The care sector continues to be challenging for operators, with significant regulatory changes coming into effect on 1 April 2015, coupled with increased compliance and funding pressures. Yet, the sector continues to be hot amongst wealthy new entrants looking to develop purpose built homes, together with multiple home operators looking to add to their existing portfolios. However, for smaller operators we expect to see a growing number choosing to leave the sector due to increased compliance demands and means of testing.
In this article we review our care sector outlook 2015/16.
Compliance, compliance, compliance!
Although care home challenges can vary from region to region – as highlighted in the ‘care home fees & market analysis 2015/16’ article through occupancy and fees – care providers across the UK are facing increasingly detailed and complex compliance regulations, leading to unrelenting pressures to contain costs and demonstrate financial sustainability.
The recent changes to the inspection criteria, effective 1 April 2015, have given the Care Quality Commission (CQC) increased power enabling it to enquire into an operators’ financial information and carryout financial inspections, in addition to care related inspections. This growing regulatory compliance, coupled with rising costs in wages (with National Minimum Wage increasing for the second time in 12 months in October 2015) and the recent onset of auto enrolment, result in care homes operating in an increasingly competitive and uncertain environment.
Furthermore, with continued funding constraints within elderly care due to come into force in April 2016, impacting already tight margins, and mounting complexity through technology changes and increased government scrutiny, many care owners may be considering exiting the sector.
New entrants to the market
Despite the increasing compliance and growing regulatory burdens within the sector, healthcare remains one of the top industries targeted by companies from other sectors. The sector is hot amongst new entrants and we are seeing a considerable interest in the acquisition of care homes, whether they are performing well or in need of a turnaround solution. We are also seeing an increased appetite in entrants looking to organically grow in the sector through opening new care homes, with one of the main incentives being the increasing availability of large empty buildings, which can lead to a quick conversion.
This is not particularly surprising as, despite the growing financial and non-financial challenges many in the sector are facing, there are considerable opportunities to achieve success through striking a delicate balance between providing quality care and maintaining financial stability and sustainability.
What does this mean for the sector?
We expect the next 12 months are certainly going to be eventful for all involved in the sector!
With many care home owners thinking of exiting the sector, new entrants continuing to show interest, improving willingness for banks to lend and an attractive tax regime, we expect the next year to involve an increasing number of acquisitions and disposals, both nationally and locally. If you have been waiting for a healthy environment to sell your care home or enter the sector then the next 12 months may be a great opportunity for you to make that move.
Read more about buying and selling a care home at hawsons.2020staging.com/care-home-buying-selling
The care sector is also set to become a gradually more competitive and uncertain environment, as the new entrants challenge the status quo. It is therefore crucial that care home owners within the sector see the increased compliance and growing emphasis on financial sustainability as an opportunity to highlight key areas where their home can improve and, critically, implement new policies and procedures to work towards a stronger, sustainable financial future.
More from our care sector experts
You can also find all of our latest care sector news and newsletters here.
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