Earlier this year Editor Tim Probert asked if I would analyse what happened in the care home market during COVID-19 and put together an editorial for publication in one of the Autumn’s Care Home Environment magazines.
Well this is the editorial, but at the time of asking I think both of us thought it would as report saying, “this is what happened, now onwards and (hopefully) upwards”.
Even as I am writing in September things are changing on a daily basis, and the Government’s mis-management, specifically with regard to regular testing in care homes, policy U-Turns and with lockdown being eased and once again tightened, and above all their unmet promise to “fix social care” - it means that we are all still in turmoil.
We are all extremely worried about how a second spike of the Virus will continue to affect those operating, working and living in care homes going into the colder Winter months, not to mention the ability of relatives, like myself to eventually visit their loved ones.
As the virus, arguments and lobbying continues, I have looked at what has been happening within this market sector with regard to openings, closures and changes of ownerships both in the first quarter of 2020 (Pre-COVID) and the subsequent “COVID months” between April and August.
Obviously, openings and changes of ownership do not happen overnight, but by measuring what did occur we can estimate to some extent what pent up activity is likely to occur if and when the COVID dust settles.
Just to put in place a starting point and context of where we were at the start of 2020, the number of care home beds in England had shrunk by around 10,000 (2.5%) over 5 years due to higher levels of closures than openings, whilst the 75 plus population, that accounts for around 90% of all care home beds, has grown by around nearly half a million (11%) during that same period. That same age group will grow by a further 19% by 2025, and so a reversal in current trends is essential.
As CSI has repeatedly cited, supply levels across the country vary greatly. Areas of high supply have up to 150 beds per thousand population aged 75 plus, but as low as 26 beds per thousand where supply is low – so a 6 times variance.
So current supply levels are decreasing on a national basis and on a local basis are in a mess.
A Great Start to The Year
First the good news. 2020 started with promise, as care home openings during the first quarter were up by 79% year on year, with an 83% increase on the number of new beds.
Then comes lockdown, and things stalled or even stopped as developers, investors, lenders, sellers, and buyers had to stop and take a deep breath.
From a 79% year on year increase prior to lockdown, openings during the “COVID months” dropped by 8% year on year. Without COVID 19, and if the year on year increase had continued from quarter one, there would have been an extra 50 new homes and a much needed 3,000 new beds.
There were 49 different providers across the 55 openings, with over a third of them as new providers – welcome to the sector guys!
There were four groups who between them made up about a fifth of all openings. The author did contact them for a comment on how they have fared filling the new beds but has had no responses to date in this respect – I imagine it will have been a slow process.
But at least closures are down, that’s good isn’t it?
In the first quarter closures were up by 2% year on year, but the number of beds lost actually dropped by 19%.
And from April onwards closures dropped even further by 31% year on year.
This is probably due to the fact that homes that may have been thinking closure was imminent have found themselves committed to continue as they shield their vulnerable clients from the outside World, and are hopefully buoyed by whatever got through to them from the £4.3 billion of extra funding the Government gave to local authorities to help with public services, of which £600 million was ringfenced for social care.
Now in September there is a second spike in new COVID-19 cases, albeit deaths are very much down on the initial crisis, and the age profile of those testing positive in younger, but lockdown restrictions on social gatherings have once again be tightened, and there are still no guidelines as to visiting care homes.
This could well mean that strict shielding within care homes will continue through what will be the harder Winter months. Should this be the case a further tranche of money will be needed to support those homes who would otherwise have to close.
The Net Effect of Openings and Closures
Over recent years I have used the rule of thumb that for every care home that opens, two have closed. In 2020 it is more like two openings for three closures, and with the new homes being larger, by the end of August we lost 365 beds compared to 1,850 in the same period in 2019.
The COVID-19 Effect on Occupancy Levels
Based on the information available from various sources I have had a shot at the change in occupancy levels in care homes between April and the end of August.(See Table 1)
The generally recognised average occupancy levels across residential and nursing homes is around 90%, so 360,000 of the approximate 400,000 care home beds in homes registered for older people are filled.
The CMA Care Homes Market Study 2017 estimated 41% of care home beds were taken up by self-funders, with the remaining 59% local authority funded.
According to the ONS there have were around 66,000 deaths in care homes between April and August , including 14,683 attributed to COVID-19, and so without any re-admissions the care home population would have dropped below 300,000 an average 73% occupancy level.
According to CQC estimates in June there has been a reduction in the number of re-admissions to around 35% of last year for self-funders, and 72% of those funded by local authorities. When you multiply these percentages by the Nuffield Trust’s average admissions for every 100,000 population aged 65 plus in 2018/19, we can see that new admissions are much lower than those lost through deaths during the same period.
If this is accurate then occupancy levels will be down from 90% in April to 76% at the end of August, meaning homes will be missing the weekly income from around 55,000 residents or a reduction of 15%, which is a massive financial loss of income against already tight, and probably now negative, margins.
Knight Frank research published in September stated that they believe occupancy levels have more recently recovered to just above 80%, but still well below the pre-COVID levels.
But of course this is average. Supply levels and therefore occupancy levels will vary greatly on a local basis. And of course, there has not been a flat line COVID-19 death rate in all homes, with many not experiencing any deaths (although still tarred with the same brush with regard to new admissions) whilst other homes will have lost much higher than the average number of residents.
The CQC recently declined to report on COVID-19 deaths by home for commercial and confidentiality reasons, although they are quite happy to publicly brandish these same commercial ventures as anything between Outstanding and Inadequate via their inspections.
There is of course a longer term worry, and that is with regard to future capacity expectations for care homes in England. Should the existing concerns as to the safety of, and accessibility to loved ones within a care home continue, admission rates will stay low.
However there are somewhere between two thirds and three quarters of care home residents who are living with dementia at various levels of dependency.
It is difficult to know what other environment could properly manage a person’s dementia once it has reached a certain level of dependency, but it could well be that people with earlier stages of dementia that would previously been moved into a care home, may well be cared for longer in the community, which could reduce the care home population greatly.
Before COVID-19 some dementia care homes I have spoken to have told me that the level of dependency of newer admissions seems to be getting higher, so there is already a trend in this respect.
But at current rates the dementia population looked after in a care home is due to grow by around 16% over the next 5 years, and due to high mortality rates within that age group, the true growth of dementia means that by around 2027 the dementia population will be made up of people who have not been diagnosed as yet. So even if there is a shift from care homes to community care the dementia population within care homes will still be massive.
Above all this is of course is the hope that a cure for dementia, or a way of slowing its development, will come as soon as possible. Dementia is a massive influencer of the care home sector.
New Investment in existing homes
In addition to openings being well up year on year during the first quarter of 2020, sales and purchases were looking good as well, with a 3% increase in activities year on year.
It is not surprising to see that this activity reduced, falling by around 12% year on year between April and August, as many impending deals will have stalled or even stopped.
Within this reduction around half of all the deals that were completed in this period were sales of the Four Seasons brand from its administrators.
The largest purchasers included Roseberry Care Centres, whose 13 purchases has increased their portfolio to 29 locations, predominantly in the North of England. Their purchases were from small groups, mostly in administration.
Barchester Healthcare Group added eleven homes to their group through the purchase of Four Seasons locations through their Barchester Hellens company.
Barchester also added four new homes through openings, and so are by a length the most progressive care group during this period.
Marton Care added ten homes through procurement, nine of which were from Four Seasons, which brought their total portfolio up to 14 homes. Marton Care are connected to the Burlington Care Group who have a further 17 homes.
Richard Hoggart, Owner and CEO at Burlington Care & Marton Care Homes said about the purchases, “the staff teams, residents and families have been so welcoming with us as we acquired these Marton homes. We have ensured the staff teams remained employed and already commenced our upgrades and investments.”
It is obviously an insensitive thing to say but it seems that COVID-19 has come at the wrong time for the care home market.
It is difficult to know if without the pandemic the Government would have been true to its word to “fix social care”. BREXIT is raising its head again and there always seems to be something that diverts attention from social care reforms.
Once again, this editorial is being updated as it is being written, as Matt Hancock, Secretary of State for Health and Social Care has said that whilst work had started on Social Care Reform, he would not give any idea as to when it would be delivered.
In the conclusion of the newly published report Beyond COVID: New thinking on the future of adult social care, the Social Care Institute for Excellence (SCIE) say “Now is the time for bold action to transform social care for decades to come. After nearly 20 years of underfunding it is time to call time on austerity. The adult social care system needs a long-term funding settlement; one that is simpler, fairer and helps tackle the fundamental inequalities which exist in society.”
So what are my thoughts on what will happen post COVID-19, whenever that is as far as safe access to care homes is concerned?
Care home closures will increase drastically, the level of increase dependent on whether a further tranche of extra financial support is provided through local authorities. Additionally many owners may well say enough is enough.
New care homes will stay low until an acceptable Social Care Reform plan is delivered although new care developments will continue on the basis that investment in other industries such as hospitality and retail is even more risky.
Investment in existing care homes, that are fit for purpose in the mid to long term, will increase as investors see bargains ahead. This will either be from existing providers to add to their portfolios, or external investors who will want locations with a track records and an existing occupancy, however low, which will increase the market for the companies who manage for investors.
The full magazine can be viewed on line here