Financial Governance and Sustainability in the Care Home Sector
Governance is part of every business with a layer of extra consideration within a family run care home business. Tim Godfrey, Partner and Head of Healthcare at Bishop Fleming, considers different aspects of running a family-owned care home business.
CQC and Regulation 17
As the CQC regulation stipulate ‘the intention of this is to make sure that providers have systems and processes that ensure compliance with the Social Care Act 2008 (Regulated Activities) Regulations 2014.’
Driving continuous improvement for all who work in and use the service is at the heart of good governance in the care sector, and as an accountancy and advisory firm, part of my role alongside my team is advising family care home businesses on how to become more resilient and sustainable for the generations to come.
In addition to preparing statutory financial statements and supporting with real time management accounting and forecasting, I continue to support care home businesses by understanding the unique complexities of an owner managed/family run business.
I have considered below some key topics when looking after a family owned and run care home business:
Key Question: Is your care service well-led?
As a care home owner, you are aware of the ethos to provide ‘an inclusive and positive culture of continuous learning and improvement.’ (CQC)
In a family run care home this applies to best practice and continuous innovation and learning, as each generation involved in the care business brings something new to the care service. Having a culture of strong governance taking account of everyone’s experiences and enabling actions from feedback support the service to move forward.
Keeping up with specific care sector regulation is one thing especially now the CQC have commenced the roll out of the new Single Assessment Framework. Having the sheer drive and determination to go above and beyond, looking after everyone involved in the care service is like no other business.
Family businesses understand the value of learning from their peers in addition to navigating challenges and solutions within an ever demanding and rapidly ageing population coupled with the wider complexities of a care service for the vulnerable of society.
What makes a family run care home business different?
This comes from the close relationship of the owners with the business, often built up over several generations, a close family unit with a strong heritage and mission to carry on the evolving care business with a common sense of purpose.
When I talk to care home owners it is very evident that running a care home requires agility and adaptability as old and new challenges come to the fore. This is best evidenced by the pandemic and post pandemic staffing and shift to digital challenges.
Currently care home owners are raising the topic of the impact the 2024 reforms in immigration will have on their care businesses, and having real time management information to hand helps me to discuss the ongoing and future affordability of staffing costs combined with conversations around the true cost of care per bed.
From my experience it is clear that family care home groups continue to establish themselves demonstrating resilience and determination to succeed. With the next generations coming through, business innovation remains key with a new set of challenges including the journey towards Net Zero. This topic is starting to appear on meeting agendas with the ‘let’s start to plan the green transition’ albeit under the Single Assessment Framework the CQC will not be applying an initial score when looking at the environmental sustainability quality statement for most services.
Addressing the longevity of a family care business, consideration must also be given to non-family members, taking into account the changing business dynamics with new and evolving skills required.
These changes will shift the balance but with strong governance, new directors, shareholders and investors joining businesses I find that it adds depth of experience, bringing enhanced inclusivity and diversification.
Developing the business – diversification or growth?
During the lifecycle of a care home business “where to go next?” will often be a question puzzled over. At this stage it is crucial to ensure that your financial recording processes are up to date, timely and accurate. Without being able to demonstrate how the business is performing financially, opportunities to grow or diversify as you seek additional funding or further shareholder investment will take time and lack credibility.
Having advised care home owners for a number of years, it is clear that contingency planning remains an important part of the business risk assessment (as demonstrated by the pandemic). As the sector continues to adapt to changes in regulation and a more complex society, partnering with specialists in the care sector such as accountants, consultants, independent mortgage brokers and alternative providers of financing have been clearly evidenced.
Continuing to be a family care home business at its core, extending the services offered, continuing to develop the team as part of a continuous improvement strategy all add value to growing the business brand.
A common question these days and ‘What about the future of care?’ As a needs based business care homes continue to scale up which can include diversifying into the wider care sector, such as supported living and integrated retirement communities alongside building fit for purpose extensions, refurbishment and new builds.
As a care business moves into new areas, alongside my team I continue to provide a proactive and listening ear helping to achieve lifecycle and legacy success for the generations to come, in what is now perceived to be a more complex and rapidly ageing society.
A regular topic of conversation: Succession in a family business
Transferring the business to the next generation can follow various routes and include some important decisions and it is essential to ensure all are on board and want the journey to continue.
This could include:-
Family succession and how to achieve the desired result
Sale to a third party
A Management Buy Out (MBO)
Exiting the business via an Employee Ownership Trust (EOT) (note changes afoot!)
Owning and running a business in the care sector is challenging and the role of an advisor, whether internal or external, is becoming increasingly important throughout the business lifecycle.