Care Management Matters – June 2010

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LCS International is a leading research and buy-side analyst and consulting firm in health care and related sectors.

We provide advice across the breadth of the international  health care economy and the range of specialist advice provided to clients is focused on medical devices and health care services including care homes, primary care, home health and home care, clinical medical and psychiatric hospitals, health information technology and specialist children’s services (fostering, residential homes  and schools).

In our view the economic downturn will affect the health care industry in the UK and elsewhere in significant ways, despite assurances about ring-fenced funding.  The effects will be seen over the whole of the next decade.

We would argue, firstly, that ring-fencing provides only for current levels of expenditure to be maintained and little more, while demand   (due to demographics et al), will continue to grow. Secondly, that ring –fencing is guaranteed, so far only until 2014, while the aftermath of the economic catastrophe will be with us for at least a further seven lean years.  Thirdly, that the lines between social care and healthcare are not distinct and the former is not immune from spending reviews.

In the UK we expect the coalition government to pass new laws and give new incentives to local government. Value for money alternatives and greater productivity across the board will increasingly be sought.  In particular we anticipate the following: 

· New funding for long-term care whether by insurance or new taxes. 

• More investment in preventative care -  delaying the onset of long-term conditions, even for a matter of months  will be  a major saving in the longer term;

· More step-down care to free up acute settings more quickly;

· More expert tendering and more competition. Clear objective is more product for  less cost;

· Changes in care-pathways with new opportunities for the independent sector.

· A smaller proportion of the population going into care homes; the number of couples living longer will aid Government initiatives to look after more people at home;

· Very little relaxation in means testing rules;

· Less institutional care and better healthcare and social care at home;  also, improved product offerings for self-pay home health and home care;  

· A radical reassessment of the roles of the different regulators. Consolidation is inevitable with some roles  even disappearing where conflict and duplication is evident;

· A reduced level of new build in the next five years. More small homes will close and it therefore follows that despite governments efforts to reduce admissions occupancy rates will recover in due course;

·  The proportion of care homes for dementia will increase. Commissioners will favour those providers who have specialist dementia services with proven outcomes;

· A tight fee regime for local authority providers;  Commissioners will look to reward with increased fees only those with excellent ratings and demonstrably good outcomes;

· Increased involvement of consumers, for example on social websites, will drive up standards;

·  Greater emphasis on providing better quality care.  Reduced re-admission will be a key objective.

· Higher leveraged businesses will inevitably struggle; more consolidation will occur;

With regard to PLD (persons with developmental and mental disabilities) and other specialist, higher acuity sectors, we anticipate:

· Continued change on the behavioural medicine side.  Fewer spot contracts and increase in block contracts across the board;  in the medium term, the introduction also of tariff rates;

· More expert tendering and more competition. Clear objective is more product for less cost.

· Increase in the  range of care in primary care settings;

· The level of AVLOS in acute settings will decrease. Expansion of step-down care will be a key objective;

· Greater emphasis on measurement of outcomes and providing better quality care

· Changes in care-pathways with new opportunities for the independent sector.

· Improvements in IT - scope for digitalisation that will increase overall efficiency.

· Reconsideration of the role of children’s homes in specialist children’s services; also drawing back from a high level of placements in fostering care;

· The level of acuity in supported living will continue to increase;

· A greater proportion of service users will continue to be funded by supported living budgets rather than residential care budget s;

· The number of persons with learning disabilities living  outside the  family home  in institutional settings will continue to increase by 3.5-4.0 per cent per year as their family carers age;

There is one clear message for the independent sector.  The average cost of funds has risen and the multiple that parties are willing to pay has fallen back to nearer  the norm that pertained  during most of the last 50-60 years.  Inevitably there will be pain as lenders readjust their books and, they, together with investors take a more balanced view of risk and reward.

Paul Saper