Care homes funding crisis- more pain for beleaguered sector. Albert Goodman Chartered Accountants.

What we think

Funding crisis for local care homes

The care homes funding crisis continues. A series of new financial measures from our Local Authorities look set to cause even more pain to already beleaguered care homes in the region. This is somewhat surprising when set against the backdrop of Local Authorities being able to raise the council tax precept by an extra 3% specifically to help with the funding crisis in adult social care.

Care homes have been told that they will now only be paid in arrears for local authority block beds. Previously these beds were ‘block booked’ and paid in advance. Whether the change is justifiable or not is not really the question – rather it’s the effect on the cash flow for Care Homes where in some cases the majority of their income is being delayed by four weeks. All care homes with local authority paid for beds are affected.

Care home specialist accountant Julie Hopkins a Director at  Albert Goodman says. “This is just not fair on these local businesses. What business can operate when they are suddenly told that they will not receive the bulk of their income for a month after it was expected? We can help to prepare new cash flows so that the banks can understand the problem but for most businesses, it will mean that new overdraft facilities must be put in place at short notice.’

Another shock has come from a much lower than expected increase, just 1% – 1.5%, in the fees that local authorities are paying per service user. Residential homes with nursing receiving no uplift in some counties. In a generally low paid sector where the largest overhead is staffing costs, the increase in the National Living Wage of over 4% means that the sums increasingly just won’t add up. We are all aware of the funding problems Local Authorities have been having but from April 2017 they were able to raise the Council Tax precept by an extra 3% specifically to pay for Adult Social Care. It does seem rather short-sighted not to pass on more of their windfall to businesses providing the care – instead of in fact in real terms giving them a funding reduction!

Julie concludes, “We all know that money is tight but these changes to not appear to be fair to the home care sector.”

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