Care home providers are often at the mercy of local authorities as to price and price review for residential care. Often in the contracts that are signed there is little or no ability to negotiate and penalties, such as refusal to place residents, unless the price reviews are accepted. This, of course, has income ramifications for care home providers who will, no doubt in the future, look to increase private resident numbers leaving fewer places for local authority funded residents.

The last six months have seen several High Court decisions looking at the way local authorities set care home rates, and in three out of four decisions the challenging care home providers were successful and the court overturned the councils' rate setting policies.

In one of the first recent decisions in this regard, Care North East (an unincorporated association representing care home providers in the Newcastle area) was successful in bringing a claim against Newcastle City Council in connection with its approach to setting fees which it is willing to pay for residential care.1. The Council fixed its rates for 2012-13 and then required the care home providers to sign contracts agreeing to these rates by a specified date and if they did not, no new residents would be placed with them.

The court held that even though the Council had adopted a costing model which was in essence acceptable, it had then populated it in a misleading way using inaccurate inflation figures, deducted efficiency savings which were not justified and taking out any return on equity. The court acknowledged that the Council had to balance fairly its duties in providing statutory services with its fiduciary duty not to waste public money but it found that the Council had:-

  • failed to inform itself of the actual costs to providers before it set the rates and acted either irrationally or failed to take into account relevant considerations when taking out return on equity and imposing the efficiency saving;
  • failed to consult properly as required under public law; and
  • abused its dominant position by refusing to place new residents with providers who did not accept the rates.

The court further made a declaration that the Council may not refuse to place residents with providers if they decline to accept rates which were discounted from the usual rates without agreement and the court ordered the Council to reconsider its rate fixing decision.

Similarly, the High Court overturned the rate setting policy of Redcar and Cleveland Borough Council on the ground that, by solely relying on benchmarking information, the Council had failed to have due regard to the actual costs of care, in particular in relation to local factors.2 The rate setting policy of Devon County Council was also quashed, albeit on different (equality) grounds.

In contrast, Northumberland County Council was successful in defending its rate setting policy.3 Care North East Northumberland, in reliance on the above decision in respect of Redcar and Cleveland Borough Council, had challenged the Council's rates on four grounds including, among others, that by relying on (selective) benchmarking rather than conducting a survey of a sample of providers the Council had failed to inform itself of the actual costs of care. However, in this case, the court disagreed, noting that local authorities were not required to calculate or ascertain the actual cost of care but instead had discretion as to how they inquire relevant cost factors.

Comment

Although some of these decision are still subject to appeal and not finally decided, overall they signal good news for care home providers and provide guidance on the factors local authorities need to take into account when setting care home fees, thus increasing transparency in this area.

Footnotes

1. The High Court decision in R (Care North East Newcastle) v Newcastle City Council [2012] EWHC 2655 is available at http://www.bailii.org/ew/cases/EWHC/Admin/2012/2655.html">http://www.bailii.org/ew/cases/EWHC/Admin/2012/2655.html.

2. The High Court decision in R (Redcar and Cleveland Independent Providers Association and others) v Redcar and Cleveland Borough Council [2013] EWHC 4 is available at http://www.bailii.org/ew/cases/EWHC/Admin/2013/4.html">http://www.bailii.org/ew/cases/EWHC/Admin/2013/4.html.

3. The High Court decision in R (Care North East Northumberland) v Northumberland County Council [2013] EWHC 234 is available at http://www.bailii.org/ew/cases/EWHC/Admin/2013/234.html.

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