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PAPER J

Purpose: For Decision




Committee EXECUTIVE

Date TUESDAY, 9 SEPTEMBER 2014

Title LEARNING DISABILITY CARE HOME FEE REVIEW
2013/14 AND 2014/15

Report to EXECUTIVE MEMBER FOR ADULT SOCIAL CARE AND
COMMUNITY WELLBEING



EXECUTIVE SUMMARY

1 To agree a revised fee structure for Learning Disability residential care home providers for
the period 2013/14 and 2014/15. This fee structure affects a total of 11 residential homes,
with a current total of 74 eligible service users. Should the recommended option be
agreed the value of the increase will be 90,742 for both 2013/14 and 2014/ 15.

BACKGROUND

2 The Isle of Wight Council currently commissions and contracts with 11 homes in order to
meet the residential care needs of people. This does not include general residential care
homes or care with nursing homes as these services are covered under a different
contract and is subject to a separate consultation process. Off island residential
placement fees are subject to different arrangements as are internal council services.

3 Under the council contract, the learning disability residential care providers collectively
support up to 74 adults (based on J uly 2014 data); the care being provided in various
establishments across the Island.

4 Total costs in relation to these services collectively are 1,981,008 per annum, based on
current client numbers as quoted above. As the costs of providing care in these settings
may increase generally, the council is obliged to consider the local costs when reviewing
fees and when making a decision to have regard to the actual cost of care, rather than
simply relying on benchmarking across comparator areas.

5 As an outcome of the formal consultation undertaken with providers within the general
market, the council has been requested to consider the additional costs pressures that the
care homes face, principally the impact of increases to the national minimum wage and
the introduction of workforce pensions, this learning was transferred to the proposed offer
which opened the Learning Disability care homes fee review consultation.

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6 The council is required to have regard to the actual cost of care, along with other factors
when reviewing the fee structure; therefore the methodology which has been developed,
collects and collates the actual cost figures from the providers and involves a full
consultation in respect of any proposed changes to fees. This review has been delayed
whilst work with the wider market has been undertaken, therefore the proposal relates to
2013/14 and 2014/15.

7 A template has been developed in conjunction with the providers and used to gather
financial information in relation to provider care costs. This template enables financial
information relating both to expenditure and income to be supplied by the learning
disability residential care home owners to the council, the council then applies accurate
and up to date CPI inflationary rates to specific areas of costs, resulting in an overall
percentage increase that represents the different cost areas inflation. The information
requested included Return on Capital Employed (ROCE).

8 Five businesses responded with revenue information, with no (zero) responses in relation
to the capital cost information requested, which was then analysed.

9 In addition to the care cost element of the fee review, a further percentage increase (over
and above that which is already allowed for with the CPI rates used to calculate the base
percentage rate) has been recommended. This directly responds to the concerns raised
by the general market regarding the current economic pressures in relation to the
introduction of workplace pensions and the increases to the national minimum wage and
which the council have also applied to the Learning Disability care home market as these
are national influences on provider costs.

10 ROCE (Return on Capital Employed) is the return (profit) achieved by a care home
business as a result of using capital, which could for example be a building purchase, or
financing loans. Return on capital as a percentage is a measure of profitability in the use
of that capital. The council has included consideration of ROCE within the proposed
increase.

STRATEGIC CONTEXT

11 One element of Council vision is that it will meet its statutory duties and enable and
deliver services at the right quality and cost effectively within the resources available,
whilst also seeking to protect and support the most vulnerable.

12 From the Corporate plan 2014 to 2017 the relevant priorities are:-

Delivering person centred, co-ordinated social care and health services

Care is person centred, evidence based and delivered by the right person in the right
place and at the right time

Resources focused on prevention, recovery and continuing care in the community

Safeguarding vulnerable people


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CONSULTATION

14 Full consultation has taken place with the Learning Disability residential home providers,
which included invitation to an engagement event at which presentations were given by
the providers and the council. More recently, a period of financial information gathering
was followed by a formal consultation, this included an opportunity for the providers to
discuss their views on an individual basis with council staff and for the council to visit to
demonstrate how the financial information had been utilised to calculate the proposed
offer which opened the consultation.

15 A variety of financial information has been gathered, both internally from council financial
recording systems, and externally from the providers. This has been in the form of
financial reports and the templates returned during the evidence gathering stage, which
were completed by individual businesses so that providers costs are taken into account.
Whilst the opportunity for further evidence gathering in relation to costs was provided for
within the consultation period, no additional information was received throughout the
formal consultation. The financial information received has been used collectively to
assess the affordability of the proposal and gauge the budget impact risk for both 2013/14
and for 2014/15.

16 Details of this consultation and of the responses can be found at Appendix A.

OPTIONS

17 Option 1: to provide no increase in relation to Learning Disability residential care homes
for both 2013/14 and 2014/15:

18 Option 2: to provide an inflationary increase based on all financial information received,
as follows:

Learning Disability Residential care homes 2013/14
Base rate increase of 1.68 per cent; plus an increase on ROCE of 0.09 per cent; plus 0.23
per cent to further support increases to the national minimum wage

Total percentage increase for 2013/14 from 1 April 2013 is 2.00 per cent.

Learning Disability Residential care homes 2014/15
Base rate increase of 1.40 per cent; plus an increase on ROCE of 0.07 per cent; plus 0.71
per cent to further support increases to the national minimum wage; plus 0.35 per cent to
support the additional costs of providing pensions

Total percentage increase for 2014/15 from 1 April 2014 is 2.53 per cent.

FINANCIAL / BUDGET IMPLICATIONS

19 The council is facing significant financial challenges, with savings across its services of
28 million to be identified and delivered over three financial years from April 2014. In
making any decisions, the councils budget has to be one of the considerations, alongside
other matters to which the council must have regard.
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20 The table below shows the additional costs of increasing the care band levels by the two
options

2013/2014 % increase Additional gross costs
OPTION ONE
Learning Disability
Residential care
0% 0
OPTION TWO
Learning Disability
Residential care
2.00% 39,620

2014 / 2015 % increase Additional gross costs
OPTION ONE
Learning Disability
Residential care
0% 0
OPTION TWO
Learning Disability
Residential care
2.53% 51,122

21 The backdated increase will be paid from the care fee inflation budget which has been
carried forward from 2013/14 to specifically meet the costs of backdated fee increase and
is therefore within budget. The budget required to support the recommended option has
been identified within the 2014/15 budget.

LEGAL IMPLICATIONS

22 Local authorities may make arrangements for the provision of residential accommodation
under Section 21 National Assistance Act 1948.

23 Local Authority circular 2004(20) provides guidance to councils and in particular advises
that "in setting and reviewing their usual costs, councils should have due regard to the
actual costs of providing care and other local factors.

24 There have been several judicial review applications against local authorities, such as
Birmingham and Sefton. The focus of these cases has been in relation to councils
needing to have regard to the actual cost of care, consultation, and procedural issues.

25 The council has consulted widely with care home providers as detailed in this paper, in
order to seek the fullest information as to the actual cost of care and local factors relevant
to that provision and to enable the providers to engage in consultation and discussion.

26 The council has carefully considered the views of the care home providers received
through the consultation, and in particular the need to address the issues of increased
costs to the providers due to increases in the national minimum wage and the introduction
of the workplace pension scheme.




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EQUALITY AND DIVERSITY

27 The council, as a public body, is required to meet its statutory obligations under the
Equality Act 2010 to have due regard to eliminate unlawful discrimination, promote equal
opportunities between people from different groups and to foster good relations between
people who share a protected characteristic and people who do not share it. The
protected characteristics are: age, disability, gender reassignment, marriage and civil
partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

28 A full equality impact assessment has been undertaken and is attached at Appendix
B. The assessment does not identify any negative impacts as no change in the criteria for
learning disability residential care is proposed and as the recommended option is
considered to represent the actual cost of care and should enable the residents' assessed
care needs to be met. The recommended option will provide an increase in fees which
will have no impact on age and disability protected characteristics, but will, however
mitigate against the risk of homes closing and residents having to move elsewhere which
could be distressing for residents. The council will continue to prepare individual needs
assessments and care plans which will further assist the council meet its equality duty.

RISK MANAGEMENT

29 Option 1. The council could be at risk of challenge on the basis that the information
provided during the formal consultation period in relation to the increase in costs of care
has not been properly considered. The quality of care to vulnerable people living in
residential care, some with complex needs could be compromised, by not providing
payments that represent the actual cost of care, and this in turn could lead to a possible
reduction in availability of choice to individual clients or the market failure of the homes.

30 Option 2. The council could be at risk of challenge on the basis that the information
provided during the formal consultation period in relation to the increase in costs of care
has not been properly considered. However, this is considered a very low risk as
providers were given the opportunity to update their financial information, along with
providing any other comments to the council and these have been taken into account, and
none were received. Therefore, Option 2 represents a payment that has regard to the
actual costs involved in this provision, taking into account local factors, and inflationary
pressures. It also allows for the request from providers generally, to consider the
additional costs pressures that the care homes face, principally the impact of increases to
the national minimum wage and the introduction of workforce pensions.

EVALUATION

31 The process to understand the costs of providing for care in the learning disability
residential home market was built on the basis of continuing to build an open and
transparent relationship with providers on the Isle of Wight. The council has encouraged
engagement with providers through the engagement event, consultation period, along
with individual discussions regarding how the information provided has been used to
calculate the proposed offer.

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32 Option 1 represents the option of not increasing learning disability residential care home
fees. However, it does not take into account the financial information and feedback
received from providers during the consultation.

33 Option 2 has taken into consideration the actual costs to include additional financial
information, inflationary factors and Return on Capital Employed. It provides additional
assistance with the increases to the national minimum wage and workplace pensions.
This information along with further market analysis and information from the Office of
National Statistics will, with continued feedback from providers, enable the council to have
a clear view of the Learning disability residential care home market place on the Island.

RECOMMENDATION

Option 2: to provide an increase as follows:

Learning Disability Residential care homes 2013/14
Base rate increase of 1.68 per cent; plus an increase on ROCE of 0.09 per cent; plus
0.23 per cent to further support increases to the national minimum wage.

Total percentage increase for 2013/14 from 1 April 2013 is 2.00 per cent.

Learning Disability Residential care homes 2014/15
Base rate increase of 1.40 per cent; plus an increase on ROCE of 0.07 per cent; plus
0.71 per cent to further support increases to the national minimum wage; plus 0.35 per
cent to support the additional costs of providing pensions.

Total percentage increase for 2014/15 from 1 April 2014 is 2.53 per cent.


Total cost of this option is 90,742 for the period 2013/14 and 2014/15.

APPENDICES ATTACHED

Appendix A Summary of consultation
Appendix B Equality impact assessment

Contact Points:

Mark Howell - Head of Adult Social Care and Community Wellbeing
mark.howell@iow.gov.uk 01983 821000

J ackie Raven - Strategic Commissioning Manager Adult Social Care
jackie.raven@iow.gov.uk 01983 821000


MARK HOWELL
Head of Adult Social Care
and Community Wellbeing
COUNCILLOR STEPHEN STUBBINGS
Executive Member for Adult Social Care and
Community Wellbeing