While new admissions to care homes are beginning to return to pre-lockdown levels, they likely remain sensitive to further restrictions while COVID-19 is brought under control with the widespread vaccination programme, according to Duff & Phelps, the world’s premier provider of governance, risk and transparency solutions.
Benjamin Wiles, Managing Director, Restructuring Advisory, Duff & Phelps, stated: “Prior to the outbreak many providers were operating with incredibly tight margins, so any reduction in patient numbers was going to have a dramatic effect at a time when care homes are seeing additional cost pressures associated with personal protection equipment (PPE), staff sickness and costly agency staff.
“The Government launched an ‘infection control fund’ to offset the additional costs incurred by service providers, and this has subsequently been topped up with an additional £546m and extended through to March 2021. While this is welcome news for the sector, it does not address the lower occupancy levels which underpin financial viability.”
The Government’s “Winter Plan” has requested an end to all non-essential movement of staff between care homes, resulting in likely adverse operational and cost consequences for some homes. In addition, local authorities were requested to identify homes “that are safe for people leaving hospital who have tested positive for Covid.” These so-called “hot homes” are designed to be separate standalone units. For their stakeholders this means increased risks that will need to be carefully assessed and managed.
In December the Government announced an additional £149m for the sector to speed up care home testing, partly in response to the rise of the more transmissible strain of COVID-19. Staff are now being asked to take rapid tests twice a week, in addition to weekly PCR tests.
Wiles continued: “Despite the short-term pressures, many expect the long-term outlook for the sector to be robust, mostly because of the baby boom generation entering old age. However, smaller independent care homes are likely to remain sensitive to the continued financial impact of lower occupancy rates and the increase in operating costs imposed on them as a result of the pandemic. Financial pressure such as this could lead to reduced investment in staffing, facilities and therefore care, possibly resulting in safeguarding concerns.”
There is no doubt that the operating environment for care homeowners and managers is challenging, but it is possible to protect your business if you act quickly. Care home operators need to turn to experts who can independently assess the position of the business and model various scenarios to provide clarity of the financial needs of the business now and into the future. Advisors can also assess available funding options to mitigate any funding requirements as well as more formal restructuring options should that be necessary.