Two home care providers give up ‘unworkable’ council contracts

TWO domiciliary care providers have given notice on their contracts to Merseyside councils, citing unworkable pay rates.

Listed home care business Mears Group has cancelled its contracts with both Liverpool City and Wirral councils, stating that the new hourly rates they pay for care services would lead to unworkable pay and conditions for care workers.

Mears said that “no organisation could legally deliver the care service required at the rate proposed by the councils”, which as well as covering the new Living Wage must pay for training, travel time between each home visit and overheads.

Alan Long, executive director at Mears Group, said: “Our top priority is to provide a quality service to people requiring care with well-deserving staff being paid a decent wage.

“This is the first time Mears Group has ever had to take action of this nature, but we will not operate in an illegal way and we do not see how any other provider can do so either.”

Long said that local authorities were effectively bullying providers into operating illegally but that the group would support the transition of services to new providers.

Meanwhile, local provider WarrenCare has been forced to prematurely terminate a three-year £1m contract with Wirral Council for the same reasons and after six months of fee negotiations.

The decision will see 65 WarrenCare staff transferred to a new care provider instated by Wirral Council, by July 17.

WarrenCare’s chief executive Richard Walker told TheBusinessDesk that the company moved from being a tier 1 to a tier 2 provider in April, because it could not manage referral volumes at existing fees adding that even now, if the company continued with the contract it would effectively be subsidising the local authority.

He said: “Regrettably we are being forced to terminate a contract with a local authority due to their unwillingness to meet the true costs of the service and allow us to properly fund staff and infrastructure costs.”

Walker added that during negotiations the company provided commercial and financial information so that the level of fees paid for each hour of care could be “adequately and fairly” increased to cover rising costs.

“Despite this information being provided, tested and accepted as reasonable against cost of care calculators, the council has been unable to address the full costs of delivering a home care service,” he said.

Colin Angel, policy director for industry body the United Kingdom Homecare Association (UKHCA), told TheBusinessDesk: “This is a good example of providers pushing back.”

The UKHCA recommends a minimum rate of £16.70 – Wirral Council pays £12.92 and Liverpool City Council pays £13.10.

Angel continued: “While a few councils have entered into proper discussion with providers about their costs, many councils have simply imposed a rate, based on their own assumptions on costs and what the council thinks it can afford.”

He added that until now, most councils have been able to re-let contracts to alternative providers but that with more wage and cost increases over the next two years, providers will not be able to continue to take on larger volumes of uneconomic business.

“There is also a message for providers: taking on work rejected as uneconomic by a competitor is not a sound plan, unless your cost-base is significantly lower,” he said.

Wirral responded by saying it had invested an additional £3.35m in increasing fees to the care sector to help meet the growing gap between the money they receive and the care they need to deliver – £1m more than that the government allowed it to raise via the budget precept for adult social care.

Graham Hodkinson, Wirral’s director of Adult Social Care, added: “Wirral has a clear commitment to good quality care for the residents of Wirral. The providers we use offer a vital service, and we will continue to work with them.”

Liverpool City Council, which has contracts with 11 home care companies, said its proposed rate will cost an additional £2m a year, and that it reflects the new National Minimum Wage and allows firms to make a “reasonable” profit. It added that when calculating rates it looks to the amount paid by other local authorities in the region.

Liverpool City Council’s Cabinet member for adult social care and health, Councillor Paul Brant, said: “Mears are a company based outside the city region without the long experience and economies of scale of many of our local providers. Mears only provide a small share of local provision, but we will continue to work closely with them to ensure a smooth transition. Their staff will simply transfer across to other providers in the city, meaning there will be no disruption in the home care provided.”

He added: “We did offer to work with them to help reduce their overheads, and we are sorry they have instead chosen to pull out of the region altogether.”

Another Merseyside council is due to make its decision on provider rates next Monday.  A publicly available report to Councillor Cummins, the cabinet member for adult social care at Sefton Council, has recommended an hourly rate of £13, which it says will cost the council an extra £945,000 a year.

The report states: “If… the cabinet member considered that the recommendation would not result in the council’s proposed rates being sufficient to meet the assessed care needs of service users and to take into account the legitimate current and future costs faced by providers, including the impact of implementation of the national minimum wage / national living wage, he could decide to set them at a higher level.”

It then adds that each 10p increase in hourly rates above the proposed £13 costs the council an extra £63,000 a year.

UKHCA’s Angel warned: “Sefton and other councils need to consider what its price will cover, and what it does not.  It is highly likely that such a rate can only offer a workforce paid at bare National Minimum Wage (national living wage for workers over 24 years), and increases the risk of non-compliance with minimum wage regulations.

“Councils should expect providers to begin serving notice where they believe they cannot meet their legal responsibilities.”

Sefton Council was contacted by TheBusinessDesk but said it would not comment as it was still in negotiations with its care providers over fees.