Agenda Item No

The Vale of Glamorgan Council

Cabinet Meeting: 29th November, 2011

Report of the Cabinet Member for Social and Care Services

Setting a standard contracting rate for places in independent residential care homes for older people in 2011/2012


Purpose of the Report

1.            To outline the process which has been used to determine the fees that the Council will pay when contracting for places in residential care homes for older people run by the independent sector and to seek Cabinet approval for the fees that the Director of Social Services intends to set for 2011/2012.


1.             THAT Cabinet agrees the proposed fees for 2011/2012 as set out in paragraph 19, Table 1 of this report.

2.             THAT Cabinet gives delegated authority to the Director of Social Services, in consultation with the Cabinet Member for Social and Care Services, to vary fee levels in appropriate circumstances.

Reasons for the Recommendations

1.             To establish the final fee for 2011/2012.

2.             To deal with exceptional circumstances where use of the agreed contract rates operates against the interests of individual service users or the Council.


2.            During 2007/2008 the Council undertook an extensive piece of work to produce a robust and evidenced methodology for establishing a fair fee level. All independent sector homes in the Vale of Glamorgan providing residential care for older people were asked to provide information about their running costs, to ensure that the methodology reflected the cost of providing care home services locally. The outcome of this exercise was the report, A Fair Price for Residential Care 2007/8, approved by Cabinet in October 2008. 

3.            Since that time, the methodology set out in the report has been accepted by both the Council and the independent care home providers as providing the basis on which the Council determines care home fees in the Vale of Glamorgan. The information about costs used in applying the methodology has been updated each year by applying the appropriate indices for the different areas of expenditure. However, a number of external developments have made it necessary for the Council to review how care home fees are determined.

4.            In August 2010, the Welsh Government published new statutory guidance on commissioning social services; Fulfilled Lives, Supportive Communities: Commissioning Framework Guidance and Good Practice sets out the responsibilities of local authorities in this area of work. The Framework has two parts.  Part 1 of the guidance was issued under Section 7(1) of the Local Authority Social Services Act 1970.  It contains thirteen standards; these provide the benchmark against which the effectiveness of local authority commissioning activity will be measured.  The standards focus on the capability needed to develop evidence-based commissioning plans and then to deliver them through effective procurement.  Additionally, the Framework clarifies the roles and responsibilities of those involved in the commissioning process.  Part 2 of the Framework describes good practice in commissioning and procurement, outlining nine key challenges.

5.            The new guidance was reported to Cabinet on 19th January 2011.  Cabinet requested the Director of Social Services and the Director of Finance, ICT and Property to (i) evaluate how far current commissioning arrangements for social care in the Vale match the standards and meet the challenges set out in the statutory guidance; (ii) formulate appropriate actions within the new Change Plan for social services that would bring them into compliance with these mandatory requirements as soon as possible; and (iii) report further to Cabinet on conclusion of that exercise. 

6.            These tasks were incorporated in the work undertaken to formulate the Change Plan for Social Services 2011/2014; Cabinet endorsed the plan on 13th April 2011.  The Change Plan deals primarily with those issues where a corporate approach, across Council directorates, is required to deliver appropriate action. Commissioning is one of the seven priority areas in the plan and an ambitious programme of work is under way.  It seeks to link together (in a business-oriented way) the Directorate's activities in the key areas of planning and partnerships, commissioning and contracting, and resource management.  The Change Plan is attached to this report at Annex A.

7.            Despite limited capacity, the programme of work in respect of commissioning set out in the Change Plan is progressing well, with good support from all parts of the Council.  On 16th November 2011, Cabinet was asked to approve two documents which represent significant milestones in bringing about improved commissioning practice - the Social Services Commissioning Framework 2011 and the Social Services Commissioning Strategy for Older People's Services 2011 to 2018.  These are attached to this report at Annexes B and C.

8.            In addition to the legislation and statutory guidance surrounding residential placements and commissioning of placements, there has been a successful public law challenge to Pembrokeshire County Council’s policy for setting care home fees, known locally as the ‘Forest Care Home’ case[1].  Although the judicial review covered the fee setting process and methodology adopted by Pembrokeshire County Council, the judgement has implications for all local authorities when negotiating fees with independent providers of residential care homes.

Relevant Issues and Options

9.            In setting fees, the Council takes very seriously its responsibilities for complying with legislation, guidance and case law precedent.  It agreed, therefore, to ensure that the process adopted in the Vale of Glamorgan in setting a standard contracting rate takes proper account of the new statutory guidance on commissioning social services and the Forest Care Home judgement. At the same time, this was seen as an opportunity to develop as far as possible a shared understanding across key stakeholders about factors such as market risks, the needs of current residents within nursing and care homes in the Vale, the needs of the care and nursing home providers, the needs of other residents in the local authority area and finally the needs of other service sectors within the Council’s areas of responsibility.

10.       Given these circumstances, it was decided that the process could not be completed in a thorough manner in time to set the level of fees payable by the Council for the year 2011/2012 before the beginning of the financial year. An interim uplift of 2% on the current fees was put in place, with an agreement that any further increase as the result of the process put in place for determining fees would be backdated to the beginning of the financial year. 

11.       A substantial piece of work has been undertaken to review the methodology set out in A Fair Price for Residential Care 2007/2008, to ensure that it meets the requirements of the Welsh Government guidance and that lessons from the Forest care home case have been incorporated. In October 2010, all independent sector care homes in the Vale of Glamorgan were invited to provide the Council with information about their running costs. The time frame was extended to February 2011 to enable as many homes as possible to participate in the exercise.  The information requested was more detailed than in previous years because feedback from the sector indicated that the questionnaire used in the past had not allowed homes to reflect all costs accurately. Financial information was received from 11 homes, out of 19 in total. The information was used then to populate an updated toolkit.  External experts were again engaged and assisted the Council with this piece of work.

12.       The initial findings were set out in a comprehensive document setting out the rationale which the Council would be asked to adopt in seeking to establish the appropriate level of fees payable for 2011/2012.  This is attached at Annex D.  At that time, the proposed fee for frail elderly clients was £441 per resident per week and for Elderly Mentally Infirm (EMI) clients was £482. The document was provided to all independent sector homes and discussed in a meeting with the service providers in August 2011. At this meeting, representatives from the homes raised issues about:

·               the methodology used by the Council;

·               the way in which staffing costs had been calculated including consideration of the minimum wage, the number of care hours and payments for the use of agency workers;

·               the figure for non-staff costs, including costs of repairs and maintenance and running costs; and

·               the figures for capital costs, including the value of land and the detailed assumptions made within the capital cost element of the methodology.


13.       In response to these comments and further representations from the independent sector, additional work was undertaken with the external experts to ensure that legitimate concerns were acknowledged and taken into account when calculating the proposed fees.  A written response was produced, detailing the way in which the issues had been addressed and the rationale for changes made in the calculations regarding costs of agency workers, repairs and maintenance and the value of land.

14.       The written response by the Council was distributed to the members of a working group nominated by the care home owners and a meeting took place in October to discuss the revised proposals. At this meeting, the Council was again asked to review:

·               staffing costs used in the calculation in respect of management and care hours;

·               non- staffing costs in respect of running costs; and

·               capital costs in respect of land values, costs of new build and issues regarding quality of care.


15.       Officers revisited the proposals and again consulted the external experts about these issues and further changes were made regarding the allocation of management costs, the number of care hours used in the calculation and land values. These changes were reported to and discussed with the working group in November 2011. Representatives of the independent sector care homes acknowledged that the Council had made some response to their concerns but they remain dissatisfied with the proposed uplift in fees.  The specific areas of continuing disagreement are management costs, running costs and the capital elements. It was agreed that issues concerning the capital elements would be addressed in discussions about setting the fee for 2012/2013 when further collaborative work will be undertaken. Consideration has been given to all the matters raised by the independent sector and there are no further negotiations planned in respect of the proposed fees for 2011/2012.

16.       In order to demonstrate that the Council has in place a robust and transparent methodology for establishing a fair fee level this year, which complies with statutory guidance and makes appropriate use of information about local costs, the external experts have produced a final report.  This report, A Fair Price for Residential Care 2011/2012, is set out in Annex E.

17.       Given the extensive work that has been undertaken, including detailed negotiations with the independent sector providers, officers are confident that the fees proposed in this report reflect the cost of providing care home services in the Vale of Glamorgan.  However, Cabinet should be aware that this is a complex area of work requiring not only the use of evidence but also the making of informed judgements about a wide range of variables such as assumptions regarding economy, efficiency and the prevailing resilience of the independent sector.

18.       The Commissioning Strategy for Older People Services 2011/2018 highlights the growing need for services to support older people with dementia.  Within the Vale of Glamorgan, there is insufficient capacity within the care home sector currently to meet this growing demand in full and the Council continues to face difficulties in obtaining specialist places for older people suffering from dementia related illnesses.  It is proposed, therefore, to amend the methodology to provide an additional incentive from April 2012 so that more independent sector providers will be willing to provide this type of care.  

19.       Use of the methodology set out in this report produces standard fees for 2011/2012 as set out in Table 1 below

Table 1

Type of Provision

Fee 2010/2011

£ per resident per week

Fee 2011/2012

£ per resident per week

Percentage increase

Residential Care for Frail Elderly







Residential Care for Older People with dementia (Non-incentivised)







Residential Care for Older People with dementia (Incentivised - from 2011/2012)







Resource Implications (Financial and Employment)

20.       The standard contracting rate which the Council pays for places in independent residential care homes must be a fair one and comply with the Welsh Government guidance.   Because of the placement numbers involved, the level of payment has a considerable impact upon the budget of the Social Services Directorate.  Within the budget for 2011/2012, an inflationary increase of 2% was provided for care home fees, which equates to £81,000. The total additional cost of the proposed fees arrived at by the detailed review that has now been carried out is £587,000 per annum.

21.       Some of the shortfall in funding in 2011/2012 will be met from a social services reserve but this will be a considerable cost pressure in coming years. Cabinet will be aware of the exceptionally challenging financial situation that faces the Council.  A report to Cabinet on 16th November 2011 outlined the pressures on both the Children and Adult Services budgets within the Social Services Directorate and the measures proposed to reduce the predicted overspend of £3.7m this year.

22.       The draft budgets for 2012/2013 and beyond indicate that the pressures on social services to reduce expenditure will remain while at the same time the service will experience increased demand for services. It is the intention of the Council, on the basis of the considerable increase in fee levels brought about by the proposed uplift, to undertake a programme of work with the independent sector as a matter of urgency to ensure that the services provided are efficient, effective and mindful of the pressures on the public purse. The Council will be asking providers to demonstrate that their financial arrangements keep people safe, asking them to show that their business is sustainable in terms of occupancy rates, cash flow, volumes and transparent accounts. 

23.       All the people placed in residential care by the Council are financially assessed to determine whether and to what extent they are required to contribute to the cost of the care provided.  These charges are calculated in accordance with the Charging for Residential Accommodation (CRAG) Guidelines produced by the Welsh Government.  The care home is paid net of the resultant assessed charge and the home must collect the balance.

24.       Nursing homes receive an additional payment from the Local Health Board to provide the nursing care required by individual residents. This payment is currently £120 per resident per week and was not uplifted for inflation in the current financial year.

Legal Implications (to Include Human Rights Implications)

25.       The legislative context within which the Council sets fees for residential and nursing care placements requires that it must aim to ensure stability and sustainability in the provision of placements, so that obligations under community care legislation can be met.

26.       The National Assistance Act 1948 (Choice of Accommodation) Directions 1993 places local authorities under an obligation to make arrangements for placing a person  assessed as “in need” in accommodation of their preferred choice subject to certain conditions.  Under the Act, local authorities have “... the legal responsibility for commissioning the accommodation and personal care an individual requires. As a result, it is the responsibility of each local authority to determine the level of fees it will pay for this”.

27.       Relevant regulations include ‘The Care Homes (Wales) Regulations 2002’ and subsequent amendments. These regulations state that “the registered provider shall carry on the care home in such a manner as is likely to ensure that the care home will be financially viable for the purpose of achieving the aims and objectives set out in the statement of purpose.”  Additionally, the National Minimum Standards for Care Homes for Older People (2004) sets out minimum standards relating to choice of home, planning, quality of life, quality of care, staffing, conduct and management of the home, concerns, complaints and protection and the physical environment.

28.       The adoption of the methodology to determine care home fees set out in this report ensures that the Council fulfils its legal obligations as set out in legislation, statutory guidance and case law. 

29.       The Fulfilled Lives, Supportive Communities Commissioning Framework Guidance and Good Practice is issued under section 7(1) of the Local Authority Social Services Act 1970 and it is, therefore, statutory guidance.  Section 10 of the guidance indicates the factors which a Council should take into account when considering the issue of fee-setting.

·               Commissioners will have to take into account the full range of demands on them and their strategic priorities, as well as the resources they have at their disposal in developing their commissioning strategies.

·               Fee setting must take into account the legitimate and future costs faced by providers as well as the factors that affect those costs and the potential for improved performance and more cost effective ways of operating.

Crime and Disorder Implications

30.       There are no crime and disorder implications as a direct result of this report.

Equal Opportunities Implications (to include Welsh Language issues)

31.       Section 149 of The Equalities Act 2010 has replaced and incorporated the Race Relations Act 1976, the Sex Discrimination Act 1975 and the Disability Discrimination Act 1995 Public Sector Duties.  Section 149 states:

A public authority must in the exercise of its functions give due regard to the need to:

a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act;

b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it;

c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it.

32.       A person who is not a public authority but who exercises public functions must, in the exercise of those functions, have due regard to the matters mentioned in subsection (1).

33.       Having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to:

a) remove or minimise disadvantages suffered by persons who share a relevant protected characteristic that are connected to that characteristic;

b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it;

c) encourage persons who share a relevant protected characteristic to participate in public life or in any other activity in which participation by such persons is disproportionately low.

34.       The steps involved in meeting the needs of disabled persons that are different from the needs of persons who are not disabled include, in particular, steps to take account of disabled persons' disabilities.

35.       Having due regard to the need to foster good relations between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to:

a) tackle prejudice, and

b) promote understanding.

36.       Compliance with the duties in this section may involve treating some persons more favourably than others but this is not to be taken as permitting conduct that would otherwise be prohibited by or under this Act.  The relevant protected characteristics are - age; disability; gender reassignment; pregnancy and maternity; rate; religion or belief; sex, sexual orientation.

37.       Any changes to social care services should demonstrate compliance with the Act and Equalities Impact Assessments will be undertaken where appropriate.

38.       The agreement of a standard fee is intended to ensure that service users can gain access to homes in the independent sector providing good quality care at a reasonable cost. 

Corporate/Service Objectives

39.       The propose feel levels will contribute to the corporate priority of "working with partners to meet the diverse needs of our residents in ways that will safeguard and support those who are most vulnerable and in greatest need; help people to keep fit and healthy; and increase social cohesion and equality of opportunity for all."

Policy Framework and Budget

40.       This is matter for executive decision

Consultation (including Ward Member Consultation)

41.       Care home owners and managers have been engaged during the review of the methodology used to determine a fair price for residential care, collectively via the Vale of Glamorgan Care Homes Association and also individually via written communications. .

42.       Three meetings have taken place with the independent care home sector regarding the fees for 2011/2012. The meetings have resulted in changes to the proposed fee level. Written responses were produced after the meetings and shared with the sector and are appended as Annex F and Annex G to this report.

43.       There are no implications for individual Wards as a direct result of this report.

Relevant Scrutiny Committee

44.       Social Care and Health

Background Papers

Cabinet meeting report and minutes of 15th October 2008 - A Fair Price for Residential Care 2007/2008

Cabinet meeting report and minutes of 19 January 2011 - the Statutory Guidance on Commissioning (Fulfilled Lives, Supporting Communities)

Cabinet Meeting report and minutes of 13th April, 2011 - Social Services Change Plan 2011-2014

Cabinet meeting report and minutes of 16 November 2011 - Social Services Commissioning Framework 2011 and the Social Services Commissioning Strategy for Older People's Services 2011 to 2018.

Cabinet meeting report and minutes of 16 November 2011 - Pressure on the Social Services Revenue Budget 2011/2012 and Budget Recovery Actions Plans.

Contact Officer

Carys Lord, Head of Business Management and Innovation

Officers Consulted

Members of the Corporate Management Team

Philip Evans

Director of Social Services