LaingBuisson: Fair Cost of Care Analysis

LaingBuisson was commissioned to undertake an analysis of the results of the Summer 2022 Fair Cost of Care (FCoC) exercise mandated by the Department of Health and Social Care (DHSC) throughout England. The focus was on the costs of care homes for older people and people with dementia, with a remit to use the nationwide FCoC results to build an evidence-based picture of the size and shape of the market and how costs are structured, to explore the relationship between costs and different models of care, to investigate where costs are similar and where they differ, and to describe the impact on costs of a range of factors such as the size and structure of providers, age of home, staffing arrangements, geography and quality of provision.

Perhaps the most important finding from the analysis is the high degree of variance in care home operating costs. This is mainly driven by variance in staffing intensity (staff hours per resident per week), see Figure 2. The high degree of variance cannot be explained by any of the variables at our disposal from the Fair Cost of Care (FCoC) data. By elimination of all other known variables, it is presumed to reflect variability of residents’ needs across different homes. Any such measure was notably absent from the FCoC exercise. The segmentation into ordinary and ‘enhanced’ care built into the FCoC template did not adequately capture variation in residents’ needs, since the cost distribution of ordinary care overlapped substantially with ‘enhanced’ care.

The broad conclusion is that care services cannot be viewed as ‘commodity-like’, and that there is no such thing as a single ‘Fair Cost’ for any of the four modalities of care (nursing/residential, ordinary/enhanced) that applies to most homes in any given geography. Rather, there is substantial, and rarely articulated, variation in costs around the local market medians. This in turn suggests that any ‘Fair Cost’ fee adopted by any given local authority must underpay some individual homes and overpay others, unless mitigated by flexibility around the local market average ‘Fair Cost’.

Professor Martin Green OBE, Chief Executive of Care England, said:

“This publication strengthens our understanding of the social care market in England through a deeper dive into the Fair Cost of Care exercise mandated by the Department of Health and Social Care throughout England. It is clear that there is not a one-size-fits-all commissioning approach to be taken to costs and models of care. There are complex differences between providers, as well as services that operate in the north and the south. Better understanding these differences, and having the advocacy of LaingBuisson’s analysis, only strengthens our position in advocating for a long-term funding settlement to truly close the Fair Cost of Care gap and ensure the future sustainability of the sector as a whole.”

Care England would encourage it’s members to use the findings of this report in ongoing fee negotiations in order to help evidence the Fair Cost of Care

To read an executive summary of the  report, click here

You can access the full report here