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Keeping up with the Investment

It is no secret that social care is under pressure. In its annual 'State of care' report, published each year in October, the Care Quality Commission (CQC) brought into stark focus the challenges facing operators in the sector in 2016.

Indeed, of the 565 organisations in special measures at the time of the report’s publication, 406 of those are predominantly active in social care (as opposed to hospitals or GP practices) and the report reveals that the majority of providers which have undergone repeat inspections over the past 12 months have either got worse or seen no improvement in their rating.

However, with a challenging environment of rising staffing and operating costs, and continued financial pressure on local authorities, how can care businesses invest in quality in a responsible and sustainable manner? And how can lenders and investors identify and support management teams that pay more than just lip service to quality?

To discuss these issues in more detail, HealthInvestor and leading sector lender Santander held a round table discussion in London on 16 November involving care home owners, operators, investors, regulators and financiers to understand how to balance quality and investment in a challenging environment.

Keeping up with the Investment

Vernon Baxter: Before we get onto the wider issue of how to invest in quality, it’d be useful to start with a couple of definitions of what it actually means to operators. David – how do you define quality in your organisation?

David Spruzen: Certainly in learning disability and mental health, it means that the lives of those people that you support are as integrated in the community as possible. Really, service users don’t want anything particularly different from us – they want quality of life, they want a fulfilling life, and we’re here to do that. We try to do always what is right for the individual and the minute we put our own organisation or any other organisation before the needs and wishes of service users, then that’s when things start to go wrong from a quality perspective.

Vernon Baxter: Daya – obviously residential care differs from LD and mental health, but do you share a common approach at Kingsley?

Daya Thayan: Our very premise is that the residents are like your parents – and you treat them accordingly. Then you’ve got to set up the logistics behind that – and provide the investment in terms of the staff and the training. But just getting the people is one challenge – retaining and motivating them is what matters. If we get those two right then everything else works well. But equally we’ve got to be transparent. If something were to go wrong, we’ve got to learn from that – rather than blame individuals. In that respect, I have always been a huge advocate of having a very open dialogue with all the stakeholders, be it family, be it social workers, be it CQC, and you know, that is the only way you can get the message out.

Vernon Baxter: Mike – you said that Care UK looks after 14 million people in various ways each year. How do you approach quality across an organisation of that sort of scale?

Mike Parish: It starts and ends with the culture. It is really important to define that all the way through. And then it’s about that kind of visible leadership that constantly emphasises the values of the organisation, and gives people the opportunity to call it out when they experience values that are not consistent with that culture. I sometimes compare working in care to gardening – it’s really hard labour and it’s work that’s never finished. But that’s care, and that’s what in the most part attracts people with the right values. Occasionally there are wrong'uns, and then we really need to enable everyone in the organisation to call it out when they experience bad behaviour, bad attitude and poor values.

Vernon Baxter: Sue, in your role at the CQC, do these comments echo what you are seeing?

Sue Howard: We ask five questions: is the service safe, is it effective, is it responsive, is it caring and is it well led? And we rate each of those questions and then we aggregate these for an overall rating for the service. We’ve done 18,814 inspections and probably a few more yesterday. And we are at the stage were we have 2% at ‘inadequate', 23% that ‘requires improvement’, 74% at ‘good’ and 1% ‘outstanding’, so it is important to recognise that actually the majority are ‘good’ and ‘outstanding’. And I do think that the definitions of quality around the table have been absolutely right – it is about a service that really puts the people at the centre of it.

Vernon Baxter: Mark, when you consider lending to a business, how do you assure yourself that it’s a quality organisation that you’re supporting?

Mark Pavis: For us, we start with the quality. If we can’t get comfortable with the quality of care that’s being provided by that particular business, then pretty much that’s the end of the discussion in terms of providing funding. We look very, very carefully at the quality of the management team, its experience and the breadth of that management team – particularly in relation to what their future strategy and plans are. In other words, if they’re looking to rapidly expand, have they got the bandwidth to be able to accommodate that? We also use up a bit of shoe leather and go and see the actual units and the homes – we basically use our eyes and ears as we would expect anyone to do.

James Mesquitta: We also look to drill down into what type of service is being provided. The CQC compliance data is helpful but if you break this down into subsectors it is clear, for example, that the average compliance ratings for large nursing homes is considerably lower than the total market average so when we are assessing market trends and comparisons we need to ensure it is on a like for like basis. Every provider will have issues at some point – but what is key is how have they dealt with them and are they able to show improvements. It is about getting beyond just saying “here are the reports and they look good” and understanding the compliance and care culture within a service provider.

Mike Parish: James picks up on a really good point there. To me it’s clear that CQC, and you can understand why, take an absolutist perspective that says they call it as they see it. But I think it’s worth hearing the debates you must have about proportionality and the overall challenges a service is facing. We withdrew from being a domiciliary care provider because we didn't feel we could meet our values in providing that service, and it is possibly the most difficult decision I’ve made in my 15 years in this sector. And yet the ratings of domiciliary care providers are surprising high. My perception is that whereas in a care home, you will assess the way that that resident is having their needs met, that’s not the same test in domiciliary care. You assess whether the logistics of the service are compliant.

Sue Howard: So from the proportionality angle, when we’re making a judgement around enforcement decisions, we would have an internal, what we call management review. But ultimately any decision has to be based on, at the bottom line, what is the impact on people? And actually that’s what the public absolutely would expect us to do. When it comes to domiciliary care, the intention of the methodology is that we do make an assessment about the care being delivered to the individual. It’s a challenge for CQC in the same way as it’s a challenge for the local authorities, in that of course we don't have the same rights to enter peoples’ homes as we do going into a registered service. With a domiciliary care package, it is about the service that has been commissioned to be delivered to that person – whether or not the initial assessment has been made correctly in the first place, you and I will know that it sometimes hasn't and we have had situations where we would identify that and we would take that up on that person’s behalf.

Jane Ashcroft: We are getting to a really important point about the limitations and regulation, aren't we? Regulation can’t be the only game in town. If we’re talking about quality, we can’t entirely focus on regulation. It has a role to play, but it’s part of a bigger picture. I’m sure I'm not the only person around the table who weeped for joy when I read the annual ‘state of care’ report and saw you talking about the tipping point in the sector and CQC talking about the money in the system. Well done CQC, because we’ve got to make those links. Sue and I were having a conversation earlier about the number of regulatory regimes we’ve had over the last few years, and one of my big fears is that we have to have another one, because the one we’ve got is fine. It’s not perfect, we’d probably all like to fiddle with it, but if we lost another couple of years to a reorganisation, that would be the wrong place to spend our time.

Mike Parish: The only thing I’d say is that for all the flaws of the current system, the current iteration of CQC inspections has been a massive force for good. All of us recognise how it’s improved standards right away across the centre, and we’ve each got to face up to why we needed that stimulus, but it’s absolutely been a huge force for good.

Alison Rose-Quirie: I absolutely concur with what you said in terms of proportionality, but there is a danger that CQC inspections start to move towards being more documentation based, and moving away from the individual. I say that because we’ve been picked up and got ‘required improvement’ for things like the odd staff file not having a reference on it. And actually, okay, yes, they should have their references on it, but equally, it’s about the quality of care.

Sue Howard: Taking your point about the documentation, the inspectors are very much taught to take the views of the people first – that’s the starting point. And actually records and documentation is there to sort of support that, but is not and should not be the ‘be all and end all’.

Alison Rose-Quirie: My other comment, if I may, is around staffing issues. We all know that there’s a shortage of nursing and care support staff nationally. And so we have to pay high agency costs to make sure that the staffing is there, and then when CQC come in, we get hit over the head because we’ve got high agency. And my question back is, what do you expect us to do? Not you personally, but if you’ve got any other suggestions, then please give them to us.

Sue Howard: You’re absolutely right, it’s actually not for us to tell you how you staff the services. It actually is about the staff that you’ve got and how you’ve made sure that they’re suitable.

Howard Sereda: Amongst the providers we oversee, there was a significant range of reliance upon agency staff, depending on the nature of the service provided, the age of the facility, the stage of the evolution in the organisation, the part of the country in which they operate, and whether these are immature facilities or established operations. Clearly there has been in general an increased reliance on agency staff for all kinds of reasons. We recognise both the financial and non-financial pressures which give rise to increased reliance on agency staff, but you will agree that the current reliance on agency staff in many instances is unacceptably high. There’s a number of providers that have found means by which to retain staff, and lessen their reliance upon agency. But agency is an ubiquitous element now – it’s just some providers, in our experience, are better able to manage their agency expense on a sustainable basis.

Vernon Baxter: Dasos – in an environment of rising cost pressures, is there a risk operators will stop investing? Has the sector learned its lessons in this regard?

Dasos Kirtsides: As a bank we’ve been in healthcare for some 20 years, and the main area we look out for is the quality of the people and management. That’s the investment in training and supporting your staff – because it is these people that create your business and deliver the care. But you also need to invest in quality assurance. We don't look for just a big, shiny asset. We look at an asset and ask “is it fit for purpose”, “is it efficient”, “is it the right type of facility for your service users”. It’s easy to differentiate between the winners and the losers, and if you look at the ones that are struggling, it’s the ones that haven’t actually invested in their quality.

Mike Parish: There's a great old saying that if you think training’s expensive, try ignorance. You can apply it to Dasos’ point. If you think quality assurance is expensive, try embargos.

Mark Pavis: Over those 20 years you can see the operators that have survived and those that have unfortunately fallen by the wayside, and there’s quite a clear correlation with the investment that they’ve made, both in terms of quality of asset, but probably more importantly quality of care.

Dasos Kirtsides: Absolutely, and that’s why we are very selective with who we work with. We’re not a volume driven bank. For us it’s about quality, making sure we’re working with the right management teams and the right businesses.

Vernon Baxter: David, when you are taking a business to market, how high up the agenda is quality – and how does it impact a deal process?

David Jones: If I speak to any stakeholder, whether it’s a bank that might make an investment or a PE house, or even a corporate acquisition, the first question is “how big is the opportunity”. But the second is question now is always “what’s the quality of the management team, what’s the CQC scores?”. If you track that back through the last 10-15 years, quality used to be down the pecking order. Now quality is absolutely there at the top and has a huge impact on valuation. For a lot of processes, investors say “if it’s not at that level of quality, I’m not interested”. So it does impact value. But where a business does go into administration, CQC has been very supportive to work with us to make sure local authorities and all the stakeholders are on board, and can we get that business back to a decent standard. So we’ve had great support from CQC around challenged assets.

Tim Street: If you see a service that doesn't have the quality, you have to ask “is it lost, or is it something that can be turned around”. And if it’s going to be turned around, you have to then price that, because to turn around a service takes about three or four times longer than it does to grow a good service. Having done both, there is a very big difference. From a private equity perspective, it comes back to people again. You need to have a clear run with a team that is focused on the turnaround culture. But, like Mark and Dasos, we like to walk around the homes and spend time visiting assets, which is the hardest thing to do from an investment perspective. Usually the seller doesn't want you walking around because they see it as being a destabilising of the service, because staff get wind of this going up for sale, which creates uncertainty. It’s one of the biggest tensions between buyer and seller in the current market and you have to rely on the regulator.

Mike Parish: One of my biggest worries as a citizen as well as somebody that runs a business, is that if you work on the basis that companies will eventually make intelligent decisions, then they will eventually all turn away from nursing in favour of residential care, because nursing isn’t rewarded sufficiently relative to the degree of difficulty. They will then turn away from publicly-funded residents in favour of self-funded residents, because the economics are compelling. They are turning away from domiciliary care because fundamentally it’s inappropriately funded. And so it goes on.

Vernon Baxter: Howard, how concerning is this?

Howard Sereda: There are certain areas of the sector that are faring much better financially and are able to surmount their current challenges much better than others. What concerns us most is really the local authority market. We are seeing reductions in surplus inventory in that market, particularly in certain parts of the country. I think that virtually every care home provider we talk to has plans afoot in the direction of self-pay and I can see the economic logic for it. But the reality is that most people receiving service in this country are receiving service thanks to public support.

Alison Rose-Quirie: Within the elderly care sector, there is an opportunity for a business to reposition themselves and move towards to the private pay market – within the specialist market, that’s far more difficult and there are a significant number of homes that are going out of business. There’s got to be a wake-up call to the government.

Tim Street: You’ve got look at where the economics are going in the next one to five years, not where they’ve been over the last one to five years. Otherwise you lose a sector.

David Jones: From my perspective, taking businesses to market, it’s really difficult. We know there will be a living wage increase in April, but we don't know what the fee settlements are going to be. So from an investor’s perspective and I’m sure from the bank’s perspective, you can get a set of forecasts and you kind of go, ‘Well, how do I test this? How do I know what next year’s going to look like?’

Daya Thayan: In this environment, it’s about having transparent discussions with the commissioners. You need to be able to have the kind of conversation with the stakeholders where you say, ‘What kind of service would you want to put the residents in’?

Tim Street: One of the biggest problems is that – because we’re so focused on the fires – we don’t talk about the lack of innovation in the sector. We’re always looking backwards, talking about funding, talking about health and social care, joining up budgets, talking about regulation and quality, but very little is done to sit down and say, ‘These are the things we should be doing and here’s a great example of something that someone’s already done’. If you go to the NEC to a care show, I can find 50 different types of beds manufactured in Italy to show you, but that’s it.

David Spruzen: We’ve talked about 75% of services doing okay, which means there’s over 100,000 people in services that aren't. 100,000 people in services that none of us would want a relative of ours, and that’s just a huge number. I worry that sometimes you get numbed by statistics and I think we need to sit around and say “what are we going to do about the fact that over 100,000 people are in services that don’t meet minimum quality standards”.

Sue Howard: There are a number of different things that we can do to try to drive improvement. But clearly we need to do this with the other stakeholders, so we do work very closely with commissioners, local authorities and providers. There’s a variety of different enforcement tools that we can use to do that. It might be by applying positive conditions for example. It might be by issuing a notice of proposal to cancel the service, but in doing that it’s allowing them actually time to improve. What we do is try to influence, both at a local and a national level and our commitment is to continue to do that.

The above is an edited transcript and is not reported verbatim. The panel met in central London
on 16 November 2016.

For further information on Santander’s healthcare team, please contact Dasos Kirtsides.

We were delighted to get such a great mix of prominent sector participants around the table to discuss what we feel is such an important topic.

The really pleasing takeaway from this debate is that despite the diversity of stakeholders, there was unanimous agreement that quality is absolutely at the centre of everyone’s approach to the sector. There are a number of acknowledged headwinds including national living wage, the shortage of nurses and the LA funding pressures and whilst these won’t be going away anytime soon, these cannot be an excuse for allowing quality to suffer. What was extremely comforting to hear is that everyone around the table was committed to ensuring that this doesn’t happen.

Jane praised the CQC for acknowledging in their State of Care report the financial challenges that providers are facing and we were delighted to have Sue and Howard join us and so eloquently articulate the desire to work constructively with providers to deliver improved levels of care. The challenges are unequivocally great but the desire for improvement around the table was greater and hugely encouraging.



Dasos Kirtsides
National head of business development, (UK) healthcare, Santander
T: 07920 531 739

Mark Pavis
Head of London, South East & corporate healthcare, Santander
T: 07714 143155

James Mesquitta
Head of corporate healthcare, Santander
T: 07525 597067

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Dasos Kirtsides

National head of business development, (UK) healthcare

Mark Pavis

Head of London, South East & corporate healthcare

James Mesquitta

Head of corporate healthcare

Jane Ashcroft

Chief executive
Anchor Trust

David Jones

Head of healthcare
Deloitte UK

Sue Howard

Deputy chief inspector central

Mike Parish

Chief executive
Care UK

Alison Rose-Quirie

Chief executive
Swanton Care

Howard Sereda

Head of market oversight

David Spruzen


Tim Street

Senior advisor
Patron Capital

Daya Thayan

Chief executive
Kingsley Healthcare

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