Competition and Markets Authority’s care homes market study: update paper

28th June 2017

Background to the market study

On 2 December 2016, the Competition and Markets Authority (“CMA”) launched a market study to examine whether the residential care homes market is working well for elderly people and their families. You can read our analysis in relation to the launch of the CMA’s market study here.

Having reached the halfway point of the market study, on 14 June 2017, the CMA published an update paper on its progress. The update paper identifies the CMA’s initial competition and consumer law concerns relating to the care homes sector and sets out potential recommendations to resolve the issues that have been identified. The CMA also announced that, as a result of information received during the market study, it has opened a consumer protection case to investigate its concerns that some care homes may be breaking consumer law. The potential breaches are based mainly on providers charging large upfront fees, as well as charging families for extended periods after a resident has died. The CMA’s update paper can be found here.

Update paper

The main concerns expressed in the CMA’s update paper are set out below.

People are struggling to make decisions about care

Prospective care home residents and their families need to be able to make informed choices, often under stressful and time-pressured circumstances. However, the CMA’s initial findings suggest that many people find it difficult to get the information they need, are confused by the social care system and funding options, and do not know how to find and choose between homes.

The CMA states that it is considering the following:

• ensuring the relevant information relating to care homes is published in an accessible and consistent format
• encouraging the public to give consideration to looking into care homes at an earlier stage in life (for example, as individuals approach retirement) to allow them to make a properly informed decision
• exploring ways in which prospective care home residents can receive up-to-date accurate information.

Complaints procedures are not functioning well

The CMA states that it is not realistic for many residents to move home if they are dissatisfied with the care they are receiving, as to do so would be distressing and harmful to their health. The CMA’s view is that it is therefore essential that effective systems are in place for them to be able to complain and, where necessary, have these concerns acted upon. The CMA’s initial findings, however, indicate that redress systems often do not work well, and residents can find it very challenging to make complaints.

Proposals the CMA is currently considering are:

• introducing a model complaints process which is specifically designed for care home residents
• the provision of advocacy services to help people make complaints
• making it easier for care homes residents to contact the ombudsman and/or regulators.

The sector is not positioned to attract the investment necessary to build greater capacity needed for the future

The CMA states that demand for care home services is expected to increase substantially, with the number of people aged 85 and over projected to more than double by mid-2039. The level of care they require is also expected to increase as, having spent longer in their own homes, they will be more frail when they do move to a care home. At present, the CMA’s view is that short-term public funding pressures and uncertainty mean the sector is not incentivised to undertake the investment necessary to meet future demand.

Potential breaches of consumer law

The CMA has concerns that certain business practices employed by some care homes and identified during the market study may breach consumer law.

The CMA’s main concerns relate to the treatment of self-funded (as opposed to local authority-funded) residents and include issues around:

• the lack of indicative pricing information on care home websites
• care homes having a wide discretion to ask residents to leave
• the charging of large upfront fees and deposits
• care homes imposing requirements to pay fees for an extended period after a resident’s death.

As a result of these concerns, the CMA has opened a separate investigation into a number of care homes, focusing on the latter two issues set out above. To the extent that the investigation finds gaps in the protections offered by consumer law, the CMA will consider whether legislative or regulatory charges would be an appropriate response.

Decision not to make a market reference

On 1 June 2017, the CMA issued a notice of its decision not to refer the care homes market study for a more detailed investigation. While a market investigation would potentially allow the CMA to impose remedies through the use of order-making powers, it believes that the outcome it is pursuing can be achieved through the use of recommendations and the parallel investigation into potential breaches of consumer law.

Next steps

The CMA invites submissions on its finding in the update paper by 5 July 2017. It states that it would particularly like to hear views on possible remedial recommendations, how they address the identified issues, whether they would be effective and proportionate, and how they might be implemented.

The CMA states that it will take into account responses received to the update paper in its work during the second half of the market study. During the next six months, the CMA intends to focus on developing remedies, obtaining further evidence on specific issues to develop its assessment of the market, as well as continuing to review the evidence obtained, and progressing its consumer protection work. This will include completing its consumer research and analysis of care home providers’ finances.

The final report is expected to be published on 1 December 2017. Before this deadline, there is an opportunity for care home providers and local authorities to have input into and influence the CMA’s final recommendations.

If you are interested in finding out more about the care homes market study, or receive a direct communication from the CMA and wish to understand the implications of your proposed response, please contact Trudy Feaster-Gee, Partner (Barrister) or Andrew Northage, Partner.