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1 caredata CD Full Text - copyright NISW/Social Services Research Group Mixing it in the Mixed Economy Paul Waddington Professor/Senior Research Fellow, University of Central England Abstract: The article examines the current development of the mixed economy in community care and concludes that this has been uneven and characterised by the continued domination of provider interests. If the market is to be more effectively managed purchasers will need better information and an improved relationship with provider) Introduction Although the economy of Community Care has always 'mixed'. the idea that it should be purposely planned by statutory enabling authorities operating via the purchaser-provider relationship remains problematic at the levels of both principles/values and practice. This paper discusses both general and practice factors that influence the nature of the 'market mix', ways of mapping and managing the mixed economy more sensitively and implications for styles of relationship/partnership between purchasers and providers, and for provider development. The Market for Care and 'Market Mix' It is suggested that starting points for an understanding of the working of the care market at this point in time should include recognition of the following: (i) that all real world markets work imperfectly and need, therefore, to be managed (although it is important also to recognise that local (and health) authorities only directly manage a portion of the market for community care). (ii) that the market in care has developed unevenly and remains in an immature stage of development (two different traditions - public and private markets currently operate in uneasy parallel, exhibiting a high level of uncertainty about the rules of market behaviour since the early 1990s). (iii) that, at this stage of market development, provider values continue to rule and the challenge to aspiring managers of the mixed economy of care (i.e. purchasers) is to enhance its responsiveness to need. (iv) that the aspiration to manage the market in community care is significantly beyond the reach of social services department (SSD) purchasers at this point in time, (although they certainly influence it, in ways more or less intended). An approach to understanding the working of the market for community care can be illustrated by the following figures: Figure 1 demonstrates the configuration of relationships implicit in 'Caring for People' (DoH/DHSS, 1989). The user and carer are placed at the centre of the gaze and the statutory authorities are enabled

2 to put together the ingredients of an assessed (publicly supported) package of care from across the four sectors of provision via the separation of the commissioning/purchasing and provider functions (Waddington, 1995a). Figure 1: The Mixed Economy of Community Care - The Present Reality Four Sectors SSD DHA Finance Local Local FHSA Housing Authority NHS NHS Trusts etc Sector Sector GP Fundholders The user/carer Voluntary Relatives Private 'Independent Informal Neighbours Housing Sector' Sector' Self-help groups Associations Churches etc etc Figure 2: Tensions in Purchasing Purchasers Agenda Value for money Service user needs Risk management Independent Statutory Sector Sector Agenda Agenda Service funding Ethical conduct in Service funding Consumer needs purchasing and Statutory Professional contracting requirements judgements Professional judgements Service Users or Carers Agenda Individual needs Minority needs Community profiles (source: CCETSW, 1994:) Figure 2 illustrates the tensions bearing upon the exercise of the purchasing function (CCETSW, 1994). These are exacerbated by the lack of clarity and transparency of the purchaser-provider relationship currently to be found in SSDs, including the arrangements for devolution of financial decision powers to those responsible for assessment and care management. Figure 3,4 and 5: (omitted) Figure 3 demonstrates the extent to which the SSDs' share of the economy of care has become progressively more mixed with the introduction of the STG and consequent 'externalisation' of many previously local authority directly managed services. Figure 4 suggests that, with the passage of time and the accumulation

3 of experience, SSDs are learning about the more effective management of the internal division between the purchaser and provider functions even while they remain significant stakeholders in both camps ('hybrids'). Figure 5 contrasts the evolving patterns of the arrangements for the purchase of community/primary care implicit in Government policies between local authority SSDs and the NHS. (Waddington, 1995b). The 'odd bed fellowness' apparent in this picture - with 'hybridity' characterising the position of both SSDs and GPs who are fundholders - will require the development of effective mechanisms for locality purchasing if seamless provision of assessed community care is to continue to be sought. Figure 4: The Evolving Pattern of the Purchaser-Provider Relationships and the Mixed Economy Figure 6 indicates the range of factors bearing upon the local authority SSDs policy choices about the 'market mix' in relation to different sources of supply (local authority, private and voluntary sector services) to meet identified needs in differing segments of the publicly managed market. These factors apply whether or not these policy choices are formally recognised and explicitly made. Figure 6: SSDs and Provision: What Should Be the 'Market Mix'? Factors bearing upon this policy choice include: * local circumstances * historical inheritance/inertia * different client groups * political steer/values * professional - managerial policy choices: factors include:- values variety protection specialisms protection quality risk management retention expertise * pressing need for provider development Strategies (organisation development, business planning) Market Trends and Market Mapping Notwithstanding the accumulation of experience at local level since the implementation of care in the community in 1993, it is clear that SSDs will have to develop significantly improved bases of information and intelligence about supply and demand for community care in each sector. The market for nursing and residential beds is a convenient starting point. Laing and Buisson's annual survey (Laing and Buisson, 1996a) is the major source for obtaining the national picture. The following figure indicates some significant trends whose bearing on the

4 evolving picture at local level will need to be considered. Figure 7: (omitted) Figure 8: Major Provider Market - Projections (Provisional) Major Provider Places Other Places projected Major providers defined as for-profit groups with 3 or more care homes (Source: Laing & Buisson, 1996b:7) all figures in 000s Figure 7 indicates the increased penetration of the market by 'forprofit major providers' (defined as groups with three or more homes) especially in the nursing bed sector. Figure 8 shows both the recorded and projected numbers of places to illustrate this penetration. Figure 9 shows how the increase in overall capacity In terms of private nursing home elderly and physically handicapped places in the period since 1990 has been accompanied by a decrease in occupancy levels since a matter generating considerable anxiety among providers, especially smaller players. Figure 9: (omitted) Figure 10 shows the total numbers of residential, nursing and long stay bed in 1994 between the different sectors of ownership Figure 10: 1994 Long Term Care Sector (Places) Residential Home Places Local Authorities 86.4 Private Voluntary Nursing Homes Places Private Voluntary Long Stay Beds Geriatric 34.7 YPD 2.1 Psychogeriatric TOTAL PLACES CAPITAL VALUE (APPROX) œ14 BILLION (Source: Laing & Buisson, 1996b:?) all figures in 000 Figure 11: Newly Registered for Profit Care homes - UK Late 1994 to Late 1995 Nursing Homes Beds Beds per Home

5 Major Provider Other Total Residential Major Provider Other Total Source: Laing & Buisson, 1996b:?) It is evident that, with an estimated 1994 capital value of œ14 Billions, the market for nursing and residential beds is already 'big business'. The tendencies, pressures and behaviours associated with such enterprises in other sectors can be confidently expected to permeate increasingly all quarters of the market, including the large 'cottage industry' segment currently occupied by proprietor-managers of single homes at local level. In the search for market share and for adequate capitalisation, a pattern of further closures, mergers and take-overs seems inevitable, whether or not the overall size of the market continues to expand or the major `big bang' fallout predicted since the run-up to implementation of community care in 1993 ever happens. Property market and financial interests, including North American health and Middle Eastern oil-rich sources, are already advice in this business and their influence will continue to increase. Figure 12: Mapping the Market - 1 THE PROJECT AN ANALYSIS OF RESIDENTIAL AND NURSING BED SUPPLY AND DEMAND WITHIN SHROPSHIRE THE PURPOSE TO IDENTIFY THE CURRENT SITUATION AND HELP ESTIMATE THE FOCUS, EXTENT AND SPEED AND IMPLICATIONS OF ANY CHANGE THE PARTNERS PROVIDERS OF RESIDENTIAL AND NURSING BEDS AND PUBLIC SECTOR PLANNERS/COMMISSIONERS SSD purchasers will have to develop a more sophisticated understanding of local manifestations of these national tendencies. A an' starting point is to map the local market in terms of the supply of nursing and residential home places - as Shropshire SSD have begun to do in an exercise conducted in partnership with independent sector providers and their associations. Figures 12, 13 and 14 indicate the information sought in terms of type and funding source (Shropshire SSD, 1995). The product of the first round of analysis (to be updated on a regular basis) has been published by the Shropshire Care Partnership and copies sent to all local providers as well as purchasers (Shropshire SSD, 1996). The availability, for the first time, of systematically collected and presented market mapping data is beginning to inform a more open and purposive dialogue between purchasers and providers, and between sectors about policy directions

6 and contracting protocols etc. It will also inform the decisions and behaviours of each of the individual players as the local market continues to mature. As well as providing summary pictures for the County and District Council areas within it, essential data not otherwise available have been obtained on 'preserved rights', DHSS supported cases and bed occupancy levels. Except for certain specialised areas of provision (e.g. EMI), it is generally perceived that the market for nursing and residential places is characterised by competition for business for relatively standardised products, has a strongly developed consumer image, is not especially innovative, is driven by provider values and interests, is actually or potentially in over-supply and is, for the most part, a segment where spot contracting procedures by SSD purchasers are most appropriate. Figure 13 and 14 omitted The market for domiciliary care offers a very different profile and its pattern of development appears to be more patchy from one area to another. Audit Commission surveys (1996) suggest that in many localities this market continues to be dominated by direct local authority service provision with its 'home help' tradition. In relation to the private sector of provision, Jewitt's analysis (Laing and Buisson 1996b) is that 50 per cent of the market is held by four major players (BNA, Care Alternatives, Goldsborough and Allied Medicare). Whilst there is a good deal of evidence of diversification into and within this area of provision, the level of innovation in, for example, 24 hour round, flexible intensive home based services, has remained disappointing in most localities (Waddington, 1995c). This reflects continued uncertainty about the market for such products on both the supply and demand sides, the risk level and start-up costs for providers and the 'short-termist' contracting practices of most SSDs in this area. Unless these conditions change, it may prove difficult to sustain the `green shoots' of innovation in the domiciliary arena, especially in view of sharp pressures on SSD budgets and the continued dominant influence of the nursing homes lobby over the terms of public and political debate. Shropshire SSD plans to conduct a similar mapping exercise for local domiciliary provision to that described above in relation to the nursing/residential homes sector. Purchaser-Provider Relationships and Partnerships It seems reasonable to conclude that the present market for community care remains at an immature and unevenly developed stage, with features characteristic of a' dual economy' (private and publicly financed, 'corporate' and 'cottage' etc.), dominated by provider values and interests, neither especially competitive nor innovative and exhibiting widespread uncertainty among players on all sides about the `rules of engagement'. Purchasers and providers need better information and intelligence on how the market is developing, locally as well as nationally, if they are to make their influence tell. Shropshire SSD's market surveys - conducted under the auspices of the Shropshire Care Partnership with the independent sector - demonstrate its aspiration to operate as an effective enabler and thus provide the foundation on which a more creative dialogue between sectors can be built.

7 Contracting practices are another level at which the relationships between purchasers and providers and between the statutory authorities and the independent sector are mediated. With growing experience and confidence since 1993, SSD purchasers are developing their capability to vary their contracting practices better to suit the nature of the care products they wish to buy. Their capacity to do so remains restricted by budget pressures and arrangements for financial management which encourage 'short-termism' and inhibit innovation. Figure 15 suggests a range of dichotomies or tensions which need to be considered by purchasers wishing to secure an appropriate fit between form and function or to select 'horses for courses'(welch, 1995). Figure 16 illustrates the range of possibilities available to purchasers in the form of a contracting spectrum (Audit Commission, 1996). Figure 15: Commissioning and Purchasing Issues Dichotomies or tensions to be considered, according to the service required. include:- case v strategic level? collaboration v competition? preferred provider v tender? external v 'internal' provider? spot v block? short-term v medium term? price v quality? purchaser flexibility v provider security '? high v low transaction costs? Figure 16 omitted Conclusions It was suggested that workshop participants took back the following messages to their authorities: * the need for improved market mapping. * the value of developing (and promulgating) an overall market strategy (with reference to market mix and purchasing intentions). * the utility of adapting contracting styles to fit the service sought. * the benefits to purchasers of staying close to providers and engaging in dialogue via the construction of partnership arrangements.

8 References Audit Commission (1 996)'Audit Commission Bulletin March 1996: Balancing the Care Equation: Progress with Community Care'. CCETSW (1994)'Purchasing and Contracting Skills'. Laing and Buisson (1996a)'Care of Elderly People Market Survey 1996' (1996b) 'Me 1996 Annual Long-Term Care Conference: papers by Laing, W. and Jewitt, J. (unpublished). Shropshire SSD (1995) 'Mapping the Market Survey (1996) Mapping the Market in Shropshire : An Analysis of Residential and Nursing Home Activity. Waddington, P. (1995a) 'Purchasers will Need the Creative Touch', Care Plan, March 1995 (1995b) 'A Journey Through Joint Commissioning' Care Plan, September 1995 (1995c) `Towards Care in the Community : A Catarrh's Tale', British Journal of Nursing, Vol. 5, No. 1. Welch, B. (1995) 'Shaping the Market' (unpublished Workshop Notes, Social Services Inspectorate). caredata CD Full Text - copyright NISW/Social Services Research Group

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