Home Care

Private Equity Financing – A Cause For Celebration Or Concern?

Until recently, domiciliary care wasn’t a topic to grace the front pages of the broadsheets, let alone the tabloids. But recent events have brought it out of the shadows and it seems everyone is talking about it.

The interest has been sparked by a series of unrelated – and, in some cases, related – events. There have been two inquiries into domiciliary care – from the Law Commission and Dilnot; the public are increasingly aware of the service’s shortfalls, prompted in part by local authorities’ struggle with finances; and, as people live longer, they are becoming more aware of the challenges in dealing with an ageing population.

High profile cases coming to light, such as Beryl Carter (who was left for three days without care) and Elaine McDonald (whose request for night care was turned down by her council), also put the topic on the front pages.

And now we have to add the issue of private equity investors into the mix. Hitherto, a rather discreet way of financing the growth of care organisations, their involvement has been thrust into the spotlight by the recent scandal of Southern Cross, the UK’s biggest care home operator and backed by private equity, which found it unable to pay rent to its landlords.

Hard on its heels, the closure of a string of homes by Castlebeck, which hit the headlines after the BBC Panorama investigation into one of its centres, Winterbourne View.

Which all begs the question, is private equity funding appropriate for domiciliary care? Private equity-owned companies are not listed on markets, not subject to public disclosure and reporting, and so are not publicly accountable. At the same time, private equity investors are attracted to health/social care investments as, due to the demographics, they are a relatively safe bet.

Their strategy seems to be to get in, build up and make money. The businesses come in and gather up a number of smaller companies for a relatively low price, build a bigger enterprise and generate a great deal of wealth, without any real interest in the market itself.

So anyone already alarmed by the role of private equity in the social care sector will be unhappy to learn of the growing involvement of Acromas, which owns the Saga and AA brands and has an annual turnover of some £1.84bn, employing 14,000 people.

Acromas brands offer services ranging from insurance, holidays, driving schools, and, of course, Saga’s portfolio for the over 50s.

Towards the end of July most news coverage was concerned about rising gas prices, the increase in the American debt ceiling and concerns over Sovereign debt in Europe.

Slipped in among these stories were a couple of others with huge potential impact on the domiciliary care market.

The first was the publication of the annual accounts for Acromas, where debt has risen to £6.6bn following yet another year of minimal tax payments (both trademarks of highly lucrative private equity financial engineering strategies). The second was the announcement that Acromas is to take over Allied Healthcare, making Acromas the largest domiciliary care provider in UK.

So why should service users, staff, local authorities and other players in the sector by worried by this injection of private equity finance?

For one, large organisations, like Acromas, have the advantage of economies of scale and so more competitive pricing, as well as specialised central services including bid/contract teams. The upshot is that smaller providers, which can’t compete where price is the bottom line, will lose out. And cash-strapped local authorities will be attracted to the cheaper option, even though it may not always be the best one for the service users in the medium term.

Equally worrying, few people know of, or make the connection between; Acromas and the ‘high street’ names like Saga and AA, making the growth of such private equity companies go almost unnoticed.

Acromas is well financed (its private equity backed collectively have circa £80 billion under investment, equivalent to the combined GDP of the world’s poorest 50 countries), but it is reported that the business has an estimated debt of £6.6 billion, which must be a cause for concern when we see what happened to Southern Cross.

No doubt the Care Quality Commission will be watching the takeover of Allied carefully, but it seems there is little that can be done to prevent the march of private equity finance into the health/social care market.

Interestingly, it’s been said that when renewing breakdown cover with the AA (which comes under Acromas’ umbrella) it’s best to negotiate annually to get the best deal. Sadly, service users and their families aren’t likely to have that luxury and those at the smaller end of private domiciliary care can only look on with concern.

Steve Mills is Managing Director of DoCare Ltd, a Gloucestershire-based private homecare provider. For more details visit www.docare.co.uk

15 minutes – give or take

The public was shocked last week at the report from the Equality and Human Rights Commission that found severe failings in the level and standard of homecare given to elderly people throughout the UK.

“Homecare slammed as elderly left in bed for up to 17 hours”, screamed the Daily Mail headline. Even the usually more measured Daily Telegraph and Guardian homed in on the report’s phrase that the level of care currently “abuses basic human rights”. Radio 4’s Today programme gave the report extensive air time and they – like much of the media – focussed on the finding that many people’s visits were limited to 15 minutes at a time.

All headline-grabbing stuff, which has left the public up in arms. Care for the elderly is a pretty hot potato at the moment, what with the recent Panorama investigation into Winterbourne View and the coverage of Southern Cross. No doubt we’ll soon to get to read the outcome of the Dilnot report into homecare. Coming as the sandwich filling in between, the EHRC report has fanned the flames of public opinion, namely that the state, the private sector, the local authorities and care staff are letting down the elderly.

So let’s look at the issue of 15 minutes per visit. It may be topical, but this is nothing new. Some local authorities have been commissioning short duration domiciliary care visits for years, while others have caught on more recently. That being the case, why have the EHRC put this report out now? The more cynical among us could speculate that it’s a way of deflecting attention from their accounts, which have yet to be signed off by the National Audit Office (speaking of headlines, what about this one from the Guardian a couple of weeks ago? “Equality commission accused of mismanaging £2m of taxpayers’ money”).

Putting aside the shenanigans of the EHRC, it remains the case that 15 minutes appears, at least on the face of it, to be a woefully inadequate length of time for all but the most basic visit. But where does the blame lie for the situation that has arisen?

The support workers’ willingness to go along with inappropriately short duration visits may be part of the problem. Most staff are on zero hour contracts (not the case in my organisation, it has to be said) so they are faced with a situation that if they “cause trouble” their work may simply dry up.

Domiciliary agencies could refuse to work under the terms the local authority dictates, but they would quickly be replaced by another agency which would be happy to comply. So the private sector must take a measure of blame for the increase in 15-minute visits through its willingness to collude with social services.

Can we blame families? It’s our experience at DoCare that the majority are closely involved in the care of their elderly relatives, but this isn’t always the case. The elderly themselves also need to be brave enough to speak out if they are unhappy with the care provided, but they very often won’t. This is, in part, because they come from the generation who “don’t want to make a fuss” and also, it must be said, for fear (probably unfounded) of what may happen if they complain.

Does the blame lie with the local authorities? After all, it is they who set the agenda, they who made the 15-minute rule. Surely they could just draw up a different care programme for each person, factoring in more time per visit. Unfortunately, if they did then very quickly the costs would escalate beyond the budgets they had available, resulting in even more problems.

All of the players mentioned above must, to some extent, take their share of the blame for the failure of the system, but everyone is under pressure and making changes is not that simple. The local authorities, on the face of it, have the most leverage but with recent budget cuts hitting all areas of public life, where to swing the axe is a tough decision. Any extra money spent on homecare must come from another budget and you’ve only to look at the local television news to get a taste of the public’s anger at the closure of libraries and special schools, fury at pot-holed roads, and uproar at fortnightly rubbish collection.

But how do we change the system? Taking homecare back solely into the public sector can’t be an option, if for no other reason than cost. Having private sector involvement in homecare has saved local authorities £40bn over the last 15 years. Nor can the sudden removal of 15-minute visits be the answer. For many people, a 15-minute visit can be appropriate in certain circumstances.
The Dilnot report, when released, may shed some light on how to resolve the issue of funding care for the elderly in our ageing population, but we’d be unwise to pin our hopes on either its findings or its chances of being adopted. Already, there have been media reports that the Chancellor, George Osborne, wants to “strangle the proposals at birth”, (this comment came from a Liberal Democrat, quoted in The Observer). And as for its findings? Well, we’ll have to wait and see. But bear in mind this will be the fifth major report or inquiry into the funding of care for the elderly to be conducted in the last 14 years and the recommendations of the first four weren’t taken up. Instead all were placed by successive politicians in the ‘too hard to deal with’ pile.

The situation is at crisis point but until the political will is there to make a change, or public opinion forces a new approach, the prevalence of 15-minute visits, symptomatic of the wider funding deficit, will still exist. It’s quite possible that things will get worse before they get better. In the meantime, those working in the sector – be that the local authorities or private providers – will continue to do their best for their clients within the constraints they face.