Although the crucial initial milestone of offering the COVID-19 vaccine to all eligible care home residents and staff has been achieved, operators of residential care face continued pressures, including rising costs, insurance premiums, potential litigation, and a reduction in self-funded admissions. Robust business plans are more essential than ever.
The vaccination programme has proceeded more swiftly than anticipated, aided by the authorisation and availability of the Oxford/Astra Zeneca vaccine. In the meantime, rapid testing has been key in battling the rise in infections in this most vulnerable population.
The operational and financial challenges of COVID-19
However, COVID-19 has had a profound impact on the residential care sector. Numerous providers have experienced a reduction in self-funded admissions. Homes reliant on people who fund their own care have come under increased financial pressure, and future occupancy rates remain uncertain.
Care providers are additionally facing an increase in COVID-19 related compensation claims. Some law firms have established teams to pursue claims of this nature, alleging breaches such as lack of PPE, inadequate social distancing, and failure to provide secure care.
The rise in these claims has seen spiralling insurance premiums across the care sector, as well as restrictions in cover that in some cases go beyond COVID-19 to exclude communicable diseases. In a survey by the National Care Association, 68% of respondents reported an increase in their insurance premium. In one widely reported case, the insurance premium renewal quote for a care group increased by 880%.
What are the potential opportunities for care home providers?
It is especially important in this climate to identify any potential opportunities. Care home providers may benefit from the recent Supreme Court ruling in relation to business interruption insurance. In September 2020, the High Court ruled in favour of businesses, followed by the Supreme Court in January 2021¹. Those care providers whose business has been interrupted by COVID-19 may be eligible to make a claim under their insurance for losses incurred.
The Government’s Adult Social Care Winter Plan received an additional £564m in 2020, funding sick pay and PPE for care homes, until March 2021², and it remains to be seen whether the Government will extend this support.
It is likely that the residential care business will continue to experience difficult operating conditions and financial pressures. As the Government’s Winter Plan itself highlights, all care providers need to review and update their business continuity plans to ensure the provision of sustainable care services.
Careful planning includes the preparation of robust business plans that reflect the continuing additional costs and potential reduced occupancy levels, when compared to seasonally adjusted pre-COVID-19 levels.
Such analysis may identify cash flow shortfalls, operational improvements, working capital optimisation, and new funding requirements.
A proactive and collaborative approach for medium to long-term solutions
It is more important than ever to engage early with relevant parties, including owners, lenders, other funders, landlords, CQC, the NHS and local authorities, to identify potential solutions. The challenges and opportunities of 2021 can be navigated by working together with all stakeholders: testing care providers’ plans, using sound financial forecasts and analysis, and planning for strategic use of any business interruption windfall.
If you would like to discuss anything you have read or would like to chat about any other aspect of the care sector, please contact Kerry Bailey, partner.