If you’re not convinced that now more than ever you need to set and receive the care fees you need and not accept the fees your commissioners want to pay, here are 7 compelling reasons why.

1.  Councils Are Running Out of Money

Let’s start with the overriding fundamental reason…their shrinking budgets mean they can’t afford to pay all care providers the care fees they need.

This is nothing new. For years you’ve been told about their budget cuts how “we need to work together” to find a solution that works, from which nothing changed.

But now, we know that many councils are facing the real threat of bankruptcy. “Nearly one in five council bosses believe it is “fairly or very likely” that they will go bust in the next 15 months…” The Guardian, December 2023.

Read Full Article Here.

Then last week we were told that at the end of last year the UK economy fell into recession. And yesterday (19th February) Birmingham Council were all over the national news because they have announced £300m of cuts they are going to have to make over the next two years in order to balance the books.

According to the BBC, these cuts include £23.7m from adult social care in the next financial year (which starts this April). And they will raise council tax by 21% over the next two years.

But with one in five councils heading the same way, even if you don’t fall under the Birmingham region, you still should prepare for the worst – that being your council being in a similar position as Birmingham.

Because of this lack of funding, getting the care fees that you need is going to get even harder as councils at best tighten their belts even more and at worst make huge cuts to services in order to claw their way out of bankruptcy.

And if for a moment you feel some sympathy towards councils and feel pressured to “work with them” which means accept lower fees, remember that you have a business to run and all the responsibilities that go with that towards your staff and clients and yourself.

Also, check out the Town Hall Rich List 2023  and see just how much council leaders and senior managers paid themselves in the fiscal year 2022 in your region.

The CEO of Staffordshire County Council (where our nursing homes are based) earned a salary of £211,743 and the Director of Health and Care earned a salary of £195,694 plus a bonus of £11,262. Plus more than £4.39 million was spent on ‘exit packages’ – cash paid to staff to leave their job – as part of a ‘restructure’.

Their top priority is diametrically opposite to yours. Achieving their priority harms your business. This is why you must set your fees – not let your commissioners set them for you.

 

2.  Your Commissioners Don’t Know the True Cost of Care.

Your commissioners set fee levels and yet, they have no idea how much it costs you to deliver care.

Commissioners have previously openly admitted to me that they didn’t know the cost of care and how good it would be to learn, so they understood better what fees care providers really needed. I managed to disguise my shock.

Since the Fair Costs of Care (FCOC) initiative that took place in July 2022, the situation has become worse, because now they think they know your costs.

Councils across the country are using the results of the FCOC initiative to try and show that they know your numbers better than you do and that you should therefore accept the “fair” fees that they are willing to pay.

And they are succeeding.

Councils across the country are making big savings at your expense.

Here is a quote from Essex Council showing a cost saving of £510,000 on residential services for adults with disabilities alone.

It doesn’t matter that the costs are taken from a handful of care providers who may not know their own costs accurately, nor that the costs were taken from the financial year ending March ’22. Commissioners are still using this initiative and tool to negotiate fees down.

But the key point here is that local council aren’t succeeding to negotiate your fees down because they know what your costs should be.

They are succeeding because care providers don’t know their numbers well enough and hence don’t have the clarity needed to counter these challenges and defend the fees they set.

If you don’t know your numbers you will struggle to receive the care fees you actually need because you will struggle to justify the fee you have set.

In my report, 5 Steps to Make Your Care Business Financially Secure, I take you through how your commissioners are using the FCOC results to challenge your fee and how you can stand up to these challenges.

3.  They Don’t Understand Business.

LAs and ICBs don’t know how much it costs you to run your care business. They are public sector organisations who haven’t got a clue about running efficient, cost-effective businesses that need to return a healthy profit. If they did, they wouldn’t be facing bankruptcy and we would still have council-run care homes across the country.

Neither do they know what level of profit a business needs to return in order to be financially healthy.

If they did, one LA would not have put this question out to providers in one of their surveys. Look at how many options are at 10% or below and only one above 10%.

Operating Profit Percentage

Clearly they think 10% or less is an acceptable profit margin.

The lowest option is below 3%. They think it is reasonable for a business to make less than 3% profit. It shouldn’t even be an option.

Profit is not a dirty word – it is the lifeblood of a business. 10% is not a healthy profit margin – you need to be making around 30% to ensure long-term financial sustainability.

Only you know your costs. Only you know how much revenue and profit your business and therefore only you can set the fee you need.

You cannot take the fee a referrer pressures you into accepting if it does not return the level of profit your care business needs. 

You must know how to calculate the right fees for each of your individual residents. How else will you know you are receiving the right fee to deliver a quality service and keep your business alive?

4.  You Will Most Likely Have to Close Your Care Business

Accept the fees your commissioners want to pay and you will struggle to be financially healthy and will eventually have to close or go under as so many providers before you.

There is little more I can say here because if you’ve worked in this sector for any length of time you’ll know from experience that this is the case.

If you do normally accept their fees, even reluctantly after much pressure, then please take a step back and decide that this is no longer going to be the case.

Having made that decision, if the whole prospect of knowing your costs well enough to set accurate fees that you can justify makes you a little nervous, then read this report, 5 Steps to Make Your Care Business Financially Secure.

 

In this report I’ll show you exactly how to set, defend and receive the care fees you need. It covers how to set accurately calculated fees, how to use that information to defend your costs and how to counter the challenges you’re likely to face.

Click this link to download the report.

5.  Commissioners are Under Very Little Pressure to Change.

The government and local councils should find themselves between a rock and a hard place – the rock being a lack of public money and the hard place being you, the provider, setting the fees you need.

But they are not.

They are between a rock and spongy place that easily yields to pressure. Rock on one side and soft stuff on the other – which is going to win? And because, for years care providers have yielded to pressure, there is little incentive for the government and local authorities to change.

Until you become ‘the hard place’ nothing will change.

The nursing homes of our sister company are ‘hard places’. They calculate and set the right fees and they receive them. And they are prepared to say no to a new client if a commissioner won’t pay the fee needed. In fact, after years of this, the commissioners know not to haggle and to either pay or go elsewhere and more often than not they pay.

You need to become the ‘hard place’ or nothing will change.

6.  The Care Sector Will Never be Out of Crisis.

The care sector is in crisis. Fees are too low. Record insolvencies is the proof.

Only you and all other care providers can get this sector out of the crisis it is in. The only way to do that is to set the care fee your business needs. 

 

If everyone stopped accepting low fees and instead set the fees they really need, then LAs would have to pay them and we could turn this sector around.

 

 Your competitors aren’t other care providers – demand outstrips supply. Your biggest competitors are your commissioners and yourself.

The former is clear for the reasons I have outlined here. But you being your biggest competitor? If you accept the fees they want to pay then you are hurting your own business and so yes, you are one of your biggest competitors.

 

7.  You Will Never be in Control of Your Business

The success of any business, including yours, is wholly reliant on its financial health.

Everything you do in order to run your business and to deliver the best of care possible costs money.

If you don’t receive the fees you need, you can’t be in control of your business.

Without the revenue and profit you need you will pinball from one crisis to the next as you struggle to…

      •  Have enough staff and keep them well trained.

      •  Pay for extra wellbeing events and activities.

      •  Expand your business.

      •  Get any kind of a loan because banks won’t loan to financially weak businesses.

      •  Cover unexpected costs, like the extraordinary rises in the cost of things like energy, food and insurance.

And, when you want to exit, you will struggle to find a buyer who will pay the price you want to sell your business for. 

Accept the fees commissioners want to pay and you will always struggle financially.

Calculate the fee you need, eliminate the guesswork and take control of your care business.

To see how to calculate the care fees you need and how to then confidently negotiate for those fees, download the report, 5 Steps to Make Your Care Business Financially Secure.

And right now, as we approach 1st April’s rise in National Living and Minimum rates, review your current fees based on your increased costs from April.

To see more on that check out my previous post, National Living Wage 2024 – Why You Need to Care About This Now

If you feel daunted at the prospect of reviewing and setting the right fees, check out our  Care Fee Calculator and try it for free.

This post was updated from 20th April 2023.

Share This