Business Review Risk Mitigation Plan g Notify relevant LAs d Key stakeholder engagement 13

14 Step 6: When does the CQC have to notify LAs? Paragraph 56(1) of the Care Act 2014 defines the point where the CQC s duty to formally notify the LAs is triggered. Legal definition Where the CQC is satisfied that a registered care provider to which the market oversight scheme applies is likely to become unable to carry on the regulated activity in respect of which it is registered because of business failure CQC interpretation There are three conditions that have to be satisfied: 1. Business failure; 2. A registered provider is unable to carry on a regulated activity - a service or activity will cease; and 3. It is likely that both 1 and 2 may happen; 14

15 Step 6: Satisfying the Likely condition CQC s interpretation of likely is On a balance of probabilities a registered care provider may satisfy the Business Failure and Unable to carry on a regulated activity conditions. The CQC does not have to prove conclusively that the conditions will be satisfied. It only needs to demonstrate that the conditions are more probable to occur than not to occur. The decision will be based on a reasonable, fair and proportionate assessment of the information available at the time. This means there is a possibility that the conditions are never satisfied even after the LA has been notified. 15

16 Step 6: Satisfying the Business Failure condition CQC s interpretation of Business Failure is Business failure of a Corporate Provider means: - The appointment of an administrator; - The appointment of a receiver or an administrative receiver; - The passing of a resolution for a voluntary winding up in a creditors voluntary winding up; - The appointment of a liquidator; - The making of a winding up order by a court; - A members' voluntary winding up becoming a creditors' voluntary winding up; - The making of bankruptcy orders where individual members of a partnership present a joint bankruptcy petition; - A move from administration to winding up pursuant to a court order; - In relation to an unincorporated charity, the charity trustees becoming unable to pay their debts as they fall due. One of the legal procedures set out above is performed on any legal entity within the wider corporate provider group, as per the Group Undertakings definition in the Companies Act. 16

17 Step 6: Satisfying the unable to carry on a regulated activity condition CQC s interpretation of a registered provider being unable to carry on a regulated activity means The closure of a location where the regulated activity is provided. A location ceases to provide one of its regulated activities (i.e. a care home ceases to provide nursing care to focus on personal care). The lease of a care home is surrendered and is then re-leased to another provider. The business and assets of a care home is sold to another provider. A contract to provide homecare services is novated to another provider. There is a change in ownership of the registered provider (i.e. its shares are sold to another party). 17

18 Local Authority Duties Market Oversight is an important contribution to both a Local Authority s market shaping responsibilities as well as their duties to ensure continuity of care. LA duties apply for all providers not just those in Market Oversight Regime. Duties fall to LA where service is delivered not on commissioning LA. Duty NOT triggered if business has failed but service continues to be delivered (e.g. administrator running the business). LAs have the power to compel information from the provider to assist in the delivery of this duty. LA duty excludes NHS commissioned care. 18

19 Market Trends - Overview Since the start of the Health and Social Care Act in October 2010 there has been a 46% increase in the number of domiciliary care agencies in England. Contemporaneously there has been a 11% reduction in the number of residential homes along with a 7% decrease in total beds, 255,289 to 236,946. In contrast to this there has been a 6% rise in the number of nursing homes and 9% increase in total beds, 205,375 to 224,098. In March 2015 nursing home registrations plateaued at 4,698 units before declining to 4,634 units in March During the same period residential home registrations have continued to decline to 12,117 homes. Since the latest episode of bed capacity reduction started in September 2014, 3,285 beds have exited the market. Capacity is already exiting the market and the expectation is that this will be predominantly LA provision. 19

20 Market Trends - Finances The graph to the left demonstrates that care providers have typically been receiving below inflationary fee increases since 2010/11 for both nursing and residential care. Latest estimates of the current level of underfunding across ASC vary wildly. The main reason for this difference is generally the assumption surrounding what a reasonable level of profit to be earning is. 20

21 Market Trends - Finances The Knight Frank graph to the right demonstrates that sector profitability has steadily declined since 2006/7. This data reflects the entire market and masks the picture for predominantly LA focussed providers where actual EBITDARM% is typically lower (c. 15%). The consequence of this is a two tier system where new investment is not attracted into LA funded assets. Providers have already started to react to this position as demonstrated by (i) their exit from particular markets, (ii) a clamp down on cross subsidisation, (iii) the withdrawal of capacity, or (iv) the hand back of unprofitable contracts. The balance of power is moving towards the providers most advanced for nursing provision. 21

22 Market Trends - Quality Ratings by size of Care Home The pursuit of economies of scale in an attempt to protect profitability appears to adversely impact the quality of care received. The first chart demonstrates a clear trend between small and large home sizes when CQC ratings are considered. Knight Frank research suggests peak profitability occurs in nursing homes providing beds. Consequently the extra large phenomenon may reduce in time. The second graph demonstrates a similar pattern for domiciliary care whereby larger agencies are frequently rated less favourably by CQC. 22

23 SR Settlement Essentially there are three components to the settlement that could generate up to 3.5bn of new support for social care by 2019/20. These are: 1. Social Care Precept that allows an additional 2% to be added to household council tax bills. Any additional amounts raised by this mechanism as well as existing social care budgets are ring fenced. Government projections estimate that this could generate up to 2bn per annum by 2019/20. Take up of the 2% Precept in April 2016 has been strong. The key question moving forward is the extent to which this level of take up continues through to 2019/ Better Care Fund (BCF) from April 2017 an amount that rises to 1.5bn is made available to local government via this instrument. It is also proposed to use the BCF to smooth any inequality that arises from the implementation of the Social Care Precept. 3. Disabled Facilities Grant - 500m by 2019/20 to allow people to stay well in their homes for longer. The critical period will be the next 6-18 months as NLW starts being paid and the extent to which the local government Social Care Precept is directed towards the front line becomes clear. Also, the cost of NLW may increase in subsequent years depending on where this is pegged. 23

24 Market Reaction Domiciliary care: - Provider exit; - Widespread contract hand backs; - Labour is the limiting factor. Residential care: - Ongoing portfolio reviews; - Home closures; - Disposals. Investor sentiment: - Ongoing austerity and Government intervention have made the sector less attractive; - Limited, if any, appetite in purely LA funded stock; - Self funder opportunities but what about saturation? - Robust appetite for higher acuity, more specialist care provision; - Some investors currently see a market opportunity to purchase and upgrade low quality stock. 24

25 Questions? 25

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