Future Proofing Care: innovative solutions to support independent care providers

Future Proofing Care, is a paper dedicated to delivering innovative solutions and turnaround strategies to sustain independent adult social care providers.

 

Overview

The independent adult social care sector faces significant financial and operational challenges, with 56% of providers considering exiting the market, according to the 2023 Sector Pulse Check report.

Larger organisations can often manage these challenges by restructuring, securing additional funding, or leveraging existing assets. They may also use high-cost consultancy services. However, these options are less accessible to Small and Medium Enterprises (SMEs), which make up over 60% of the sector. Without sufficient support, these vital services are at increased risk of closure, potentially destabilising the sector and leaving many without essential care and support.

In response to this crisis, Care England has spearheaded a coalition of industry experts to support smaller providers through our paper, Future Proofing Care. This initiative aims to help providers navigate financial and operational challenges, ensuring the stability of adult social care in England.

 

 

 

This report has been collaboratively produced by industry experts to provide care providers with accessible solutions for sustaining, turning around, growing, or developing their services. An overview of the authors is provided below, and their contact details can be accessed by clicking the image.

 

What strategies can you learn in Future Proofing Care?

 

Recognising distress

 

Providers must stay alert to early distress signals and act swiftly. A key indicator of trouble is a drop in occupancy rates, which impacts revenue and can lead to severe financial issues. Feedback from the Care Quality Commission (CQC) is also crucial; repeated poor reports require immediate action to prevent reputational damage and increased scrutiny.

Addressing financial mismanagement, escalating debts, and cash flow challenges early through strategic interventions can set care homes on the path to recovery. Staff competency and engagement are vital for quality care, making training and upskilling programs essential for improving care quality and staff morale. Rebuilding trust with stakeholders, including regulatory bodies and local authorities, requires comprehensive audits and action plans.

Discover insights into early intervention in Annex A of Future Proofing Care by clicking here.

 

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A robust response

 

A proactive approach is essential for early detection and swift action on potential problems. Conducting independent business reviews and engaging interim managers are key to a successful turnaround. These reviews offer an objective assessment of operations, finance, and compliance, identifying critical areas for improvement. Interim managers provide fresh insights, addressing overlooked inefficiencies and enabling transformative changes.

Collaboration with stakeholders, including families, local authorities, and regulatory bodies, is vital for comprehensive improvement. This partnership enhances services and public image, supported by community involvement. Sharing best practices fosters a culture of learning and adaptation. Technological integration modernises operations, improves care delivery, and broadens community engagement. A strong online presence and active social media use extend a care home’s reach and reputation.

Learn insights into effective turnaround strategies in Annex B of Future Proofing Care by clicking here.

 

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Physical improvements

 

Renovating care homes is a cost-effective way to meet modern standards and regulatory requirements without the financial strain of new construction. Renovations cost about £60k per room, significantly less than the £125k to £150k per room for new builds. This approach maintains operations and income streams while attracting capital by meeting modern layout standards

Cosmetic upgrades can also improve the atmosphere, making homes more inviting for residents. A resident-centred approach to refurbishment, involving both staff and residents, ensures changes meet their actual needs.

Understand the benefits of modernising services in Annex C of Future Proofing Care by clicking here.

 

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Securing finance or investment

 

Exploring diverse lending options and engaging with lenders is crucial, though challenging. A specialist team with care sector experience can greatly assist in securing finance for development and operational needs.

Investors and lenders have distinct preferences: trade investors seek strategic alignment, debt lenders focus on low risk, equity investors look for growth potential, and real estate investors value stability. Understanding these preferences is essential for tailored proposals and negotiations. Banks require transparency and empirical evidence, assessing care homes based on inspection reports, annual accounts, occupancy levels, and financial performance.

Key financing terms, such as loan-to-value ratios, interest rates, and covenants, vary by lender based on risk assessment, the care home’s operational model, and the borrower’s financial health and track record. Effective financial management, including proactive forecasting and transparent communication, is vital for maintaining strong lender relationships. Lenders prioritise projects with a clear path to profitability and compliance with operational standards.

Third-party financing, when done correctly, enables care providers to undertake necessary refurbishments, adapt to regulatory standards, and enhance services, remaining competitive in a challenging market.

Discover insights, tips, and best practices on approaching lenders in Annex D of Future Proofing Care by clicking here.

 

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A fresh perspective

 

A management takeover allows owners to outsource day-to-day operations to care home operators, maintaining ownership benefits while ensuring efficient management and maximising returns. This approach can enhance a care home’s market value through improved operations and regulatory ratings, making it attractive for those considering an exit strategy.

Management Buyouts enable the existing management team to take ownership, using their expertise for continued success. Employee Share Ownership Plans provide a tax-efficient transfer method, fostering commitment and alignment with company goals. Flexibility in the seller’s post-transition involvement ensures continuity and supports the business’s strategic evolution.

Learn more about how you can benefit from operational support in Annex E of Future Proofing Care by clicking here.

 

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Market dynamics

 

With many care homes at risk of becoming outdated, understanding market dynamics is crucial. Awareness of evolving expectations and the financial implications of operating older facilities helps providers strategically position themselves. Recognising the threat from newer homes and larger operators with more liquidity and innovative designs is key.

Smaller providers must understand the risks of older facilities becoming uncompetitive without significant investment. However, there’s potential for repurposing or transitioning homes to meet demand in sectors like mental health, opening alternative revenue streams. Awareness of funding trends is also critical for future financing and investment strategies.

Smaller operators need to proactively assess their market position and enhance competitiveness. This may include leveraging the unique appeal of older, converted homes offering a homely atmosphere at competitive rates.

Learn the importance of market awareness, and how to assess the market successfully in Annex F of Future Proofing Care by clicking here.

 

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Exit planning and preparedness

Exit preparedness is essential for care providers aiming for a successful transition, requiring meticulous planning from marketing to finalising sales. Initial presentation to potential buyers is critical, demanding a strategic approach to negotiations and due diligence.

Learn strategies, and access essential guidance on how to exit the market effectively in Annex G of Future Proofing Care by clicking here.

 

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Future-Proofing Care Support

Please find below an list of all the authors who contributed to Future Proofing Care. Should you require further assistance, you are welcome to contact any of them for additional support. For general enquiries, please email Fraser Rickatson at Care England. We would like to extend our gratitude for their invaluable contributions.

 

 

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