UK care home groups plan fee increases as costs soar

Britain’s biggest care home chains are planning to raise fees by as much as 10 per cent this year as they pass on higher staffing, food and energy costs to their frail and elderly residents.

Overall costs for care homes are expected to increase roughly 30 per cent this year, according to a survey of operators, representing 98,000 beds in the UK, by property consultant Knight Frank.

The sector is in the grip of an acute staffing crisis with some agencies charging £60 an hour for nurses, leaving operators with “no option but to pass on the costs otherwise they can’t take in the residents,” said Julian Evans, head of healthcare at Knight Frank.

Last week some operators closed to new entrants as the spread of the Omicron coronavirus variant exacerbated shortages.

The cost-of-living crisis in the UK, as well as higher insurance costs in the wake of the pandemic and staff shortages exacerbated by Brexit, are prompting operators to lift fees by between 7 and 10 per cent, Knight Frank said.

The fee increases come as some larger operators have come under scrutiny over the financial help they received from the government during the pandemic while also handing out generous rewards to investors and executives.

Barchester Healthcare, which runs roughly 200 homes, said it was planning to lift fees 7.5 per cent this year, although a letter to residents in November seen by the Financial Times warned of “an increase of around 9 per cent”. The company cited rising food, energy and staffing costs as well as the increase in the national living wage and additional national insurance tax as reasons.

Its accounts show that Pete Calveley, chief executive, received a £250,000 rise last year, taking his pay package, including a long-term retention plan, to £2.27m in 2020. The care home operator also received £12.6m in government grants during the Covid-19 crisis.

David Haggie, a software business manager, said his wheelchair-bound mother was already paying £1,525.21 per week, or £79,000 a year, for her room in a Barchester home near Edinburgh, after successive fee increases amounting to 19 per cent since January 2019.

“The combination of a resident who can’t realistically move, maximum fee increases for three years, a large government Covid grant combined with high and rising CEO pay is pretty toxic,” Haggie said.

Barchester, part of a Jersey-based investment company, said it had informed residents that it was facing “extraordinary circumstances”, adding that it was “an above national living wage employer who is constantly investing in our homes”.

Four Seasons, owned by US hedge fund H/2 Capital, said its fees would increase but declined to give details, while Care UK, owned by private equity firm Bridgepoint Capital, said it was “impossible to give a blanket figure about fee changes”.

HC-One, the UK’s biggest chain, said its charges had risen 3.5 per cent last year and that given the “significant increase in cost pressures” it “expects this to be higher this year”.

Fees have been rising by above the rate of inflation for several years partly because of an increase in the minimum wage for staff, which account for 80 per cent of costs.

Local authority or NHS-funded residents have some protection as the state has to provide an alternative. But people who pay for their own care, which includes anyone with assets exceeding £23,500, have little security or protection against eviction if they cannot pay the fees and need only be given 28 days’ notice.

Helen Wildbore, director of the Relatives and Residents Association, warned that moving care home could have “catastrophic consequences” for older people with deteriorating health. “With so little legal security, many residents also find themselves in too vulnerable a position to feel able to challenge such increases, especially as they can be evicted so easily,” she added.

Knight Frank said roughly 100,000 beds were at risk as care homes closed because of rising costs, enabling surviving operators to benefit from higher occupancy rates and push up prices.

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