Next NLW Will be 6.6%. Here is Why You Need to Prepare for This Now.

Next NLW Will be 6.6%. Here is Why You Need to Prepare for This Now.

We now know that next April the National Living Wage is to increase by 6.6% from £8.91 to £9.50 for those aged 23 and over and by 9.8% from £8.36 to £9.19 for those aged 21 to 22.

What impact will this have on you as a care provider?

More to the point, what do you intend to do to make sure this huge cost rise won’t financially harm your business?

Hang on Chris, this is 6 months away. Why do we need to think about this now? Well, when’s a better time? If you think about this now and do some what if analysis like I’m going to show you then you’ll know how long you’re likely to need to make sure you are in the best position you can be when it arrives.

What if you didn’t do any preparation? Unfortunately, too many people do nothing. It’s in our nature to put things off until it’s too late.

So, let’s leap forward 6 months – its payroll time and you now know how much extra this is going to cost you each month. You haven’t done anything to prepare for this huge increase and your financial pressures are the same as or worse than (with increasing costs of utilities and food) they were 6 months ago.

How do you feel? Worn out? Sick, wondering how you’re going to manage? Wondering if it’s time to throw in the towel? Hoping you’ll make do?

Or do you feel ok because you made a decision 6 months ago to prepare for this impending rise?

Of course, the right answer is to prepare for this rise.

So, what will the financial impact be on your care business be?

First, take your current average monthly staff bill and increase it by 6.6%. In reality you’ll have people under 23 on lower rates and more experienced staff and on higher rates but a simple 6.6% across the board will give you a good enough indication of the financial impact.

I first wrote about this in a post back in May 2020 after the NLW rose by 6.2% taking this hourly rate from £8.21 to £8.72. I showed the impact of the NLW then and I think it would also be good to show the accumulative rise since then. This would cover those who have had no fee increases since then.

In May 2020I used the example of a 30-bed nursing home with an overall staff cost of £90,000 a month prior to the April NLW rise and showed that this would mean an increase of £ 1,288 a week, or £5,580 a month or £66,960 a year. (See first table below.)

That could easily be the equivalent of a bed fee gone right there.

In this example, this rise would increase each resident’s cost by £43 a week or £2,232 a year. (Bottom separate table in this image.)

For a 50-bed nursing home with an average monthly staff bill of £175,000, the 6.2% rise equals an increase of £2,504 a week or £10,850 a month or £130,200 a year. This works out to be the equivalent of £50 per resident a week or £2,604 a year.

Last year the rise was predicted to be a similar amount in order for the government to reach its goal of £10.50 an hour in 5 years. But because of Covid, the rise was reduced to 2.2%.

Now the rise has been announced to be 6.6%. What Does that mean for these two example homes?

Come next April, the 30-bed nursing home will see a monthly rise in staff costs of £6,447 or £1,488 an annual rise of £77,365.

In the Cost Per Resident table you see that this £1,488 a week rise is the equivalent of almost £50 a week extra cost per resident or £2,579 a year.

But for any residents this home has had since April 2020, you see the accumulative weekly increase (including next year) will be £108.69.

But since April last year that resident will have cost an extra £3,073 by the end of March next year (£2,232 + £841). By the end of March 2023 that resident’s cost will have increased by £5,651.94.

So, if this care home hasn’t increased its fees for any residents since April last year and doesn’t for the coming April then across 30 residents, that will be a cost rise of £169,558.

No wonder so many care homes go out of business.

Here are the numbers for the 50-bed home.

Under the same scenario as above, no fee rises for 50 residents between April 2020 and April 2023 means a rise in cost of £329,696.

I hope you see why you need to do this exercise for your own business and do what you can to increase your fees so the next rise doesn’t actually hurt your business.

Also, you are going to struggle to back date your fees to cover previous year rises. Don’t do the same for this coming year’s rise.

Even though these aren’t your numbers, they may not be a million miles off. Do these numbers open your eyes to something you haven’t looked at hard enough? Is it revealing?

I do hope so because this is too important to ignore and your numbers may work out to be too big to easily swallow.

And this is just your staff costs. What about your utilities and food? Everything is going up.

The tables above come from an excel tool I created for our nursing homes and which is available for free. So, if you want a breakdown of what the next 6,6% rise and those predicted for the coming years then feel free to use it.

National Living Wage Calculator.

I’ve also extrapolated this table a further two years to 2024-25 and used predicted percentages to reach the government’s current goal of a £10.50 an hour NLW.

Your unique challenge – unlike most other businesses – is that you can’t simply increase your non-private bed fees. You are tied into unhealthy contracts and your customers – your LAs and CCGs – have an unhealthy power over the prices you set.

But if for years you have been accepting the kind of low fees that your LAs and CCGs want to pay then now really is the time to stop before it is too late and you go out of business.

If you’ve read my other posts like When is Enough Enough? or 5 Reasons Why You Must Know your Care Home Costs or my report, Will Your Care Home Survive This Crisis? you know I’m all about the numbers.

When you know your numbers you have so much more control over your business and have the visibility to make sure it is sustainable rather than simply hope it is.

If you don’t know your numbers, please make it a priority. Prices across the board are increasing too much for you to simply soak them up. If you’re still not convinced then please do read my post or report or both.

Moving on – having worked out how much your costs will rise what next?

Review Your Fees

You know what your fees are now and you know that you need to increase them so now is a good time to review them and the impact of the cost rise on the profit you currently make on each.

Does each fee return a healthy profit against your current running costs and the cost of the care you deliver?

If you haven’t reviewed your fees for a while then I would simply review them all and prioritise your lowest profit fees as the ones to address first.

Just as a quick reminder – the two key things you need to know…

Know your average care and nurse hourly costs (average hourly rate plus employer on-cost) as shown in this table below.
You need to separate them from the rest of your staff as they are the ones delivering care and you need to accurately calculate the cost of this care based on the time it takes for tasks to be carried out.

Don’t forget to include employer on-cost, which is a real cost to you and must be taken into account. In this table the home has added 30% to the nurse and care average hourly rates. 25% to 30% is right for this sector.

Know your running costs (fixed and staff costs) because this gives you your minimum breakeven point for each client.
Within this running cost a certain amount of care can be delivered each day to each resident. (Your monthly care (and nurse) staff bills divided into days and by the number of residents.)

For example, this (different) 50-bed nursing home has monthly care and nurse costs as shown below, which when divided down into weeks and across the 50 residents, gives a weekly cost that equates to care time each resident can receive.

Divide into days and by their average hourly costs (taken from the table above) and the table below shows that each resident can receive 4 hours of care time and an hour and 20 minutes nurse time each day as part of your running cost.

I call this Basic Care and covers all tasks including paperwork and other duties carers may have such as domestic. Since the pandemic it should also cover tasks like checks, testing and visitor escorting.

For residential care this basic care allocation is probably enough and the running cost per resident (minimum breakeven point) will cover all ‘care’ costs.

For nursing homes Extra Care will almost certainly be needed.

It is important that you know what falls into the realms of ‘basic care’ for each client so that once that time is hit you then start to calculate any additional care as extra care and reach a new individual breakeven point.

For example, if a person’s ‘basic’ care has been allocated but it doesn’t include the Personal Care that you have assessed this person needs, then this ‘extra’ care needs to be calculated, and added.

 

In this case, 20 minutes Personal care by two carers, twice a day works out to take 9hrs 20 mins a week and cost you £108.08 to deliver. That’s £5,620 of Personal Care a year.

These are the kinds of calculations you need to make if you want to establish what your costs are per client and set an accurate fee that includes a healthy profit.

Having reviewed your fees for each of your clients. And calculated how much the NLW is going to increase your client costs by, you can then make an informed decision as to what you need to do.

But what if you don’t follow my advice and work out these costs and increase your fees?

What if in April this 50-bed nursing home hadn’t worked to increase its fees. In this case by increasing the hourly rate staff by 6.6%, the overall staff costs per resident rises from £719.32 to £765.71. (See image below.) A rise of £46.39 per resident per week.

That’s a weekly increase across 50 residents of £2,319.50 and an annual increase of £120,614. Again, I know these aren’t necessarily your numbers but if you don’t do this exercise for your care service then you won’t know its impact.

It’s all about knowing because only then can you do something.

Assuming you can’t reduce their ‘basic’ care then that extra cost comes out of your profit or your pocket.

And what about ‘extra’ care?

The 9 hours 20 minutes of Personal Care would rise from £108.08 a week to £115.27 a week. That rise of £7.19 a week, which is £373.88 a year.

 

You might well think £7.19 a week cost is going to have little impact if that was the only cost rise. But first, it’s still a cost that you have to find. And second, what other extra care does that person need that will increase? And third, that’s just for one client.

So, now you have the extra running cost per resident of £46.39 a week plus extra personal care of £7.19 giving a total increase of £53.58 a week or £2,786.16 a year.

If all residents needed similar extra care that works out at an extra £144,880 a year cost for this home if it doesn’t increase its fees.

Remember, this is just the NLW, and doesn’t take into account your other cost rises such as utilities and food. And if you haven’t yet calculated the cost that coronavirus has had on your business, then now is a good time to do that too. And yes, we have a calculator that can help.

Coronavirus Cost Calculator.

Of course, if your review has highlighted that you have some loss-making fees then you need to speak to your referrer immediately. You should never be subsidising the care a person needs.

Next, if you have clients on fees that return very low, single-figure, profit margins then chances are, when you add the NLW rise that’s coming and your other cost rises, these fees will in fact become loss-making.

And so on…work through your clients and the fees you receive and prioritise them according to the returns you are making. If too low now – big priority to address before these cost rises hit.

And this is why you need to do this exercise now. This gives you time to do this important costing exercise and prepare for conversations with your referrers.

And now we get to the crux of the issue…

Your referrers – your LAs and CCGs – don’t want to review fees if the care needs of a person hasn’t changed. But it’s time to change that.

Costs have increased dramatically and every year the government increases the NLW but doesn’t compensate you for these increases. They are having their cake and eating it.

It’s time to discuss the need to increase your fees.

If a client has been with you for a long time, say more than a couple of years, then your referrers should be pretty open to discussing these ‘evergreen’ clients with you. I know of one local authority that expects people who go into care homes to pass away after a couple of years and so understand if their original fees need to be reviewed even if care hasn’t changed. We have clients who have been with us for around 7 years.

In these ‘evergreen’ cases the  National Living Wage Calculator can help you demonstrate just how much the cost of a client has increased in the last couple of years and how much it will increase overall from next April because, as you see in the tables above, it shows the accumulative, year on year increase, as well as the increase from the year before.

(Remember that doesn’t include the rises in your fixed costs.)

For those who haven’t been with you that long, your referrers should still recognise that costs have started to increase dramatically and will again come April.

If your local authorities and CCGs at first resist your need to increase then keep at it. Don’t take an initial no for an answer. Remember, their goal is to stay within budgets and they will almost certainly resist increasing your fees without pressure from you.

You have to decide where you draw the line. For those clients who it turns out are, or will come April be, loss-making and your referrer refuses to consider the fee you’ve calculated you need, then my line would be to serve notice on them. This kind of decision is of course yours to make.

And if you’re concerned about empty beds, again knowing your numbers will help you make informed decisions. This blog post will also help.

How Long Can Your Care Home Manage with Empty Beds?

If you currently have clients who’s care needs haven’t changed and who are on fees with very low margins like 10%, it’s one thing reviewing the fees and increasing them so that they stay at 10% as your costs increase. (That you should do.) But it’s another to try and increase your fees so that your profit margin increases to say 20%.

You may be on sticky ground if you try that and your referrer may well have every right to say you should have set a higher fee, with a healthier profit margin in the first place.(I know one local authority’s head of commissioning who recently said she wished providers submitted real fees and that they are often too low.)

You could argue you tried at the time but were pressured into accepting a low fee but how a retrospective conversation like this could go I can’t say.

My reason for raising this is to again, emphasize the need to do this this time round if you didn’t last year or the year before and also to highlight how important it is that you get this right first time with new clients. Don’t bow to pressure to reduce and turn a healthy profit into one that makes you financially vulnerable.

Now, really is the time to address your low fees for current and new clients.

Know your numbers and know the impact of these cost rises so that you have all the information you need to present a strong argument.

Right now, the average occupancy is at 89% and rising. The NHS have way too many beds blocked by people who should be in care homes or receiving home care. But they aren’t because for one thing the sector currently has a chronic staff shortage.

So, if you can take a new client then set the right fee and stand your ground – they need your beds. (Make sure these people have had a negative test first though and refuse to take anyone who hasn’t.)

Keeping your care homes and services going has been a hard slog for years with the sector underfunded and in crisis. Nothing the government has announced is going to change that and has simply shown that, compared to the NHS, we really aren’t that important.

So, know your numbers, prepare now for the rises that are coming and stand your ground when discussing the need to increase your fees.

And we have tools to help you.

You’ve seen the National Living Wage Calculator in action and know how that can help you.

If you don’t have a tool to record your costs then here’s what we use in our homes. The Running Cost Calculator will build up your monthly average costs over time a lot more – worth checking out.

You also saw the purple tables showing average hourly costs being used to work out how much care tasks cost. This is our Quality Care Calculator and definitely worth a look at.

The Quality Care Calculator costs the equivalent of a few pence per bed per week and you get a 14-day free trial so you can actually use it to review all of your fees without paying a penny and then cancel if you decide it’s not for you. (I’d be surprised if you did.)

So, it’ll cost you nothing to try out and help you to know what fees you should be setting for your current residents.

Please review this now. April may seem a long way off but it’ll be March before you know it and then the pressure will really be on. Do this now and take you time and get it right. To your success.

5 Reasons Why You Must Know Your Care Home Costs

5 Reasons Why You Must Know Your Care Home Costs

Knowing how much it costs to run your care home is so important, but just how important? What difference does it make to the success of your care home?

Well, it can make far more difference than you might first think. In fact, it can make ALL the difference in the world.

Knowing your costs can be the difference between running a highly successful care home and one that struggles to get by and even stay afloat.

It can make a huge difference to how well you run your care home and how strong a leader you are.

Here are 5 key reasons why you must know your care home costs.

1. Set the Right Fees

This is the all-important number 1 reason for knowing your costs. If you don’t know your costs you cannot know if you are losing money on a particular resident and essentially subsidising some of the care they receive.

Running Cost

All businesses set prices that ensures they cover all costs. These prices could be based on volumes of products they forecast they will sell, like mobile phones or coffee, or it could be based on the service they deliver to however many customers.

Whatever the business models, the price will include a percentage of how much it costs to run their business. Your care home is no different.

The cost of running your care home needs to be divided across those who receive your service.

Once you have calculated that cost you have a minimum breakeven cost for all of your bed fees.

Average Hourly Cost

You deliver a service and therefore time is literally money.

Each of your residents need to receive a certain amount of care. Some of that care provision will be included in your running cost – basic care (see image).

But for nursing homes especially, residents will almost certainly require care beyond that ‘included’ provision – extra care.

It’s vital that you know how much daily basic care time each of your residents can receive and what that ‘care’ entails because any care delivered over that daily allowance needs to be added to your fee or you will be paying for it.

‘Basic care’ covers all the tasks that your care (and nurse) teams carry out, not just direct care delivery. For a residential home that might include some domestic duties and in all cases needs to include paperwork and other non-care tasks such as Coronavirus tests and checks and escorting visitors.

When you add this up you may well find that what you always considered basic care, such as help at mealtimes, should actually be classed as extra care and the cost of that task calculated.

To accurately calculate these costs of care you need to know the average hourly costs for your care and nurse teams.

Notice I say average hourly ‘cost’ instead of rate. An hourly rate could be the National Living Wage rate of £8.91, but the cost to the employer is more. On-cost in this sector is around 25% – 30%. 25% added onto £8.91 gives an hourly cost of £11.14.

Across your whole care team your average hourly rate could be £9 or more. 25% on-cost would bring that up to £11.25. This extra £2.25 every hour for every carer every day, week, month and year can add up to a massive amount of cost so please make sure you include it.

If you aren’t sure how to accurately calculate your average hourly rates then check out our free Average Hourly Rate Calculator.

Both running costs and average hourly costs are vital elements to setting the right fees and to ensuring that you are not paying for some of the care you are delivering.   [Click to Tweet]

I detail how to accurately set and receive the right fees in my report, Will Your Care Home Survive This Crisis?Will Your Care Home Survive This Crisis

If you aren’t sure you are setting the right fees so you can deliver great care and return the vital profit your care home needs, then please download this report.

The title of the report is such because in it I first highlight how the sector is set up to make you fail and then move onto the key to running a successful care home in such a tough sector.

Fees and being financially viable is of course central to this and so how to calculate the right fees is a key part.

 

 

2. Manage Empty Beds

Knowing your costs means you can better manage those empty beds. When I say ‘manage’ I mean not panic and do a knee-jerk reaction to the empty bed and accept any fee offered.

An empty bed can actually be preferable to having an occupied bed for a low fee. But you can only know if this is the case when you know your costs.

When you know your costs you can work out how long your bed can stay empty for before before it becomes a financial loss for the remaining 12 months.

For example, in this image I show a 30-bed residential care home that has a running cost of £521.05 per resident. (Apologies for the .05 but I calculated a real running cost and this is how it came out weekly for each of the 30 beds.)I’ll ignore the things you can do to reduce the cost of an empty bed and stick to this cost when the bed is empty. 

If the intention was to fill this bed for an ideal fee of £762.97 that returns a 30% profit margin of £241.92 (a healthy profit that should be aimed for) then the bed could remain empty for 16 weeks.

On week 17, it would fall into the red for the remaining 35 weeks of a 52-week period and produce and overall loss of £390.65.

 

If filled on week 18 for the ideal fee then on the 37th week of occupation the bed will once more return a profit.

Weekly per bed on referrer fee - Quality of Care

If, however the care home was willing to accept the average fee that residential homes were paid in England last year of £596, then, as this next table shows, the bed could only stay empty for 6 weeks to remain profitable.

On week 7 the bed would fall into the red and wouldn’t make a profit for the remaining 45 weeks of the 52-week period.

 

If filled on week 7 on this low average fee, the bed wouldn’t return to profit for 49 weeks.

If you don’t receive the bed fee you need an empty bed will become loss-making far quicker and stay loss-making far longer than if you filled it for the right fee. [

And that’s for a single bed. When you know your costs you can also work out your worst-case scenario of how many empty beds you can handle before you just about break even.

In these examples, on the ideal fee of £762.97 for each resident, the care home would start making an overall loss if it had 10 empty beds. But on a fee of only £596, it would start making an overall loss with 4 empty beds.

You see how powerful knowing this is. How you can make informed decisions rather than knee-jerk reactions if you know your costs.

For more on this including how to work this out check out my post on managing empty beds.

 

3. Track Overspend

Any business needs to keep a handle on how much they spend. This is arguably even more important in the care sector which isn’t known for its high profit margins.

Every penny of your fee counts. If you record your spend in enough detail and regularly enough then you can see trends of spend and spot spikes. You can then question the reason for the increased trend or spike.

For example, if your kitchen spend is gradually increasing over a number of months (like in this image) you need to see that so you can question it. Care Home Running Costs - Quality of care

Is your chef making decisions that is costing you more money? Or has a supplier increased their prices and you should be arranging to negotiate a new contract or look for a different supplier?

Staff is a big cost and you need to see and control this cost especially when it comes to agency staff which can increase dramatically.

If you don’t see these increased cost trends then you can’t act on them and you won’t know that the spend in an area of your business is getting out of hand.

When you record your spend on a monthly basis you can build an overall average spend and set monthly budgets so you can better see how well or not people are staying within agreed budgets. In this image you see the straight-line budgets and the actual monthly spend in comparison.

These charts are examples taken from a tool that we use to track our care home costs, called the Running Cost Calculator.

 

4. Be the Leader Your Care Home Needs

Recording and knowing your costs gives you the knowledge you need to be a better leader.

Knowing your costs means you will be able to make better decisions because you won’t be hoping for example that the bed fee you have agreed to is enough – you will know. [

Knowing how much it costs you to deliver care means you can negotiate for the right fee from a more confident and powerful position because you can argue what the impact on the client would be if you accepted a lower fee. I talk about how to negotiate from a stronger position in the report, Will Your Care Home Survive This Crisis?

As you have seen, knowing your costs also means you will manage empty beds better and have more control over your spend.

Knowing your costs means you are in more control because you are eliminating guesswork and instead making decisions based on hard facts.

Knowing your costs means you can keep your care home on course to be one that can succeed instead of one that struggles and fails like so many others do.

 

5.  Have a Financially Strong, Successful Care Home.

The industry is set up to make you fail. If you have any doubt about that then please do read my report, Will Your Care Home Survive This Crisis?

Your customers – LAs and CCGs – don’t know how much care costs but neither do too many care providers and they succumb to the pressure commissioners put on them and eventually run out of money and close.

Your customers don’t know your business and they shouldn’t have a say as to how much they are willing to pay for your services. It’s your care home business and as such you need to be the one in control and set the prices you need to deliver a great service and make enough profit to keep going.

They think making 10% profit margin or less is perfectly acceptable. And that was before the pandemic which has cost care homes on average 10% of their revenue.

And this week’s announcement by the government regarding funding the NHS and social care by increasing NI, is woefully inadequate.

Do not rely on the government to help you run the care home you want to run. Take control of your care home and its destiny like any private business should. [Click to Tweet]

That control starts with knowing your costs.

I hope you see just how important it is that you accurately know your costs. You should aim to have all of your costs recorded so you can see on a monthly basis just how much your care home is costing to run.

If you don’t have a tool for recording your costs then do check out the Running Cost Calculator.

Do You Want to Receive the Fees You Need? Here’s How

Do You Want to Receive the Fees You Need? Here’s How

Do you receive the fees you need to deliver quality care and maintain a financially healthy care home?

If you do receive the fees you need, then you know your numbers – your running costs, average hourly rates of those teams delivering care – and you accurately calculate the fee you need and confidently negotiate that fee. And you are rare.

If you don’t receive the fees you need, at least you know – which is a start – and know that this is unsustainable and needs to be addressed.

If you don’t know, then you cannot know your numbers and almost certainly accept the fees that your LA and CCG want to pay and hope that they are high enough for you to deliver good care and return enough of a profit. Heads-up these fees won’t be.

If you don’t sit in the first option, then please read this post as we’re going to address how to make sure you set the right fee and then all you can do to make sure you receive it.

There are two steps to receiving the fees you need.

  1. Calculate the right fee. If you don’t know how to calculate the right fee then, as it is a big subject in its own right, instead of taking you through the steps download and read my report, Will Your Care Home Survive This Crisis?

This report will take you through the 5 steps to calculating the right bed fee.

If you have read the report and know these steps but still struggle with the maths then check out the bed fee calculator I created that will help you calculate the right fee.  Bed Fee Calculator.

  1. Negotiate and win that fee.

In this post I will focus on step 2.

 

Your referrer doesn’t know what fee you need

You’ve accurately calculated the fee you need. You know that this fee covers your running costs, the cost of the care the person in question requires and returns the profit the care home needs to be financially healthy.

Now you need to receive that fee.

If you are bidding on an online Dynamic Purchasing System, then you know that there may be no opportunity to negotiate unless you receive a call because none of the bids were successful.

My advice with these systems is, don’t be tempted to reduce your fee because others will bid lower. You have the clarity of knowing the fee that you have set is the fee you need.

If you bid lower because you feel the pressure of an empty bed, then set your fee at the lowest profit that is acceptable but no lower. There is no point taking a client for a fee that returns no profit. (Of course, a fee that results in a loss is unacceptable.) An empty bed is manageable and an opportunity to fill it for the right fee. An occupied bed for a fee that is too low could be a financial burden for years that will only harm your business.

Read more: How Long Can Your Care Home Manage with Empty Beds?

If you are on the phone to someone who wants to refer a person to your care, then you have an opportunity to negotiate for the fee you need.

And what a surprise, the referrer says your fee is way too high.

But, having calculated an accurate fee in this way, again you have the clarity of knowing that this is the fee you need. Knowing this and knowing you can justify it should also give you the confidence to stand your ground and ultimately say no if they refuse to agree to your fee.

Two important things to remember when negotiating with referrers:

First, the referrer doesn’t actually know how much it costs to deliver care. I’ve been in meetings where both LA and CCG referrers said it would be nice to have some training on how much care costs, so they had a better idea.

Second, they have a budget to meet and are targeted to set fees within the range that their budget can handle. At the start of the fiscal year, local authorities and others have to forecast how many beds they are likely to need and of what ‘type’, residential, basic nursing and so on.

They then have a budget that they hope will cover the number of beds they forecast they will need. This pot of money will always be a compromise between paying you what they think is enough – based on what they have paid historically – AND satisfying their budget restraints.

It will not be based on what you need and will 99.9% of the time be too low.

On the day, they may have a fee in mind that is an average ‘quote of the day’ based on the fees of three other providers (who themselves don’t know how to set fees). This has nothing to do with the cost of running your care home and the cost of delivering the care this person needs.

And no doubt they will talk about budget restraints and the need to compromise and to “work with them”. It’s just another application of pressure to get you to accept the fee they want to pay.

Their budget constraints is not your problem.

Read more: 5 Reasons Why You Should Never Accept Referrer Care Fees or reference Prices.

So, you’ve told the referrer you fee, had the expected response and been asked to reduce it which you of course say you can’t because it’s the fee you need. Your referrer comes back with questions and objections – how should you respond?

Here are some ideas.

Stand your ground

Referrer: Why is your fee so high?

You: They’re not.

This fee has to cover a fair percentage of the cost of running our care home and increased costs of food and utilities and insurance, etc. Then there is of course our biggest cost which is our staff who we have to pay at a minimum the national minimum or living wage. I have to increase all my wage tiers every time the government increases the National Living Wage.

Our staff have to receive a certain level of training. The building and equipment need to be well maintained and we have to meet certain standards in order to be industry compliant and rated at least ‘Good’ by CQC.

Then there are the Coronavirus tests and checks we have to carry out and the escorting of visitors which you mandate we have to do and of course, PPE.

You are the biggest cause of my increased costs. You can’t have it both ways.

As a private business we of course need to make sure we are financially viable, which is mandated by CQC by the way, and which, as a business, we have a legal responsibility to ensure. Therefore, we need to return enough of a profit to ensue our care home is financially sustainable.

We need to make sure that we don’t go under like so many others have and leave the region with even fewer beds and with you having to find other homes for your clients that we care for.

Referrer: But we can’t afford to pay you £XXXX a week.

You:  I can’t help that. This is the fee that I have calculated we need in order to give this person the care he needs.

If I accept the fee you want to pay, I will be paying for some of the care your client needs and hence make a loss on this person. You could go further here and use our bed fee calculator to state exactly how much you would lose and hence how much of the care you would be paying for.

You understand therefore that I can’t accept your fee, it will harm our care home.

Referrer: Can’t you reduce your fee?

You: I can’t reduce my fee because I’ve accurately calculated it based on our costs to run the care home and pay our staff [see above] and to provide [Fred]the care he needs.

So, if you need me to reduce this fee, which part of his care do you want me to take out?

Of course, you’ll point out that the care you’ve assessed he needs is there for a reason and the Care Act stipulates that LAs and CCGs cannot expect you to reduce that care. Neither can they knowingly place a person with a provider whose fee is so low that it is questionable that they’ll be able to provide the care the person needs.

Referrer: Why does your care cost so much to deliver?

You: The cost of our care is based on the average hourly rate of our carers and nurses. These rates increase each year because you increase the national minimum and living wage. This has a knock-on effect across all our staff as we have to maintain acceptable gaps between a new carer and a more senior and experienced carer. Then we have to increase our more expensive nursing staff to maintain that gap. [If you have nurses of course.]

And we also have employer on-cost which has to be added to cover costs such as national insurance, pension, recruitment and induction, advertising costs, legal and payroll costs and more.

You have a breakdown of the care required. That care takes a certain amount of time to deliver which is then multiplied by these average hourly rates (with on-cost).

The cost of delivering the care this person needs is very black & white. It is simply a mathematical calculation. If you want this reduced, then we have to take away some of the care he needs. What care would you like to take away?

See Care Act argument above.

Referrer: Can’t you reduce your profit?

You: No, I can’t reduce my profit (and no, what my profit is, is none of your business) because that will put my care home at financial risk. I have an obligation to my residents, their relatives, my staff and to the sector to ensure this business is financially healthy. And, as I said earlier, since 2018 it is a CQC requirement for care homes to be financially viable. New guidance for assessing your financial viability.

Coronavirus has increased our costs around 10% and double that when we’ve had to carry out 7-day LFTs for all staff because of a positive test.

Yes, we’ve had some financial help from the government, but you have told us how we can spend that money (like bikes and bike racks so people can cycle to work but not PPE for that first tranche of money) but it hasn’t been nearly enough. And its questionable that their will be any more.

Operating Profit PercentageGoing back to that 10% profit. Local authorities don’t know business and don’t know what level of profit margin a business needs to return to be healthy. If they did one LA would not have put this question (shown in this image) out to providers in one of their surveys. The implication from the choices offered is that 10% or less is an acceptable profit margin.

Any care provider on that level of profit before the pandemic would now be making a loss.

Referrer: I have another care home willing to take this person for £XXX.

You: Well, it is your prerogative to place Fred with them, but if I accept £750, I will be paying a large proportion of the care Fred needs. Now, when you spread the cost of running a care home between residents and the cost of care then per resident our costs and those of another care home won’t be that different.

So, if another care home says they can care for Fred for £750 either they aren’t doing their numbers, in which case they will suffer financially because they will have to pay for some of that care, or they are lying in order to fill an empty bed and intend to reduce the care Fred needs.

Now that you understand better why this is our fee and how I have accurately calculated it, you need this other care provider to justify how they could deliver the care we’ve gone through that Fred needs, on such a low fee. Remember, you have an obligation to make sure you’re placing Fred with a provider who will deliver the care he needs.

I’m sure there are other questions and objections you can think of that your referrer could come out with. It’s a good idea to pre-empt what they are and have your answers, like these, ready.

Take control

You see how by knowing your numbers and setting the fee you really need, you can more confidently hold your ground knowing the financial impact on you if you reduce the fee?

And you see in this conversation how we passed on this clarity to the referrer and planted doubt in his or her mind as to whether this other care home can meet Fred’s needs.

By bringing up the Care Act and reminding them of their obligation, if they do go elsewhere, you have planted that seed of doubt in the other provider’s ability to deliver that care and the referrer’s responsibility to make sure.

So, plant seeds of doubt. Put pressure on the referrer as they are happy to put on you. Pressure them to due their due diligence and if necessary, remind them of their obligation.

Care providers don’t do this and too long have bowed to the pressure referrers have placed on them, which is why the sector is in the mess it’s in and why record numbers of care home close each year.

And don’t forget, potential residents or their relatives have a say regarding placement too. If your care home is well looked after and well-staffed, if it’s clear that quality personal care is being given and is warm and friendly and if other residents themselves or their relatives say great things regarding your care home, then that is a factor that referrers cannot ignore.

Set the fees you need – you have far more power than you think.

By setting fees that you have mathematically worked out, you take away your options to reduce that fee because you clearly know the impact on the potential client and your care home if you do.

You also make it harder for your referrer to accept a much lower fee from another provider because you have clearly laid out your reasons for the price you have set.

You have strengthened your position and weakened theirs.

You are in control.

After all I have said, of course your referrer can still place the person elsewhere, leaving your bed empty for longer.

I understand the pressure of needing to fill an empty bed. And this is where knowing your numbers will also help. As I said earlier, an empty bed is better than one that is occupied for a fee that is too low. (Read that post I linked to earlier.)

Just remember that the maths showed that you couldn’t take that person for the fee the referrer wanted to pay. And hopefully, you’ve challenged the referrers on other providers being able to deliver that care for much less.

If you’ve planted enough doubt in the referrer’s mind they may well come back because they couldn’t be certain that the person would receive the right care.

We have had referrers say no, try elsewhere and even place elsewhere and then come back a couple of weeks later because the other provider couldn’t meet the client’s needs and needed the referrer to take the person back.

Calculate the fee you need in the way I’ve shown, eliminate the guesswork and present your fee from a strong, confident position.

Remember, this is the fee you NEED, not the fee you WANT. You are not being greedy.

If all care providers set the right fees and refused to accept the paltry fees offered, then the

government would have no choice but to find the money this sector so desperately needs.

And also remember, the fee they want to pay is only based on their limited budget not on a specific person’s care needs.

It is down to you as the care provider to make sure you are receiving the fee you really need.

You cannot

simply accept their fee and hope it will be enough because it won’t be.

 

About your numbers – this is the most important part of your business. It’s vital that you know your numbers because unless you earn 30%+ profit margins, then these (and other) cost increases will hurt you financially. And what hurts you financially ultimately impacts the care you can deliver.

If you don’t know your numbers, please make it a priority that you will. If you don’t have a tool to record your monthly running costs then check out this Running Cost Calculator – it’s what we use in our homes.

If you need help to set the right fees then check out the bed fee calculator.

 

 

Where is Your Care Home and are You on Course?

Where is Your Care Home and are You on Course?

We’re scarily half-way through 2021 and although arguably better than last year, it is turning out to be another tough one. Right now, the challenges are less to do with Covid-19 itself but more to do with the ‘guidance’ and legislation – like the mandatory vaccination for those working in social care – being brought in by Boris and the government.

I don’t doubt though that as we approach winter the pandemic itself will impact us as it did earlier in the year.

But regardless of the challenges we’ve all faced and continue to face, there should still be an element of reflection and assessment as to where your care home is now in relation to where you expected it to be.

The end of the calendar year is always a natural time to review how the year has gone and so the half-way house of July is a natural “how are we doing so far” milestone. (Of course, you should review where you are on a monthly basis and especially no longer than quarterly.)

Is your care home in a better place than last year? Is it recovering from where it was before the pandemic? Is it anywhere near where you expected it to be prior to the pandemic?

Did you set an expectation of where your care home(s)would be?

You may at this point have a couple of questions:

  1. “What do you mean, ‘where’?”
  2. “Does it matter right now after everything that has happened?”

‘Where’ is your care home business?

Every business needs to measure their performance against specific metrics like revenue, profit, costs, number of products sold, number of customers, average customer spend and so on.

Only by doing this can they gauge if their business is growing or shrinking or possibly doing ok now but seeing trends that could cause issues in 6 months’ time.

What are your key business metrics? Financial measurements are important for all businesses and so you should know your revenue, profit, costs and outstanding debts. Ideally you should know these on a monthly basis so you can respond to missed targets such as the collection of outstanding debts.

There are also sector specific metrics that you should measure such as occupancy level, average fee level and profit per client type. (Social services, CHC, 117, private and so on.) You could also measure spend on agency staff, maintenance and training.

Of course, you have to record things like the number of incidents and accidents, DMIs and safeguardings. You also need to know that your staff have received the training they need, whether mandatory or not, that staff levels are right for the types of clients you have, that care plans are up to date, and you may wish to measure how efficiently people are helped in the morning with tasks like Personal Care and what time everyone has had their breakfast by.

Regardless of what is going on in the sector (and the world) you still need to know how well your care home is performing.

Does it matter right now?

You might argue that where you are isn’t so important because it certainly isn’t where you expected or aimed to be.

You could argue that you know your occupancy level has been hit, that your costs have increased and your profit reduced. So, you just want to focus on filling your beds for the best fees you can and hope that nothing else hits you as you try and get back to where you were two years ago.

Perfectly reasonable response but this is why knowing where you are compared to where you were is important. It is about knowing how much.

With metrics in place, you have clarity of knowing how much revenue and profit you may be down, if your debtors aren’t paying up and need to be chased, how much more you are spending on agency staff, how many more incidents and accidents are being recorded and if that can be attributed to staff turnover and training.

You can build a clearer picture and connect dots.

With that clarity you can more strategically set a course that gets your care home to where it was before the pandemic quicker than if you are simply looking at what needs addressing on any particular day.

Instead of simply filling an empty bed with the first referral that comes your way or successful bid you make, measurements of financial return based on the type of clients you have may point to you holding out for a particular client with a certain level of needs.

And no, not all clients are equal. A social services client with few needs will cost a lot less to look after than a CHC clients with complex needs. The return you make on the latter should be greater than on the former because your profit should be a percentage that is based on the cost of caring for that person.

You also need to look at your staff levels – if you previously had a number of clients who had complex needs and your staff levels were higher in order to manage their needs then you don’t want to fill empty beds with people whose care needs are much lower because you will have more staff than you need and the cost to go with it.

These measurements could also highlight trends that you wouldn’t have known about. For example, with all of the extra tasks that Coronavirus brought you may not know that care plans weren’t updated as they should have been and are out of date. Then you have an inspection and care plans are checked…uh oh.

Strategic Destination

Did you set a Strategic Destination before the pandemic?

This strategic destination is something for your business to aim at and can comprise a number of targets such as revenue and profit, average occupancy level, average bed fee target per client type and so on. It can also include more ambitious aims such as opening a new wing or new care home.

It’s likely that because of the pandemic many of these targets were missed. That’s understandable. Now, you should review what your targets were, amend to current circumstances and set a new course to reach a new destination.

Read more: Where Do You Want Your Care Home to Be? Your Strategic Destination.

So, are you on course? Lets’ look at your 3 possible answers…

Yes, I’m on Course

To be honest that would be unlikely. No sectors have been immune to the effects of the pandemic.

The plans of many global well-known companies went out of the window because of the pandemic. The revenue of online companies like Amazon and Zoom were way beyond any expectation in 2020, whilst physical companies like British Airways and McDonalds slumped.

But let’s say you are on course. Don’t forget this is about all of your targets so you may be on course with some but not others. You may be on course regarding your target to reduce your use of agency staff by 10% but not regarding maintaining and average your occupancy level of 95%+.

The numbers only tell part of the story and you need to dive in to see what’s behind those numbers.

For example, you may only be on track regarding use of agency staff because of lower occupancy which in turn is because of the pandemic.

Or you may be hitting your average occupancy level target because the NHS was desperate to free up empty beds. Are targets being met or missed because of an unusual circumstance (luck or bad luck) rather than because of the execution of a clear strategy?

Like I said, even the global companies have been caught out so don’t beat yourself up. But do recognise if your situation is down to good or bad luck as opposed to deliberate strategy that was met of missed.

No, I’m Not on Course

Most companies aren’t – the pandemic saw to that. But either way at least you know.

Knowing that you’re not on course implies that you did create a course (a strategy) for your business in the first place.

Because you have a clear, measurable strategy you know where you are, why you are where you are, what was missed and why and what you need to do to get back on course.

If achieving the milestones, you originally set out, is no longer realistic then don’t waste time staying on that course and hoping that, with luck, you will get back on it. Revise your strategy, and set a new course based on what you’ve realistically been able to achieve so far and what you need to do in order to meet yourrevised targets.

I Don’t Know if I’m on Course

Not knowing if you are on course or not is worse than knowing that you’re not on course.

If your business is actually on course, not knowing or not knowing why it is, basically means you are blind and your business is only on course out of sheer luck.

At some point that luck will run out. But because you’re blind to the progress your business is making and the path that it’s on, you may not know that things have gone wrong until it’s too late.

The same is true if it isn’t on course and risks simply drifting further off course.

Of course, saying ‘don’t know” could imply that there was no course in the first place – that there was no strategy to get the business from where it was at the start of the year to where you want it to be at the end of the year. That truly is the worst-case scenario.

Knowing whether your business is on course or not – having this visibility – is a strength that all businesses need. Remember, even if it’s not on course, at least this visibility means you know why and can therefore do something about it.

This is why you need to set a strategic destination and create and execute a strategy that will get you there.

So, I ask again, are you on course?

If you need help to set the right course and to stay on it then check out the free resources on my website www.qualityofcare.co.uk and look out for new material on how to develop and execute the right strategy for your care home business.

Why Most Care Homes Struggle and Fail

Why Most Care Homes Struggle and Fail

Thousands of new businesses are launched each day.

It takes a huge leap of courage to start your own business – it’s exciting and scary and it’s hard. But for those who succeed it is a highly rewarding journey.

But every day, as thousands of businesses launch an equivalent number close, the majority having struggled for a few years and finally called it a day. It’s a crying shame but it happens.

But for the care sector, it’s more than a crying shame. Every good care home that closes is a disaster. Residents are uprooted, staff lose their jobs and yet more beds are lost when our society needs more of them.

If you’ve read the latest edition (July 2021) of my report, Will Your Care Home Survive this Crisis?  you’ll know that between 2015 and 2020, England alone lost 15,078 care homes and 48,607 beds.

From this report you also know the reason why the vast majority of these care homes closed – the business model of the sector is broken and essentially set up to make you fail.

But that is only part of the story and as you see in the report no care home has to fail.

Read report: Will Your Care Home Survive this Crisis?

There are still plenty of care homes out there like ours that are doing well and so the broken sector isn’t the whole story and it doesn’t explain why so many businesses fail in other sectors.

If there is no major challenge like the credit crunch in 2008 and the current pandemic, and a sector is running ‘as normal’, plenty of businesses still don’t make it when other similar businesses do.

The reason comes down to how these businesses are run and how strong the foundation is that supports it.

Read more: Build a Strong Business Foundation

A strong business foundation gives a business owner, managers and staff, two vital elements – certainty and control.

Any business, including a care home, that lacks these elements is going to struggle because instead of certainty and control, their business is based on hope and luck.

They hope that what they’re doing will work and that, with a bit of luck nothing unexpected will happen to harm them.

Well, we all know that the unexpected does happen and plenty of businesses, including care homes, have fallen because of this latest challenge that none of us expected.

Building a business (whatever that business is, including care homes) based on hope and luck is like building your house on sand. Its foundation isn’t strong enough to sustain it, especially when things go wrong.

In your business – in your care home – you need to have the certainty of knowing what it is you need to be doing to build and maintain a strong care home. And you need to be in control to make it happen and keep your ship on course.

Now, of course you can’t have 100% certainty and control. We don’t have a crystal ball to spot every challenge ahead nor a magic wand to manage it – as I said, none of us saw the pandemic coming or knew the impact it would have.

Instead, you want to be certain that your business – your care home – is strong enough to handle challenges whether expected or not. And you want to be sure that you and your staff have what it takes to manage the situation and stay in control.

This is what a strong foundation gives you.

A strong foundation = certainty and control

Certainty and control come from the 3 fundamental building blocks that make up a strong business foundation.

The first building block is Strategy. When you and your business is strategic you know each day, week, month and year what you need to do to drive your business in the direction you want to take it.

As part of your strategy, you also identify the risks and threats to your business and to achieving your aims. For example, you know that every April the government increases the national minimum and living wages which has a huge impact on your running cost.

Your strategy should identify that known event and have a plan to mitigate for its impact. In this case you can’t eliminate the event or avoid it, but you can plan on how to reduce its impact by applying an extra 2% or 3% to your fee as a cushion against this impending extra cost.

Managing empty beds is another known risk. You know it is going to happen and so do you simply react to having empty beds or do you strategically plan for them?

For example, you could have a system in place for monitoring and predicting that a particular bed is likely become vacant in the near future and start looking for your next client to fill that bed.

You should also know the financial impact of an empty bed so that you don’t stress about it and fill the bed as quickly as you can regardless of whether the bed fee is good enough.

Read more: How Long Can Your Care Home Manage with Empty Beds?

There are a couple of examples of how having a good strategy and effective systems in place give you increased certainty and control. These building blocks support each other. One can’t work without the other.

And neither can they work without the 3rd fundamental building block – leadership. Only strong leadership in you, your managers and staff will ensure effective systems and processes are in place and working and that a coherent strategy is created and successfully executed.

All 3 building blocks are needed to make this strong foundation.

 

Manage the Unexpected.

But how does a strong foundation give you the certainty and control needed to handle the unexpected?

It’s the strength of the business (the strength of the foundation) that will see you through the unexpected.

Take the pandemic. So many care homes have been hit hard by it and been tragically left with empty beds and some gone under because of it.

With a strong enough foundation many of these care homes would still be around and others suffered less.

At the core of any strategy must be the need to return enough profit. I’ve said before profit is a business’ oxygen. Without it, it will die. Plain and simple.

A financially healthy care home was straight away in a better position to handle the pandemic. First it could better absorb the increased cost that the pandemic brought in the form of PPE, staff and client checks and tests, etc.

Care homes who simply accept the fees their LAs and CCGs wish to pay or signed-up to their general contracts won’t have been making enough profit (if any) to absorb this extra cost and stay financially viable.

I cover this cost in the report The Cost of keeping Coronavirus Out of Your Care Home. The pandemic will have cost you at least 10% of your revenue. I created a calculator to check and monitor the costs for our care homes. You can get the Coronavirus Cost Calculator here to see how much it has been costing your care home.

Get the: Coronavirus Cost Calculator

Care homes with robust systems and processes to ensure residents and staff are isolated if tested positive and the strict use of PPE, etc. have been better able to keep residents safe from the Coronavirus.

Our homes had/have effective processes in place. We also isolated any new resident regardless of whether the NHS said they had tested negative or not. We simply assumed the worst.

Strong leadership has been crucial to ensure rules were adhered to and have had to be particularly strong when under so much pressure to open doors to relatives.

With training and clear rules our managers were able to manage the day-to-day processes and lock the homes down if a positive test was recorded no matter how unpopular the move was. (One home was threatened by a relative who said he would return with a shot gun.)

By being financially resilient, having the right systems in place and strong leadership at all levels of staff, each home only suffered one death due to Covid-19.

A strong foundation based on these building blocks gives you the certainty and control needed to mitigate for both known potential risks and threats and unknown potential risks and threats.

Do you hope that your business – your care home – will achieve your aims or do you want to be as certain as possible?

If you want to know more about these 3 building blocks and why they are vital, check out the Free Resource on our website.

 

When is Enough, Enough?

When is Enough, Enough?

The last 12 months have been crazy, extraordinary, unprecedented…I’m not finding the right word (good start Chris), so you decide what the pandemic has been like for you.

It’s like being in the eye of a tornado. In the eye all is calm but the tornado moves and you’re caught up in its chaos and hit from all sides. Eventually you make it back into the eye and relative calm. And then it moves again.

And of course, the chaos isn’t over. We have the Indian variant here and cases are starting to rise again.

One thing has been consistent throughout this pandemic chaos and even before it – the government’s complete lack of support for the care sector.

  • We’ve had confirmation of what we’ve always known – the NHS was sending patients, with Covid-19 into care homes.
  • The government sets out new guidelines almost weekly with no regard for the impact on your care home. The latest being how many visitors can visit your care home.
  • New fee contracts will almost certainly result in further financial hardships for those who sign up to them and result in more care home closures.
  • And there was nothing in the Queen’s Speech earlier this month about helping the care sector.

This lack of support goes way back over years, but this last 12 months has really highlighted just how little the care sector is supported.

So, I need to ask you – and maybe you need to ask yourself – when do you say, “Enough is enough.”?

When will you stop doing what the government and local councils want you to do and do what your care home needs you to do?

The government consistently does you no favours and care providers consistently take it?

  • Care Homes have been decimated because they took NHS patients in who hadn’t been tested for Covid.
  • Care providers try to meet guidelines as if they are law and put even more pressure on themselves.
  • New contracts from your LAs and CCGs amount to you needing to deliver more care for less money.

When will you say, “enough is enough”? When will you realise that the government isn’t going to change legislation so that it works for you and definitely isn’t going to set fees that pays you to deliver quality care, employ and train enough staff and return the profit that your business needs.

Only you can do that. Only you can decide what your care home needs so it can deliver the best of care and remain sustainable.

Once you decide enough is enough and decide that your customers (because that is what the government, your local councils and CCGs are) are no longer going to have this power over you then you can shake off the shackles and take control of your care home business.

If the NHS wants you to take patients they haven’t tested or that you aren’t prepared for, then just say no.

If relatives want to visit in a volume that you can’t safely manage, then just say no. (I know that CQC are coming down hard on care homes that haven’t opened up for visitors but if you can demonstrate that you can’t safely manage the number of visitors the government want you to let in but that you do let in what you can manage, then you have a strong case to argue.)

If LAs and CCGs want you to sign up to contracts that will financially hurt your business, just say no. We haven’t and we still take new clients from Las and CCGs for fees that we set.

You don’t work for the government – you run a privately-owned care home business – so do what’s best for your business.  [Click to Tweet]

You do need to meet legal requirements and you hopefully aim to deliver standards of care that will give you a ‘Good’ CQC rating. But you don’t have to do what the government guidelines want you to do, and you definitely don’t have to sign up to contracts or accept bed fees that are too low.

(Remember when councils used to run their own care homes? They all closed because they couldn’t even sustain them when they paid themselves £1000 a week per bed. They moved their residents to private homes and offered them around £450 a week.)

The point is that time and time again the government has shown that it has no intention of helping the care sector. It has no intention of increasing their spend in the sector. It has no intention of helping you to provide great care without struggling to maintain a financially healthy business.

So, you can either continue to try and meet their guidelines, accept their awful contracts and low fees and hope that things will change. “The definition of insanity is doing the same thing over and over again and expecting different results.” (A phrase wrongly attributed to Einstein and Benjamin Franklin.)

Or you can decide that enough really is enough and that you are going to take back control and do what is right for your care home.

It’s time for you to decide that:

  • You are going to set the fees you need.
  • You will take as many visitors that you can safely handle and not as many as the government say you should take.
  • You are in charge of your care home, not the government or local councils.
  • Enough is enough and it’s time to take back control.

So, how do you take back control?

First, identify where you aren’t in control of your care home business.

For example, if you did things that in hindsight you wish you hadn’t then ask yourself why.

Why do/did you…

  • Automatically try to do what the government guidelines want you to do, no matter how difficult that may be?
  • Take patients from the NHS who hadn’t been tested if it resulted in the tragic death of a number of your residents?
  • Accept fees or sign up to contracts that will financially harm your care home?

These are examples of outside pressure that you don’t have to succumb to.

But this kind of outside pressure could point to a lack of control from within.

Know your numbers.

For example, do you accept low fees or sign up to these damaging contracts or bid low online to win clients because you don’t have a firm grip of your numbers? [Click to Tweet]

Do you know:

  • What your running costs are and hence what your weekly breakeven point is?
  • How much care each resident can receive as part of your weekly running costs?
  • Your care and nurse average hourly rates so that you can accurately calculate the true cost of care?
  • What fee you need so you can deliver the care a person needs and keep your care home financially healthy?
  • How much an empty bed costs you so that you can make an informed decision about what fee level you can afford to hold out for and not panic and accept a low fee just because you feel you need to fill the bed.

Knowing your numbers is crucial if you are going to make sound, strategic decisions and avoid being pressured to make decisions that could harm your care home.

Knowing your business like this will also give you the confidence to push back and challenge when pressured to do something – like open your doors to too many visitors.

On that subject, I did a quick calculation using the Coronavirus Cost Calculator for a fully occupied 50-bed nursing home based on face-to-face visits lasting 30 minutes.

Worst-case, across a week, 50 residents equals 100 visitors a day (2 separate visits per resident over the course of one day), which means 700 visitors a week.

Other weekly Care Home Costs

One carer will be needed to escort each visitor to and from the resident and stay with them to ensure contact rules are not broken. The area will need to then be cleaned after the visit. (For this cost exercise, whether it’s the carer or a domestic doing the cleaning, I’ve simply added the time for cleaning and kept the same hourly rate.)

Let’s say total time for visit is 1 hour. That’s 700 hours a week of the equivalent of 1:1 care.

Using the national living wage of £8.91 plus employer on-cost of 25% (a real cost you must add) you have an hourly rate of £11.14.

 

This worst-case (but realistic) scenario would cost this care home £7,798 a week just to cover these visits.

These are the costs and time that the government don’t think about, and don’t really care to think about, but they are the kinds of costs that you as care providers must think about and include in your running costs and hence in your fees if you want to remain financially viable.

I assume you’re very confident when it comes to care delivery and that you are able to make the right decisions. That’s because you know care – you’ve been delivering care for long enough may have a medical background.

When you know your numbers – when you have that financial knowledge and awareness of what your fees need to be and how to manage your costs – you can build that same confidence and make the right decisions.

Be strategic.

Too many businesses fail because they are too reactive and not strategic. Basically, being strategic means deciding where you want to get to, figuring out the best route to take and then keeping on course to get there. It’s about replacing hope and luck with as much certainty and control as possible.

We’re going to cover this more in coming blog posts. But for now, here are 4 articles worth reading.

Change your mindset.

Taking back control starts with you. You need to decide that from today you will do what is right for your care home, your residents and your staff.

It is your care home, not the government’s or the council’s – yours. Only you can make sure that your care home delivers the care your residents need whilst keeping it financially healthy.

You need to be that strategic leader.

And you will only do that by always remembering that you don’t have to do what they want you to do unless they make it law. You don’t have to accept low fees or let in more visitors than you can handle.

Please don’t wait any longer for the government to do the right thing – they aren’t going to. Instead, say enough is enough, shake off those shackles and take control of your care home business.

 

About your numbers – this is the most important part of your business. It’s vital that you know your numbers because unless you earn 30%+ profit margins, then these (and other) cost increases will hurt you financially. And what hurts you financially ultimately impacts the care you can deliver.

Your local authorities expect you to be happy with no more than 10% profit margin. If you accept their fees you won’t even make that. The best you can hope for is to break even.

Why?

Not least because you have suffered an extra unexpected cost in the last 12 months with the pandemic. I calculated that the pandemic has cost care homes at least 10% of their revenue.

The Cost of Keeping Coronavirus Out of Your Care Home.

Know your numbers. Keep your care home business financially healthy. Deliver quality care.

 

The Care Provider’s GDPR Compliance Checklist

Care Providers GDPR Compliance Checklist

Will your Care Home Survive this Crisis?

How Much is Coronavirus Costing Your Care Home?

The Cost of Keeping Coronavirus out of your care home report cover

Quality Care Calculator – The Care Providers’ Fee Calculating Tool

Quality Care Calculator
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