Adult social care and support

Surrey residential and nursing care for older people cost modelling approach

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This is a transparency statement for the cost of care exercise carried out by Surrey County Council (SCC) in 2021.

Following excellent engagement with Surrey providers facilitated through the Residential and Nursing Care Working Group, Surrey County Council agreed to review the residential and nursing care placements made by Adult Social Care (ASC) in Surrey to better understand costs of care within the local market.

SCC commissioned an external company to provide analysis of ASC placements for older people's residential and nursing care in Surrey. To provide further detail on staffing costs, staffing ratios and room/facility standards, a pricing survey with providers to collect primary data on staffing costs, ratios and room/facility standards was carried out.

From this, cost models and price benchmarks for standard care categories configured to our local market have been developed. The same cost model applies across the whole of Surrey as no material evidence of consistent geographical variations in care home costs. The model assumes that all residents have broadly similar levels of need in each care category, and staff costs are shared equally among all residents. There is no assumption of subsidy from other customers. Whole home unit costs may be higher in luxury homes or those supporting residents with higher needs.

Care home characteristics

  • Cost structure for a medium to large (40+ beds) care home, owned and operated by the same corporate provider.
  • Allowance for corporate costs sufficient for efficient groups with stable portfolios. There is no assumption of substantial unpaid owner input.
  • Overall cost envelope sufficient for most smaller independent care homes, though their cost structure would be different.

Staffing

  • Building configuration that allows reasonably efficient staffing, an average occupancy of 95% and breaks unpaid during shifts.
  • Care worker hours per resident week: residential frail (21 hours and 45 minutes), residential dementia (27 hours and 15 minutes), nursing (24 hours and 30 minutes).
  • Nurse hours per resident week: 7 hours and 30 minutes.
  • Between 2 hours and 2 hours and 30 minutes per resident week for the combination of manager, deputy manager(s), unit and other manager(s) and administrator(s).
  • Dedicated roles for kitchen and domestic staff (between 5 hours, and 5 hours and 15 minutes), activity co-coordinators (45 minutes), and maintenance staff (45 minutes).
  • Each role has an appropriate mix of senior and junior job grades, as well as an appropriate mix of part-time and full-time staff.
  • Nurses, care workers, kitchen and domestic staff all backfilled for absences such as holidays and training (in addition to hours above).

Terms and conditions

  • Wages based on typical levels found in the market as of spring 2020, as evidenced by job adverts at the time and provider-supplied pay rates.
  • Public holiday pay enhancements for all rostered staff.
  • Statutory holiday and sickness for all backfilled staff.
  • Employer national insurance and apprenticeship levy costs calculated using the workforce assumptions in each model.
  • Employer pension contributions based on statutory levels.
  • Small agency 'premium' for both care workers and nurses. This can also be used to pay for overtime enhancements or recruitment bonuses.

Non-staff operating costs

  • Assumption of reasonable efficiency based on Care Analytics evidence base of data collected from working with providers, cost of care surveys, published accounts, and industry-published statistics.
  • Historic costs have been uplifted each year using the most relevant Consumer Price Index (CPI) sub-index to account for inflation.
  • Excludes non-standard costs such as General Practitioner (GP) services, private services like hairdressing, fine dining, and other luxury-or hotel-type provision.
  • Corporate costs create scope for potential lack of economies of scale around consumables in small independent homes.

Operating surplus

  • Surplus does not equate to profit. It is also an allowance for exceptional business costs that will be incurred from time to time.
  • 5% surplus applied to all care categories. This means there is a higher surplus in cash terms for the nursing care categories as costs are higher.

Rent

  • Rent can be a literal 'cash' cost such as a lease or loan finance. It will otherwise be a return on the equity invested in the care home.
  • Rent is based on the average Broad Rental Market Area (BRMA) reference rents across Surrey.
  • Rent method is designed to proxy a reasonable opportunity cost to general purpose housing so pre-existing care homes stay in the market.

Sustainable price

  • Nursing costs included in full, so Funded Nursing Care (FNC) can be deducted from the total price for nursing placements.
  • Combination of operating surplus, depreciation, and rent contribute to Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) returns of between 22% and 30%.
  • Many homes in Surrey will have higher costs than the 'lean' models. Such homes will earn lower profit margins at the respective benchmarks.
  • Care homes with either wages or other terms and conditions well above typical levels found in the market, very high staffing levels or premium facilities may struggle to operate within the benchmarks.

From 1 April 2023, Surrey County Council guide prices will be

  • Residential care: £749.97
  • Enhanced residential care: £804
  • Nursing care: £865.10 (plus FNC)
  • Enhanced nursing care: £922.13 (plus FNC)

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