Healthcare: Elderly care homes are closing at a time of surging demand
Our latest analysis of supply in the UK care home market shows that the number of beds being added to the market is growing at lacklustre rate, all because too many homes are closing.
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If the population forecasts are correct an additional 358,000 elderly people will require full-time care by 2038. This would imply that we need to be building an extra 18,000 beds per year for the next 20 years, and we are not even close to these numbers at present. 133 new homes and 6,502 beds were built across the UK during 2018/19 (April to April), suggesting that developers are ramping up activity, but a total of 219 homes and 6,459 beds were also removed in the same period. There are a number of issues that can cause homes to close but in simple terms, it generally boils down to failing care standards, financial stress or a combination of both.
Failing care standards: Looking at all the closed homes, we can observe that two-thirds of closed English homes were rated ‘inadequate’ or ‘requires improvement’ by the Care Quality Commission. Poor ratings aren’t necessarily a guarantee of closure, but it makes it harder for homes to obtain insurance and financing which can indirectly lead to closure later down the line. This is arguably the most significant cause of closure.
Financial stress: A third of closed homes were still rated ‘good’ (or ‘outstanding’) by the CQC, implying alternative reasons for closure. In most of these cases, increasing costs and dwindling profitability have been a catalyst for closure. Staff costs have seen particular increases over recent years as a result of increases in the National Living Wage. This has impacted many homes, particularly those dependent on local authority-funded residents which are less able to raise fees to mitigate increasing costs.
Clearly it is not an easy ride for most care home providers at present. More needs to be done to encourage developers to build new homes at a faster rate, and more needs to be done to help care operators to battle regulatory pressures and increasing costs in order to avoid closure. There will not be a solution overnight but perhaps the first objective is to communicate to the government the sheer scale of under supply that will occur in the approaching decades if no action is taken.