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Care Act
Cost of Care Analysis
Analysis and Assumptions for the Cost of
Domiciliary Care within Essex
Title: The Market Project, Cost of Care Work stream
Project: Care Act, the Market
Version Number: 1.0
Version Date: 19th May 2016
Status: Published
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1. Purpose of the Document
1.1. Document Purpose
To provide the outputs from the Council’s cost of care analysis for Domiciliary Care including
the methodology deployed and the assumptions underpinning the model.
The intention is that this analysis will be refreshed on an annual basis timed to inform future
pricing strategies for the subsequent year.
1.2. Project Purpose
The project supports delivery of four interrelated outcomes
Understand the cost to Domiciliary Care providers of delivering care and support in Essex
Have an agreed amount in the Resource Allocation System (RAS) used to calculate the level
of Personal Budget applicable which is sufficient for people with assessed needs to source
outcomes based solutions which are legal in terms of wage legislation and guidance,
sustainable and of a good quality.
Provide clarity on our approach to pricing in any new procurement activity aligned to the
specification against which providers are expected to deliver
Enable the Council to understand the cost make-up of providing Domiciliary Care which
supports a more informed approach to managing cost pressures in the market
1.3. Document Audience
This document has been developed for ‘stakeholders’ that have been defined, who may wish to request evidence as part of the outputs of the cost of care.
Stakeholder type Stakeholders
Project Stakeholders The Care Act Programme Board The Market Project
Internal Stakeholders Commissioning Corporate Finance Commercial Adult Operations Children Services IS Legal Audit
External Government Departments
Department of Health Other Local Authorities NHS CCGs
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Stakeholder type Stakeholders
External Parties or organisations
Providers of Domiciliary Care Services Voluntary Organisations Charities Other Professionals, Power of Attorneys Essex Guardians
Residents Essex Residents Essex Individuals Receiving Services Carers Family Members
Domiciliary Cost of Care Calculation 2
2.1.1 Cost of Care Model
The cost of care calculation has been derived from a number of items. These items have
been incorporated into a template that was sent to all Domiciliary Care Providers within
Essex or to those based outside of the county who provide Domiciliary Care to Essex
individuals.
2.1.2 The Cost of Care Model and Template
The United Kingdom Home Care Association (UKHCA) template was used as the basis for collating the data. Domiciliary Care Providers were asked to complete the template and send it back. Below is a summary of the results, detailing the different cost elements that make up the overall cost of care hourly figure of £15.37 for standard personal care. The £15.37 figure is based on a fictional mid-sized organisation providing 4000 hours of care. This was chosen as a reasonable reflection of an organisation providing Domiciliary Care services allowing the analysis to be done on a County wide basis. The model uses a range of assumptions which are specified in section 3.2 below.
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The Domiciliary Cost of Care Model
The equivalent hourly rate for 24 hour care is £11.30 per hour and for rural locations £18.07. The breakdown of these rates is given in Appendix A.
Domiciliary Methodology and Assumptions 3
3.1 Methodology Approach
3.1.1 Engagement Events
The costs were based on multiple detailed engagement events with providers. The majority of
the engagement was through conversations in small groups (59 attendees from 35 providers),
1-2-1 meetings (7); phone conversations (4). Details of the provider events held are shown
below.
Date Location
5/10/2015 The County Hotel, 29 Rainsford Road, Chelmsford
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Date Location
Essex, CM1 2PZ
06/10/2015 Harlow Town Football Club, Elizabeth Way, Harlow,
CM19 5BE
08/10/2015 Wat Tyler Country Park, Pitsea Hall Lane, Pitsea,
Basildon, Essex, SS16 4UH
12/10/2015 The Weston Homes Community Stadium, United
Way, Colchester ,Essex, CO4 5UP
Templates
Cost breakdown templates were issued to providers and a number were returned. These
were used alongside other sources of market intelligence to inform the cost model
produced.
3.1.2 Cost Drivers
The following current and significant cost pressures were identified during engagement with
the market:
National Minimum Wage (NMW): since 2011, has increased by c. 62p/hour + NI and other on-costs
National Living Wage (NLW) has added 50p/hour + NI and other on-costs from April 2016
Pensions auto-enrolment have come in for almost all providers now
Need to pay staff more to attract people into and keep people in care work
Training costs – particularly the Care Certificate which is requiring more non-contact time and increased assessment costs and a move way from e-learning
Persistently high turnover results in a knock-on effect on a range of different costs e.g. training and recruitment
Compliance and regulation – the Care Quality Commission (CQC) has evolved its approach resulting in increased quality assurance costs for providers; the increased threat of litigation; registration fees due to go up considerably
Travel costs – now having to be included as part of Care Act and NMW requirements
Recruitment costs – higher turnover particularly amongst the largest providers; job board rates much higher recently due to volume of adverts; higher advertising costs; pre-employment checks; screening costs
Complexity of packages and discharge pressures mean much higher supervision and
coordination costs
3.1.3 Geography
The analysis conducted concluded that whilst there are cost differences seen in different
parts of the county, these tend to even out meaning that a single rate can be used from a
cost of care perspective.
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The exception to this is the difference between very rural and less rural areas, whereby the
additional travel distance leads to an increased cost of care figure as detailed in Appendix A.
Client Groups
The analysis also assumes that there are few differences in the direct costs of delivering to
any particular client group. There are differences created because of the volumes of hours
related to the number of service users – so employment practices are markedly different in
many services for adults with disabilities, for example the use of guaranteed hours or full
time contracts which then impact on recruitment and retention costs.
‘Assumption’ made from collective discussions and engagement with Providers and
knowledge that providers factor in the individual’s needs.
An Example of this includes the time it takes to provide personal care for an individual will
depend on the individual’s needs, providing washing support for an elderly client could take
the same length of time as a learning disability client.
3.1.4 Outturn Costings
A template based on the UKHCA template has been developed, applying percentage changes
only to direct costs.
3.1.5 Salary
For the Cost of Care calculation, we assumed the lowest legal pay rate, and factored this
against the National Minimum Data Set (NMDS, a source of workforce intelligence) figure
which tells us 11% of the market is under 25 and therefore subject to the NMW but not the
NLW.
3.1.6 Unsociable Hours
On unsociable hours, for the analysis, we have built in the payment of time and a half for
weekends, and double time on bank holidays.
The practice of paying enhancements for unsociable hours is a typical feature of the zero
hours culture within the social care market sector.
Via the engagement events, examples were given by providers who have managed to
introduce contracts where staffs are paid the same rate regardless of days of the week.
However these exist within the adults with disabilities market and where there are much
higher volumes of hours in a single package.
‘For the 24 hour live in and waking night services, we have assumed that these staff would
more likely be working on a shift basis, and therefore reduced the enhancements to time and
half at weekends to Sundays and bank holidays remain the same.’
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3.1.7 On-costs
For National Insurance, for our model:
‘We have assumed that following the changes in NI contribution in April 2016, then a
percentage of the workforce will still fall into the 0% banding. We used the NMDS figures for
part time contracts – c. 46% - as our starting point and assumed that some percentage of
that would still be at the lower rate.
For 24 live in and sleep rates we have assumed that staff would on average be working more
hours, and therefore assumed a lower percentage would fall into the zero % category. ‘
3.1.8 Travel
Assuming a 45 minute visit as a mid-point for commissioning practice.
1. For the minimum rate and the urban rate, we have assumed an “efficient” round – with
only 2 miles between visits and good traffic/travel conditions.
There is no specific data to enable us to arrive at a more detailed analysis but advice from
Essex County Council Adult Operations along with feedback from the engagement events
support this assumption.
At these levels, the two variables allow for a slower journey time or a shorter distance (or
variation thereof) without materially affecting other assumption in the rate.
2. For our cost model we have assumed mileage is paid at 35p per mile which is the Her
Majesty’s Revenue and Customs (HMRC) rate for annual mileage of less than 10,000
miles per year for the standard urban rate, and 25p within the rural rate assuming
higher mileage – above the 10,000 miles per year threshold.
3.1.9 Training
Assumed number of days
8 days in Year 1: four days for completing the 15 modules of the Care Certificate, 2 days for
additional organisational induction and specifics on moving and handling and Mental
Capacity Act/Deprivation of Liberty Safeguards (MCA/DoLs). 2 days for additional specialist
training – most likely to be medication, but in responding to competency concerns we want
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to ensure a good standard of care around particular conditions – for example dementia and
autism, both of which are covered by more specific guidelines.
In Years 2 and onwards, we are allowing 4 days – 1 day for refresher training, three days for
specialist or other training.
Given turnover is currently running in excess of 25% for the biggest providers in the Essex
care market (NMDS evidence), the aggregate would be something around 5 days, but given
all of this is only for a year to 18 months, we have assumed an on-going pressure of around 7
days.
Evidence: NICE Guidelines Policy
Management and Supervision
In the management overhead, we are allowing for a supervisory ratio of 1:15. This assumes a
number of part time workers.
In the management overheads, we are also allowing an amount for direct training
costs: c.£75/worker as a guideline – this is the cost of actually buying training.
3.1.10 Pension
Although many providers are already within the auto-enrolment regime and in some cases
have more generous provisions, we have assumed the statutory minimum position of 1%
which will apply to all providers, however small, during the course of 2016.
3.1.11 Annual Leave
We have taken the statutory minimum – 28 days including bank holidays – which accrues
regardless of contractual status and therefore is a fixed percentage of the hourly rate.
Evidence: National Insurance Contribution Rates
3.1.12 Overheads
In order to properly understand overheads, we populated the structure needed to run an
organisation delivering c.4000 hours of care:
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3. On overheads, we have not applied a blanket percentage overhead but to cost the
management and office infrastructure necessary specifically according to our average
agency (numbers of staff), so real costs are then matched across to the income driven by
hour.
4. One of the consequences of this approach and by using a different formula for
calculating the overhead, direct comparison with percentage figures in the UKHCA
model need to be treated with care, for example when changing assumptions for travel
and salary, we have fixed the overhead figures to keep to the actual cost figure.
5. The exception is the insurance which is variable driven by payroll costs amongst over
things, so an increase in pay because of rural working needs to be factored in.
6. Obviously all providers differ here, so we have tried to take a measure of the direct care
staff to supervisor ratio as one of the key considerations, acknowledging that one key to
quality in a provider is sufficiency of leadership and something looked at as part of the
CQC’s inspection regime.
7. We have assumed that not all of the overhead should be apportioned to the 4000 hours
commissioned by ECC as the provider would have other income sources.
8. We have enhanced the figure for IT from the UKHCA rate to reflect the on-going need
for IT and technology as a key part of modern service delivery and encourage a more
proactive approach to the use of assistive technology. We can look for evidence for this
as part of our contract and quality monitoring.
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9. We have also factored in direct costs for CQC registration and direct training delivery
costs (as opposed to supernumerary time which is included in the salary costs).
10. For 24 care we have assumed a much lower overhead, based on feedback from the
market that there are lower recruitment and placement management costs associated
with these roles. The 6% overhead for management and back office costs is based on
recalculating the number of staff needed to manage fewer service users, less
supervisory time in terms of travel and assessment, simpler invoicing and lower
administrate burden.
Evidence: CQC website, UKHCA website
3.1.13 Profit
Aside from the myriad ways in which profit is accounted for and described, there are many
variables in trying to assess profit, stipulating the “right” level of profit is likely to be
misleading.
In the calculations we used 3% profit simply to give an indication of the possible levels of
profit associated with a particular volume and mix of hours. However this figure is before
tax and other costs.
Overall, the approach is to fix the overall overhead such that if a provider can be more
efficient with other overheads then their profit would increase.