News | Published November 09 2019

£1.5 billion a year of care home fees are not re-invested into the sector, report says

A report from the Centre for Health and Public Interest has revealed that around £1.5 billion of care home fees paid by residents and local authorities “leaks out” of the sector and is not re-invested into frontline care.

The money, which amounts to ten per cent of the total annual income of the UK care home industry, is being diverted toward rental payments, loan interest and profits.

The CHPI has recommended that a restructure of the sector take place to allow more of this money to be used for vital services and called on the government to introduce a "Care Home Transparency Act" to make it clear to those paying for care home services where their money is being invested.

The data was collated from the accounts of 830 adult care home companies in the UK, finding that the average cost for a place in a residential care home is £32,084 excluding nursing care. In excess of 90 per cent of all care home services are provided by the private sector.

Among the largest 26 providers, £261 million of money received goes toward debt repayments, according to the report.

In an interview with BBC Newsnight, CHPI director David Rowlands said that the industry loses “hundreds of millions” of pounds in the form of "rental payments to offshore landlords, in the form of profit, in the form of management fees and in the form of rental payments again to offshore companies.”

Rowlands added: "lots of debt has been loaded onto large care home companies by the companies that bought them and that means in some cases that 16 per cent of all the money that is given over to care for a resident each week disappears out of the system to pay off those high cost loans.”

The burden of high debt saw Four Seasons Health Care, one of the UK’s largest care providers, enter administration in early 2019.

Senior analyst at Opus restructuring, Nick Hood, pointed out that the average interest rate paid by care home providers in 2017 was as high as 11.8 per cent.

Hood said: “[this] means that they were paying over £235 million a year in interest and that’s money that could be going to frontline care but isn’t”.

Authored by

Scott Challinor
Business Editor
November 09 2019

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