Care Home Trading Performance Review 2018: Occupancy and Fees

As illustrated in Figure 4, a marginal uplift of 0.2% in occupancy percentage has been seen. With a strong demand for elderly care facilities, this upward trend is no surprise.

Figure 4

In 2018, the gap between personal and nursing care occupancy closed further, following a similar trend to last year’s review. Occupancy in nursing homes increased from 88.7% to 89.1% while occupancy rates fell for personal care homes from 90.2% to 89.9%.

The following reasons are contributing to this trend:

• Residents are moving into care homes when their needs and acuity levels are higher and admission is necessary.

• Nursing care providers are shifting their offering to personal care due to the nursing staff shortages.

• Only 39% of the existing provision is registered as a nursing home compared with 61% of personal care homes.

Similar to last year’s review, the South West region is operating at the lowest occupancy rate of 83.1% triggered by a low occupancy rate (81.6%) in its nursing homes as shown in Figure 5. This region also has the second largest self-funder (SF) percentage of income (56%), indicating longer fill periods for operators targeting the private pay market. The most noticeable movement was in Wales, where occupancy rose from 87.9% to 90.8%. 

Figure 7 illustrates that the highest occupancy rate (90.2%) is in properties built from 2000-2009. Occupancy is significantly lower for properties built after 2010 mainly due to slower fill rates for new developments strategically positioned to predominantly target the SF market. 

Please note, Knight Frank Research use effective beds as opposed to registered beds to determine an accurate measure of occupancy. Effective beds are also known as operational beds, which are available during the financial year.

Figure 5

Figure 7

FEES

AWF increased for the seventh consecutive year rising by 3.7% to £773 in the financial year 2017/18. This is above the RPI inflation of 3.3% for the corresponding period, and represents the highest rate since records began in 2006 (Figure 8). 

In real terms, the AWF increase represents a less impressive movement of only 5% since 2006 (Figure 8). The increase in fees has been driven by:

• Increased Local Authority (LA) fee rates (rising on average at 3.6% as per LaingBuisson’s Care Markets Annual Survey report, July 2017)

• Continued SF fee inflation, above RPI and the continued shift towards the private pay care market.

Income per resident increased 4.5% to £40,922. However, this is less than the 4.7% increase in staff costs per resident.

The gap between nursing and personal care fee rates has widened even further. This has been driven by the appetite for nursing homes to inflate fee rates for the acute nature of care provided and due to increasing nursing staffing costs.

Fig 8

In addition, the NHS-funded nursing care (FNC) rate increased 2% to £158 per week from April 2018. This is to assist with the nursing wage pressure, due to the shortfall of qualified nurses within the UK. In real terms, this reflects a fall. 

Figure 10 illustrates the South East region’s continuing dominance, supported by its strong affluence profile which is reflected in the SF percentage of income increasing in this region by 2% to 60% of income. 

The East Midlands also had a high percentage of SF income at 54% (increasing 2% from the prior period) which is encouraging for developers who continue to head north of the Watford Gap to maximise returns. Figure 9 and Figure 10 also identify a North South divide.

Figure 9

In comparison to the prior period, the North East is relegated to bottom place, switching with Northern Ireland, driven by the region’s SF percentage of income falling from 35% to 25%.

Figure 10 examines the relationship between SF and LA income by region.

Figure 10

The outcome is predictable with the exception of London where a large proportion of the stock was built in the last century and is funded by the LA and NHS PCT.