Financial Health for Care Businesses: Protecting your bottom line

With increasing pressures on costs and a rise in NMW due in April, the New Year is a good time for care businesses to evaluate whether there are additional ways they can protect their bottom line.  RWK Goodman offers some insights into some of the key areas.

Third Party Top Ups

Seeking third party top ups for local authority placements is commonly used by providers who wish to bridge the gap between local authority and private placements.  The rules which govern this are contained in the Care Act Statutory Guidance 2014: Annex A. Outside of the legalities, detailed thought should be given to the market, which may determine whether a resident’s family is prepared to pay the top up.  Providers may need to articulate exactly what they are offering which makes their home more appealing (and worth the additional fees) than their cheaper competitor. It is worth giving some thought to what can be offered to set the home apart (larger rooms, higher quality facilities/meals, life enrichment programmes, packages of activities) and ensure the home’s marketing supports this.

NHS top ups are a different beast and are often mis-understood. It is possible to charge them so long as providers are not charging for services which should be provided as part of a resident’s “assessed needs”. Again some creative thought needs to be given to how services can be packaged and marketed to enable this.

In both cases, contracts need to be clear as to how fee increases impact on top ups and what happens if they can no longer be paid.

Are your contracts clear?

Which brings us neatly onto contracts! It has been several years since the CMA issued their guidance on unfair terms on elderly care contracts. It is unclear what the status of this guidance currently is, having taken quite the beating in the courts when claims were bought against some large providers. Since the guidance was issued, we have had a pandemic and energy costs crisis which have resulted in the need for providers to implement significant fee rises. There is no doubt that in order to comply with consumer legislation, contracts should be transparent and clear on fees but given the lack of noise from the CMA, providers may feel braver in disregarding some of the very draconian provisions of the guidance. From a legal perspective, fee clauses should be drafted to cover change in funding needs of a resident (both where the funder changes and where resident’s needs change) as well as a clear basis on which annual uplifts can be charged and how FNC is dealt with. There are no hard and fast rules on FNC so long as the contract is clear as to how it is dealt with.

What if a resident has a property to sell?

It is often the case that a private resident is accruing unpaid fees at the home whilst their property is on the market. This leaves the home very exposed.  A deferred payment agreement (essentially a loan agreement) and legal charge can be put in place to protect the care home. This captures the outstanding fees and extends credit to the resident for accruing fees for a fixed period of time, during which the property must be sold. This can help to incentivise sale of the property (and hopefully focus minds on accepting sensible offers).  To ensure that the agreement is not caught under the Financial Services and Markets Act 2000 (requiring registration), it must meet one of the exemptions in the Act. The costs of preparing the documentation and registering it at the Land Registry can be passed onto the resident, making this a cost neutral option for operators.

Our team can help you with all aspects of financial health. If you would like more information please get in touch with Hazel Phillips, Partner and Head of Health and Social Care at RWK Goodman (