COVID-19 has had an unforgettable impact on society, both medically and economically. Health and social care continues to be one of the hardest hit sectors, particularly care homes, and the industry is calling out for support to protect both patients and staff during these times.
The lack of PPE, good facilities, technology and care workers, have all been contributing factors to the sector’s struggle, and there are ongoing inquiries into why there was a failure to prepare the sector for such a crisis, with calls for the government to address the issues and the need for fundamental reform.
Although COVID-19 has posed a serious threat to the health and social care sector, it has also awakened investors to the opportunity to support these organisations, to raise the standard for patients and staff, and address the issues caused by not only the recent devastation but also the long-term sector deterioration.
We have joined forces with Buzzacott to identify the opportunities and threats in the care sector that have arisen since the outbreak, with an aim to support business owners, consolidators and equity investors in making informed decisions to support market consolidation and the future of the care sector.
Staff and employment
The downturn of the economy will likely lead to an increase in unemployment, which could in turn lead to a larger pool of possible recruits for the care sector. This could help overcome the long-term issue within the care industry of recruiting a workforce. There is also likely to be much higher availability of volunteers and temporary workers, as witnessed by the recent NHS recruitment strategy.
Recruiting a workforce is still a long-term threat given the number of middle-aged people working in social care who will be retiring in the next decade or so. Once the economy starts to recover, it may once again be difficult to recruit social care staff. There are also likely to be increased financial pressures on local authorities post COVID-19, meaning that they will continue to struggle to meet the inflation pressures on providers, particularly if the impact on minimum wage increases, which is set to continue. It is unlikely that minimum wage increases will be fully funded by local authorities, which puts financial pressure on providers.
Care at home
There are likely to be opportunities to develop and expand health care at home services, which could lead to the development of new organisational models; for example, social care providers that establish a more specialist nursing service as part of their offer. In addition, there is already a move to develop more health care services at home as an alternative to hospital admission. This will be accelerated by recent changes to the Care Act, which is leading to patients being discharged from hospital within hours of being ready rather than days. Clinical Commissioning Groups are providing, or commissioning, services for patients until the local authority is ready to carry out its assessment.
Health care at home services are potentially risky because they involve staff supporting very complex service users in their own homes without direct supervision. These complexities unfortunately increase the likelihood of any serious incidents and therefore potential exposure for investors.
There could be development of domiciliary care to facilitate faster hospital discharge, which may perhaps include unqualified support workers receiving supervision from qualified nurses in order to support people with more complex needs. Therefore, now could be a good time to acquire domiciliary care companies at low valuations to support this development. Also, if there is a growth in demand for nursing and dementia homes to facilitate faster hospital discharge, there may be scope to acquire an older people’s provider and re-position its lower fee services to support people with higher acuity.
A reduction in the supply of services could enable providers to push for higher fee increases, particularly for new placements. As COVID-19 has had an international impact, there could also be opportunities for UK-based providers to expand overseas. There has been very little of this to date but there is no reason in principle why UK based providers could not grow internationally.
In early April, ADASS (Association of Directors of Adult Services) and the LGA (Local Government Association) issued guidance to local authorities, which encouraged them to fully fund the cost of this year’s increase in the minimum wage and give an additional temporary 10% fee increase to providers to cover specific COVID-19 costs. Implementation of this guidance has been very patchy and there is strong lobbying of the government by provider representative bodies, particularly Care England, to ensure that this funding is passed on.
How we can help
Organisations in the health and care sector will need strong and accurate governance processes to minimise the risk of serious incidents, which could have significant reputational and financial implications. We are collaborating with Buzzacott to enable the care industry and its investors to take advantage of the opportunities and minimise the threats in the current environment, especially with business acquisition.
Peter Kinsey, a senior consultant here at Verita, is currently chairing a weekly meeting with the Care England Learning Disability Group (Care England is a national provider representative body), and is closely involved with national policy developments in relation to COVID-19 and discussions with the government. Together with Buzzacott’s financial experience, we have the expertise and key market insight to provide specialist advice on investments, mergers and acquisitions in the health and social care sector.
We hope that the industry will undergo significant reform post COVID-19, with the government learning from the mistakes discovered following the inevitable inquiries, and with the right investment, social care will significantly improve in the future.
Get in touch
For more information on supporting the care sector during these troubling times, please contact Verita at [email protected]