Fair Cost of Care overview for 65+ care home providers

What is the Fair Cost of Care exercise?

The government wants to establish a sustainable care market and will provide funding to support local councils pay a fair rate for care. Read the policy paper: Market Sustainability and Fair Cost of Care Fund: purpose and conditions 2022 to 2023.

We urgently need to work with you to understand the costs for providing quality and sustainable care in Surrey.

We are asking care home providers to complete a financial modelling exercise by 29 July 2022. It covers most aspects of service delivery and organisational management for the past two financial years.

All care homes for older people (65+) should take part.

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How do I take part?

You will need to set up an account and login to the Fair Cost of Care tool, hosted by CareCubed. Over 80% of local authorities and most care providers are using it. Please complete this by 29 July 2022.

Follow the guidance in the Fair Cost of Care Awareness Pack for Care Providers

Already registered?

If you already have an account, login to the Fair Cost of Care tool

Help with the Fair Cost of Care tool

Return on Operations (ROO) section

This is a gross profit or surplus number – this is the gross amount before tax.

Care providers can provide this as a:

  • percentage mark-up on operating costs identified in the expenditure tab, or
  • per resident per week value

within the FCOC tool.

You can calculate ROO as a percentage mark-up on operations and head office costs.

These are operating costs excluding Interest, Tax, Depreciation, Amortisation and Rent (ITDAR). This information is captured separately as part of Return on Capital.

ROO will consider operational risks such as:

  • drops in occupancy
  • inflationary pressures
  • a provision for future investments (where not capitalised), and
  • dividend payments.

Not-for-profit organisations should consider a surplus in line with their reserves policy.

Return on Capital (ROC) section

Investment by nature involves risk. The cost of capital is the return that investors require to invest in a business. Return on capital is a judgement rather than a hard science.

However, return on capital is an important consideration, as it is one of the main fixed costs in a care home and should include:

  • borrowing
  • interest
  • depreciation
  • cashflow funding and
  • capital expenditure.

Where required, it should also include mortgage and rental payments. You can provide this either as a:

I want to find out more before I do this

The care home toolkit has been developed by iESE and is hosted on their web-based CareCubed platform (formerly Care Funding Calculator).

iESE has delivered the Care Home Cost of Care Tool on behalf of the Care Home Inheritance Plan (CHIP). CHIP is delivered by the Association of Directors of Adult Social Services (ADASS) and the Local Government Association (LGA).

It is free for councils and care providers to use.

The tool is built on the existing web based CareCubed platform and aims to support both councils and care providers in future cost of care work.

How will you use the data we submit?

We will use the data you submit to identify costs in Surrey for:

  • 65+ care homes
  • standard residential care
  • residential care for enhanced needs
  • standard nursing care
  • nursing care for enhanced needs.

The Department of Health and Social Care (DHSC) require all local authorities to use the data submitted to identify your operating costs and then identify the:

  • lower quartile
  • median
  • upper quartile costs.

The Department of Health and Social Care (DHSC) will use our median actual operating costs for providing care in the local area as the 'fair' cost of care.

The government recognises the complexity of local care markets, and the risk of oversimplification. However, it is necessary to find a way of standardising cost reporting. The median is designed to reflect the range of local costs.

Files available to download