MEETING the CHALLENGES of RUNNING and OWNING a CARE HOME
Divisional Director and Head of Healthcare at Fleurets Alison Willoughby (AW) considers the Financial and Operational Sustainability aspects of running and owning a care home in an interview with Julie Hopkins of Ownacarehome (OACH)
OACH: What do you consider to be key features of a sustainability roadmap for care home and supported living operators?
AW (Fleurets): Utilising my expertise in healthcare agency across the spectrum of care I would have to start with “where are you now on your business journey, where do you want to go and how are you going to get there?”
Care providers should consider the resources needed for the action plan alongside funding options and timely financial records to keep operational performance monitoring up to date.
Every care home has it’s own bespoke vision with well-led management carrying that vision throughout the business culture.
OACH: What are some of the key performance indicators when reviewing a care home financials as a care home sales Agent?
AW (Fleurets): a care home business should have readily available financials and forecasting to review the occupancy break even point. Scenario planning with ‘stress testing’ can also provide comfort about a business’s operational benchmark.
Stress testing can include as follows:
- Variable overheads and the impact of the rise in the cost of living
- With inflation over 10% and predicted to rise
- Consider the likely costs for the next 12 months and benchmark
- What repairs, maintenance or capital expenditure is needed?
- Staffing costs to meet the change in resident’s needs
- Versus weekly fee impact
- Consider when fee increases are due to take place
- Can you revisit care fees mid year if needs change?
- Ensure there is contract transparency
- Is there a planned staff recruitment and training schedule?
- Covered by internal and/or external consultancy/training costs
- Apply for all applicable training grants to help offset any training costs
- Benchmark staff turnover rates
- Carry out staff satisfaction surveys with follow up action plans with internal or external support
Funders and lenders will measure a care home business against the performance of other care homes in the same locality.
OACH: What other key operational signals do you look for to ensure a care home sustainability?
AW (Fleurets): these tend to fall into several areas:
- The latest CQC report rating and action plans for any improvement when a care home is considering listing since a buyer will ask the questions
- Having external auditors tends to be a positive for compliance alongside improvement actions
- Digital care plans are also seen as a positive to ensure care teams have timely information to hand
- Integrated Care Systems have started to provide information on how care providers can access funding which all helps with transformation affordability
- Having a good website is becoming a ‘must have’ with online care enquiries escalating, combined with a bespoke social media strategy
- Consider obtaining external support for the care home’s marketing needs, whether for visual and/or written content
- Differentiating a care home’s online presence can result in increased occupancy
OACH: What are your key operational tips to take away?
AW (Fleurets): Knowing a businesses strengths and weaknesses are key so that a care home provider can adapt to evolving challenges. Having champions for all operational areas exudes confidence in a team’s abilities and strengthens morale throughout the business, aiding staff recruitment and retention.
This in turn can create value and access funding for growth and refurbishment plans, which in due course should achieve an optimal exit and succession EBITDAR value with an ongoing stable and robust business.
OACH: If a care home owner wants to sell, what will buyers and funders want to know?
AW (Fleurets): there are several important layers to this question:
- The care home vendor should know how their business is performing, both financially and operationally with all information to hand
- Any weak areas should have evidenced action plans in place
- There should be an element of cost control with sensitivity analysis where the care business must respond to evolving challenges
- Rolling forecasting over a 12 month plus period subject to development needs will assist in the buying and funding decision
- The buyer and financing underwriters will want to know that the care provision has a stable management team in place with confirmation that the care home business is either fully compliant, or has an action plan
OACH: What are your final take away Tips for care home owners?
AW (Fleurets): having at least a weekly record of occupancy summarised monthly showing how the fees are funded is something that will always be requested when a buyer is getting mortgage ready in addition to summarising key expenditure benchmarks.
Make sure that there are timely monthly management accounts (seeking external support where the internal finance function does not provide this). This is important for the vendor and the buyer since the lack of records can delay or halt a transaction.
Having a mystery shopper can add value to the care home sustainability which can result in ‘ideas generation’ improving the environment, resulting in increased care home occupancy and help with staff retention.
The care home sector continues its resilience and although challenges remain, operationally it is attracting investment from new entrants and growth from established multi-site care home and supported living providers.