Overview
How much should it cost to run a care home?  How does the NSE compare?

The NSE claim to be an efficient organisation and make good use of the substantial government funding they receive. ‘Substantial’ means an average of £954 per person per week, as derived from their 2004 Accounts. They assert that this funding is barely adequate to cover the care costs and they are therefore unable to renew the care residences is from monies thus provided. The research by sense suggests this may not be the case. Furthermore, when the NSE is compared to similar care organisations it does not rank as highly in value for money terms as its publicity suggests.

The Joseph Rowntree Foundation (JRF)
JRF are a well-known organisation in providing care homes. Their web site (http://www.jrf.org.uk/) summarises research work by William Laing of Laing and Buisson in a paper titled "Calculating the costs of efficient care homes" and may be viewed online at: http://www.jrf.org.uk/knowledge/findings/socialcare/634.asp.

Even allowing for three times the JRF level of nursing costs, the weekly rate works out at £854 for care homes fully meeting the Care Standards Act, and £777 for those that do not.  Both these figures include provision for periodic capital replacement, the cost of land and an element of profit (as if it were a commercial organisation).  Further details are included in sense's Proof of Evidence (PoE) to the Planning Inquiry.

If we divide the data extracted from the NSE’s annual accounts by 52 we can look at the average weekly cost (and profit/(loss)) of the NSE in comparison to the JRF yardstick.

The NSE labour costs are much higher than those from JRF, even at the level of providing three times normal nursing cover. Some of this will be inefficiencies due to rapid staff turnover and training of replacement and temporary staff. Some will be due to the increased daily rates of agency staff compared to permanent staff. Those are (theoretically) controllable by competent management. It may also be the case that sense have underestimated the level of nursing expected - we have no access to information and the NSE has not provided it as part of its case. It may also be the case that there are staff costs in the assessment centre, rehabilitation centre etc that are not being supported by revenues other than those from local authorities for residential care, and the performance of the overall division is being unduly burdened by them.

There is also a major discrepancy between expected non-staff current costs and the actuals from the NSE. In 2004 the difference of £224 per week for 229 residents is worth £2.7Million. This is a significant sum - if it could be brought down to expected levels the NSE’s losses would be more than reversed.

The NSE and Local Authorities
The NSE receives its income for providing care home services from local authorities. There is a presumption that the NSE and local authorities negotiate reasonably (ideally using the JRF model above) and strike a deal whereby an agreed level of service is provided for the specified sum of monies to be paid. The local authority has a right to expect high service levels and value for money. The NSE has a right to expect a decent sum of money to cover its costs, use of land and capital replacement from time to time.

If the NSE is making losses from a provision of its care home services this may be due to poor management, poor negotiation of contract and/or the laudable desire to provide extra services/comforts to its care residents out of its own funds. However, at the end of the day, there is still the requirement to balance the books.

The NSE's position today is not something that has occurred overnight. The Care Standards Act 2000 has been in discussion since 1998. The NSE has reacted slowly to achieving increased fees from local authorities (2000 to 2004) and has apparently concentrated its expenditures in its other operations.

The NSE and the National Health Service
In its 2002 Accounts the Governors’ Report referred (in the last paragraph in the section on assessment, care and rehabilitation services) that the NSE subsidised the NHS in the amount of £600,000 for medical costs. In 2003 a similar statement was made, the amount being £650,000 for 2003.

In the 2004 Accounts no mention was made of underfunding. These sums are certainly substantial, approximately £2,600 per resident per year, i.e. £50 per person per week. Both the NSE and responsible PCT's should be able to act responsibly to jointly resolve this. Either the NSE is failing to recover money it is entitled to and could use, or it is unfairly casting blame elsewhere. Either way, it is not an indication of positive management from the NSE.

The NSE and comparable care homes
SENSE have looked at and reviewed two comparable epilepsy-based care homes, Saint Elizabeth's and the David Lewis Centre. Because the different organisations aggregate costs in different ways it is difficult to assess the detailed costing of their operations. What it is not in doubt is the overall annual profit/(loss). Both Saint Elizabeth's and the David Lewis Centre made overall profits in 2004. The Saint Elizabeth's operation declared a small loss on their care division but more than recouped that through fundraising income. The David Lewis Centre was profitable on its care division as well as other operations. This appears to demonstrate that, in normal circumstances, local authority funding of care homes is adequate for their operation.

The latest CSCI report (November 2004) on the Saint Elizabeth's operation includes the following key facts.
  - bed spaces provided 104
  - high user needs 58
  - medium user needs 29
  - low user needs 16
  - range of fees £602 - £ 792.79 per week.

Saint Elizabeth's gained a very credible report from the CSCI on the quality of service provided. Their clients include a high proportion of people with high service needs and they appear to have delivered that service for a substantially lower price than the NSE.

The David Lewis Centre is spread over a number of separately registered care homes and the overall picture of fees/user profile is not so clear. As a broad brush summary, the level of care was somewhere between that of the NSE and Saint Elizabeth's and its profitability was substantially better than both.