Do you currently have more empty beds than usual because of the crisis?
If you do, then like many care providers, will you take what clients you can at any price in order to fill those beds? And do you therefore think that an empty bed is the worst possible scenario?
Or will you be strategic and use this situation to ensure that you are not one of the 1 in 10 care homes that is forecast to ‘go bust’ because of coronavirus.
If you take a client for a low fee because you think an occupied bed is always better than an empty bed then please read on.
Before the coronavirus, the sector had been in crisis for a decade with record care home closing each year. This crisis has simply made this worse.
Why have record numbers of care homes closed over the years? The vast majority have closed because they are no longer financially viable.
For years they have accepted the low fees that their local authorities and CCGs have been willing to pay or because they have felt pressured to bid low online to win a client and have eventually run out of money.
Across England, local authorities, pay on average only £596 a week for residential beds and around £764 for nursing beds (LaingBuisson 2020).
I’ve calculated the cost of care for a 30-bedded residential (group 1 and 2 in the image below) and for a 30-bedded nursing home with clients with varying needs. Based on these average fees and more for higher end clients you see just how much your cost of care would increase beyond the fee you LA or CCG would be willing to pay.
Only with the residential client is the referrer’s fee greater than the cost of caring for this person.
This chart highlights the problem even more
And this is for one client each week. If you had 30 basic nursing clients this would amount to a loss of over £2,000 a week and for 30 clients with extra feeding needs this would become a weekly loss of £6,775.
Over a year this would amount to a loss of £111,964 and £352,295 respectively.
And these are real numbers. No wonder care homes are becoming insolvent.
There is no way an empty bed would cause these levels of losses. Of course, there is a limit to how many empty beds your care home business can handle but there are things you can do to mitigate for the loss of revenue.
An empty bed is an opportunity to fill it for the right fees. You could fill your empty bed, the next day or the next week, for the fee you need or be stuck with a client for years on a low fee that ends up costing you many thousands of pounds a year.
We would rather have an empty bed because we know we can work around that situation until we fill it. We know that this is preferable to being stuck with a client whose care we have to subsidise for potentially years to come.
When you have empty beds you can adapt to reduce the financial impact. Your fixed costs will reduce because less food and drink will be consumed, laundry and cleaning will reduce, less heating, etc.
Your staff-to-client ratio will increase, but can you change your rota to make it work better and eliminate the need for agency staff (who, to be honest, you really don’t want in your care home right now, if you can avoid it). Can you stop extra shifts being taken and ask people to use up some of their annual holiday allowance? I’m not saying all of this is possible for you, but simply ideas to consider.
If your care home is a good care home, then it’s not going to stay empty for months on end. You will always make up for the cost of that empty bed. Take the client at a loss and you could make that loss for years and during that time eliminate any opportunity to fill it with someone for the right fee.
A fee that is too low is not preferable to an empty bed.
The key to making the right decision is to know your numbers. How much does each individual resident cost you to care for? If you don’t know your numbers then you can only guess and hope, which is dangerous.
There really is no point in filling that bed if you are going to make a loss. And the real problem is that you could end up caring for that person for years – making a loss every week.
This is what’s going on with many care homes all over the country – they are making no profit and annual losses of many thousands of pounds.
And they are doing this because they don’t accurately calculate the fees their care home business needs.
So, are you making a profit on your clients or making an overall loss? Is your care home financially strong and healthy or financially weak and unsustainable?
The above table and chart come from an excel tool I’ve developed that will help you see how financially healthy your care home is. It is called the Care Home Financial Viability Checker and is free for you to download.
Never fill an empty bed for a fee that doesn’t return a profit.
Of course, your care home numbers will be different, so download this spread sheet and do the maths.
If you are worried that care providers in your area do accept the low fees LAs want them to take, well don’t be. Even if they wouldn’t be caring for that person at a loss (which they probably would be) you know your numbers and you know you would be.
The numbers eliminate the uncertainty. If you cannot make enough profit on the offered fee then don’t accept it. It’s as simple as that.
Knowing the fees you need for each person in your care is very powerful. It puts you in control. Even if you decide to reduce your target profit in order to fill an empty bed, at least you make that decision from a position of certainty.
So, the key question is…do you know how to set the right fees?
If you don’t know how to set the right fees then please make this your top priority. And don’t leave setting the right fees to gut-feel and guesswork.
If you aren’t sure how to accurately set the right fees then check out the Quality Care Calculator.
I’ve created this tool to help you set the right fees and make your care home financially viable so please do check it out.
Don’t accept low fees to fill empty beds. Calculate the fees you need and hold your ground. Don’t let the fear of empty beds ruin your business.