Market Update from Stuart Dean, CQC Director of Corporate Providers & Market Oversight

Stuart Dean Director, Corporate Provider and Market Oversight, Care Quality Commission
Helen O'Kane, Partner, BDO LLP

Care Conversation discusses with Stuart Dean, Director of Corporate Provider and Market Oversight at CQC, (1) the current landscape as we enter 2021 and (2) how, as the sector continues to adapt and evolve, this will, in turn, impact upon the CQC’s own role, functions and the regulatory model.

1600 - 1645
Presentation from Stuart Dean
1645 - 1700

Hosted by Helen O’Kane, Head of Healthcare M&A at BDO, the first Care Conversation webinar of 2021 was a market update from the CQC’s Director of Corporate Providers & Market Oversight, Stuart Dean.  Stuart Dean commenced by telling webinar attendees that the areas in which the COVID-19 pandemic had so far had the least impact were specialist care and non-specialist homecare. “What I mean by that is that non-specialist homecare providers captured by our Market Oversight scheme have continued to grow profit margins, and they’ve done that by continuing to divest of unprofitable contracts and generally being more selective around acquisitions.

Specialist services continued to see year-on-year growth in turnover and profit margins, as there had been greater discipline around fee increases, contract hand-backs and the resolution of uneconomic positions. “It’ll come as no surprise but the same can’t be said for non-specialist care home providers,” he stated. “Their operational performance has been severely impacted by the pandemic.”

While previously they had been seeing year-on-year growth in turnover and profit margins thanks to estate rationalisation and a shift towards private pay, the first COVID wave had reduced occupancy by up to 10% followed by recovery rates over the summer of just 2%. “It’s worth saying that the government support that’s gone into the sector would appear broadly to have preserved the profit margins across these operators, but there’s been a greater impact on private pay providers as a result of reductions in placements.”

In terms of the outlook, the number of care home locations was decreasing while domiciliary care agency activity was increasing. “There’s some evidence to suggest that during the first wave the number of people using domiciliary care agencies reduced, and we were very much hearing that from the provider base, with service users asking for carers not to attend.” This had been less of a phenomenon in the second wave, however, and the financial impact had been lessened even in the initial wave as local authorities had been paying providers according to pre-agreed payment plans.

A key factor in the medium-term outlook was that “there’s undoubtedly a substantial amount of capital to deploy notwithstanding the challenges COVID has presented,” he said, with healthcare assets highly attractive compared to options like retail or commercial real estate. “And while capacity hasn’t fallen off a cliff it’s continuing to decline at a time when we know that the demographics are going to drive an increase in demand.”

Although the vaccine rollout to care homes was well underway “we’re in very early days of seeing the benefit”, he stated, with up to a three-week lag before people achieved a level of immunity. Outside of the significant spikes in death rates during the first and second waves, the key challenge for occupancy recovery had been admission levels. “But as the community vaccination programme gathers momentum that should reduce local outbreaks and the number of homes that have had to close.” On whether the CQC had needed to adapt its monitoring to the current climate, the legal test that determined whether the organisation had to take action hadn’t changed, he pointed out. “But I’m a firm believer that assessments are made in the round.”

When it came to the impact of Brexit, London was likely to be one of the hardest-hit areas in terms of staffing and recruitment – “the current immigration policy will not be helping providers in terms of their labour needs.” In the event of a COVID-triggered recession, however, “there’s a school of thought that it could unlock the labour challenge that the sector faces. But we need to appreciate that these are tough jobs and not everyone will be cut out for a job in care. But certainly I’m optimistic that the pandemic has increased the profile of the sector and the importance of care jobs.”

The CQC has been actively engaging with the provider base, he stressed, with non-specialist care home providers facing significant challenges in terms of occupancy. “Clearly, we are on a downward trajectory and I expect that to continue for at least a few weeks more.”

On the subject of COVID-related insurance issues, “from a Market Oversight point of view we’ve seen a real mix. We’ve seen a good number of situations where premiums have increased, but the common denominator is that there’s reducing cover for COVID and therefore an increased need to effectively self-insure.” The success rate of COVID related insurance claims had yet to be proven, however, he pointed out.

The forthcoming rise in the National Living Wage could well have an impact, he added, with local authority finances also in “quite a precarious state”. The “elephant in the room” in terms of wider future outlook for the sector, however, remained funding reform. While there was “greater acknowledgement in terms of the problem,” consensus was another matter.  

Looking for positive trends in the wake of COVID, the pandemic had given a much-needed boost to the critical role of care workers. “There’s much more to do, but the job the workforce has been doing has been absolutely phenomenal.” It had also demonstrated how the sector fits into the wider health economy, he stressed. “But we can’t kid ourselves when it comes to the public purse and funding reform – we’ve had some of the biggest borrowing there’s ever been in recent months. Fundamentally, however, if you’re a care home operator and you’ve got decent buildings and offer a great quality of care there should be a future for your business given what we know around the demographics that are starting to come over the hill.”

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