Agenda Item No

The Vale of Glamorgan Council

Cabinet Meeting: 17th December, 2012

Report of the Cabinet Member for Adult Services

Setting a standard contracting rate for places in independent residential care homes for older people in 2012/2013

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 run by the independent sector and to seek Cabinet approval for the fees the Council intends to set for 2012/2013.


1.         THAT Cabinet agrees the proposed fees for 2012/2013.

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

3.         THAT Cabinet authorises officers to pursue further discussions with independent providers of residential care and nursing home placements for older people. 

Reasons for the Recommendations

1.         To establish the final fee for 2012/2013.

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

3.         To ensure ongoing dialogue with the independent sector in this important commissioning task for the Council and for those in need of the service.


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, one which properly reflects the costs of providing good quality care and also ensures that the services provided are efficient, effective and mindful of the pressures on the public purse. 

3.        As part of this work, 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.  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 regarding costs used in applying the methodology has been updated each year by applying the appropriate indices for the different areas of expenditure.

4.        During 2011/2012, a considerable amount of work was undertaken to review the methodology to ensure that it met a number of new external requirements, including:

·       Welsh Government statutory guidance on commissioning social services, Fulfilled Lives, Supportive Communities: Commissioning Framework Guidance and Good Practice 2010, which sets out the responsibilities of local authorities in this area of work; and

·       a number of public law challenges to the way in which fees had been set in other local authorities.

5.        In response to the Welsh Government guidance, on 16th November 2011, Cabinet approved the Social Services Commissioning Strategy for Older People's Services 2011 to 2018.  The strategy is attached to this report at Annex 1.  It identified how the social care needs of older people would be met within resources available to the Council.  The strategy provides considerable detail about the context which the Council needs to consider when making arrangements for providing an appropriate range of care and support services.  It includes an analysis of the needs of the community and a strategy for managing increasing demand within an increasingly difficult economic environment.

6.        The strategy highlighted a growing need for services to support older people with dementia.  Within the Vale of Glamorgan, there appeared to be insufficient capacity within the care home sector to meet this growing demand in full and the Council was facing difficulties in obtaining specialist residential care and nursing home places for older people suffering from dementia related illnesses.  In response, the methodology for setting fees was amended to provide an additional financial incentive from April 2012 so that more independent sector providers would be willing to provide this type of care.  

7.        In setting fees, the Council takes very seriously its responsibilities for complying with legislation, guidance and case law precedent and to ensure that the process adopted in the Vale of Glamorgan takes proper account of the lessons learned from such cases. Consequently, in 2011/12, a substantial piece of work was undertaken to review the methodology set out in A Fair Price for Residential Care 2007/2008.  This was seen as an opportunity also 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.  Following considerable dialogue between officers and owners of independent sector care homes, the external experts who had produced the original methodology provided a further report, A Fair Price for Residential Care 2011/2012. The fees for that year were agreed in November 2011, awarding a 13% increase in the fee level which was backdated to April 2011.  This placed the Vale of Glamorgan Council in the top quartile of local authorities in Wales with regard to care home fees.

Relevant Issues and Options

8.        The Social Services Commissioning Strategy for Older People's Services needs to be updated periodically in response to any new evidence that emerges about needs, costs, the preferences of older people and their families, etc.  On a national basis, despite significant rises in the population of very old people, the proportion of them who use places in care homes is reducing.  In part, this can be attributed to the introduction of new service models such as reablement.  Last year, however, the Vale of Glamorgan significantly increased the number of care home placements it makes, with the biggest rise in older people’s nursing home care and EMI residential care.  The position is set out in Table 1 below.


Number of residents supported during year 2010-11

Number of residents supported in Vale placements

% in Vale

Number of residents supported during year 2011-12

Number of residents supported in Vale placements

% in Vale

EMI Residential















Frailty Residential







Frailty Nursing














Table 1


9.        These local data on placements made for older people in the Vale indicate that over 80% of required placements are made within county.  As some service users want out-of-county placements, in order to live closer to their relatives, this suggests that overall availability of placements is sufficient. 

10.     The one area where there is a much lower ratio of in-county placements is EMI nursing care, despite the introduction of the additional financial incentive from April 2012.  Given that the independent sector would need a period to plan and implement major changes to their homes in response to the change, some time lapse is inevitable.  Through the Wyn Campaign (which the Council is delivering in partnership with Cardiff Council and the Cardiff and Vale University Health Board as part of the overall Integrating Health and Social Care Services Programme), there are new services being put in place for older people which should have an impact on this position.  This includes provision of reablement services and an EMI crisis team. Moreover, the implications of introducing the national policy which imposes a £50 cap on charges for non-residential care services are becoming more apparent.  There is now a significant cost difference for families when choosing between community and residential care which may affect demand for care home places.

11.     As part of the Wyn Campaign, a task group is examining how the three statutory organisations can collaboratively plan for and provide effective long-term health and social care, including placements in residential care and nursing homes.  Current work includes production of an agreed market position statement and a business case for a joint commissioning unit. One of the priorities for the group is to consider the position in respect of EMI nursing placements, especially as this is having an adverse effect on our collective ability to maintain good performance in respect of Delayed Transfers of Care.  It is encouraging to note that the rate improved significantly in the first two quarters of the current financial year has improved as new reablement facilities and hospital discharge arrangements have been introduced.

12.     While the agreed fees for 2011/12 represented a considerable uplift, the independent sector continued to express concern that not all the issues raised by them had been addressed.  Therefore, in November 2011, Cabinet authorised officers to pursue further discussions in respect of the few areas where agreement had not been reached, in order to negotiate the fees for this financial year.

13.     Since November 2011, officers from Social Services have continued to meet with representatives from the independent care home sector in the Vale of Glamorgan. As part of the ongoing work, a group of providers nominated by the independent sector has been given the detailed workings used within the methodology, together with the information on costs provided by care homes within the Vale of Glamorgan.  This was the first time the detailed methodology had been shared. 

14.     There was a subsequent meeting between officers, the forensic expert used by the Council and the representatives from the homes.  The independent sector representatives raised several issues for further consideration.  In response to these comments and further representations from them, additional work was undertaken with the external experts to ensure that legitimate concerns were acknowledged and taken into account when using the methodology for calculating proposed fees. 

15.     However, representatives of the independent sector continue to contest the Council’s position on a number of issues.

·               The data supplied by the care home owners to the Council about costs is now two years old.

·               They note that the allocation of overheads has not been applied consistently within the methodology as some are allocated on bed usage and others on number of registered beds.

·               They believe that the Council has been selective with regard to the data used in calculating the non-staffing costs incurred by the homes.

·               The stance taken by the Council in rewarding a high quality of care and good physical standards of care homes is not appropriate.

16.     The Council’s response to these representations is as follows

·         Although the original information regarding costs is becoming more dated, the methodology is designed so that relevant cost indices can be adjusted on the basis of inflation.  It is necessary to gather cost data periodically but a three-year interval appears to be sufficient and avoids imposing additional costs on both the sector and the Council (in terms of carrying out, completing and analysing surveys).  If the information about costs currently available is reflected in the indices used by the methodology as the basis for accommodating inflationary pressures, this would represent an uplift of 2.4% in the current financial year. 

·         Within the methodology, a differentiated basis for calculating costs has been applied since 2007/2008.  In relation to care hours, repairs and maintenance, costs are already calculated on the basis of bed occupancy.  National toolkits are silent on whether registered beds or occupied beds are the key driver in calculating other non-staff current costs.  The principle is that the rate should reflect the actual costs incurred.  The Council would experience problems in ensuring that this is the case using a uniform approach based on bed occupancy or registered beds only.  If all overheads were determined on the basis of occupancy levels, it would require a further 2.1% increase in fees. 

·         There is considerable variation in the information provided by individual homes in respect of non-staff costs for items such as uniforms, stationery and waste disposal.  The Council used the lowest figure submitted in each category as the homes should be providing care in as efficient a manner as possible. However, the data received was benchmarked also against data available from other sources, including Care Forum Wales (which represents over 500 care homes and independent care sector organisations) and the toolkit devised by Laing and Buisson in 2004 and 2008.  This exercise demonstrated that the Council’s approach is reasonable.  Using average costs in respect of non-staff costs would require a further rise of 4.5%.

·         In the methodology, two discount rates of 75% are used as the default position for assessing quality of care and the physical standards of homes.  These levels were set when the methodology was introduced but there was a commitment from the Council to develop a quality framework which could be phased in and would reward financially those homes which provided higher standards.  The potential outcome of introducing such a framework could be differential fees for individual homes depending on their ability to meet standards.  A framework was designed by the Council earlier this year following discussion with the sector and shared with them.  However, representatives of the care homes then maintained that, if homes are being used for placements by the Council, they should be regarded automatically as 100% compliant with minimum standards and should all be rewarded at this level. The Council still believes that it is appropriate to have a framework in place which allows it to acknowledge and reward financially any significant differences in the quality of care available within the various homes, in order to encourage service improvement.  Given this impasse, it has not been possible to take forward a quality framework to date.  To change the discount rates currently applied within the methodology in the way proposed by the representatives of the independent sector would involve a further rise of 5.1%.

17.     In summary, to deal with all the areas where the owners of independent care homes perceive that there are flaws in the Council’s current methodology or the use made of it, they would be seeking an overall increase of at least 14.1%. The Council maintains that the process used, the judgements made by officers about how the toolkit should be applied and the outcome set out in this report are reasonable.  It is willing to set up a task group with the independent sector, involving senior level representation from the Council, to find a way forward for next year and beyond. The remit of this group would include:

·       considering how the issue of establishing care home fees should be managed in the future

·       reviewing the methodology/toolkit;

·       agreeing and implementing a new contract for residential care and nursing home placements;

·       looking at how the independent sector can be supported in its response to increasing demands for EMI care.

18.     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 2012/2013 outlined in this report.  Any changes in the way that care home fees are calculated in future years should be conducted within the context of a wider review which considers other issues such as economy, efficiency, the nature of the Council’s contract with care home providers and the prevailing resilience of the independent sector.  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. 

19.     Using the Council’s methodology in accordance with past practice and allowing an uplift of 2.4% for inflation in respect of the relevant indices provides standard fees for 2012/2013 as set out in Table 2 below.

Table 2

Type of Provision

Fee for 2011/2012 £ per resident per week

Fee 2012/2013 £ per resident per week

Percentage Increase

Residential Care for Frail Elderly




Residential Care for Older People with dementia – not incentivised*




Residential Care for Older People with dementia – incentivised*




* As set out earlier in this report, 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 in nursing homes for older people suffering from dementia related illnesses.  It was agreed, 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.  

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.  Extensive work has been undertaken, including detailed negotiations with the independent sector providers.  Officers have paid significant regard also to the needs of current and potential residents within nursing and residential care homes within 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, including:

·               any concerns about the financial stability of the independent sector (as gauged by factors such as any significant reduction in the number of providers);

·               any negative impact upon the quality of care available to residents; and

·               the needs of others who depend upon support from social services. 

Resource Implications (Financial and Employment)

21.     Within the overall social services budget for 2012/2013, there was an increase of 2% to allow for uplifting care home fees to account for inflation.  No other provision was made for other increases in the budget for these placements. Because of the considerable number of placements involved, the fee levels have a considerable impact upon the budget of the Social Services Directorate.  Any 1% increase in the fee level increases community care spending by approximately £50,000 per year.  Payments of the 2.4% increase for 2012/13 will be backdated to the beginning of the financial year.

22.     In 2011/2012, because of growing pressures, there was a significant deterioration in the ability of the Directorate to remain within the overall budget set.  The overspend was £2.387 million.  The shortfall in funding was met from reserves but this has resulted in considerable cost pressures within the budget from this year onwards.

23.     Not all the residents in these homes are the responsibility of the Vale Council and some of them will pay their own fees.  All the people placed in residential care by the Council are financially assessed with regard to contributing to the cost of the care provided.  These charges are calculated in accordance with the Charging for Residential Accommodation 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 has not been uplifted for inflation in the current financial year.

Sustainability and Climate Change Implications

25.     There are no sustainability or climate change implications arising from this report.

Legal Implications (to Include Human Rights Implications)

26.     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.

27.     The National Assistance Act 1948 (Choice of Accommodation) Directions 1992 (as amended) places local authorities under an obligation to make arrangements for placing a person assessed as “in need” in accommodation of the preferred choice subject to certain conditions.

28.     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”.

29.     The adoption of the methodology to determine care home fees ensures that the Council meets legal requirements set out in Section 7 guidance from the Welsh Assembly Government and statutory obligations under the NHS and Community Care Act 1990.

30.     The Commissioning Framework Guidance and Good Practice is issued under section 7(1) of the Local Authority Social Services Act 1970.  Section 10 of the guidance indicates the factors which a Council should take into account when considering this issue.

·               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.

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.     Key objectives of the Council addressed by this report are:

·               to make the Vale a safe and healthy place in which individuals, children and families can live their lives to the full;

·               to manage the Council’s workforce, money and assets efficiently and effectively in order to maximise its ability to achieve its service aims;

·               to work with partners from the voluntary, public, private and other sectors to establish a shared vision for the future of the Vale and to ensure a co-ordinated approach to realising this vision.

Policy Framework and Budget

40.     This is matter for Executive decision.

Consultation (including Ward Member Consultation)

41.     Care home owners and managers were consulted about the methodology used to determine a fair price for residential care, collectively via the Vale of Glamorgan Care Homes Association and also individually when it was agreed in 2008.

42.     Meetings have taken place with representatives of the care home sector regarding proposed fees for 2012/2013. The meetings have resulted in changes to the proposed fee level. Written responses were produced after each of the meetings and shared with the sector.

43.     The Social Care and Health Scrutiny Committee considered a report about setting a standard contracting rate for places in independent residential care homes for older people on 16th July, 2012.

Relevant Scrutiny Committee

44.     Social Care and Health

Background Papers

Cabinet 16th November: Report of the Cabinet Member for Social and Care Services - the Social Services Commissioning Framework 2011 and the Social Services Commissioning Strategy for Older People's Services 2011 to 2018. 

Cabinet 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

Social Care and Health Scrutiny Committee 16th July 2012: Report of the Director of Social Services - Setting a Standard Contracting Rate for Places in Independent Residential Care Homes for Older People 2012/2013

Contact Officer

Carys Lord, Head of Business Management and Innovation

Officers Consulted

Members of the Corporate Management Team

Philip Evans

Director of Social Services