UK
Can children's homes cope with councils cutting fees?
Children's homes are struggling to survive as councils squeeze their funding and occupancy rates fall. Molly Garboden reports on how they can fight back and become sustainable.
Low occupancy, unpredictable demand and council cuts have combined to put children's homes in a tough position over the past few years. A report in December from the government's Commissioning Support Programme said children's homes are financially the weakest of children's services providers, falling below fostering and residential special schools.
"For a couple of years the unofficial word has been that children's homes were having a hard time," says Andrew Rome, author of the report The Commissioning E-book. "Referrals have been down, occupancy is low, people are saying we're going to have to close homes. Most providers will run with a level of vacancies most of the time. It's unusual to find homes that are 90% to 100% full all of the time."
Rome felt it was time to support anecdotes with evidence. His report was published soon after the controversial demands by the London and East Midlands local authority consortia for providers to cut their fees by 2% from April 2010.
With these added pressures on the sector, Kevin Gallagher, chief executive of children's home provider Bryn Melyn Group, says dialogue with local authorities is crucial for a sustainable business. "Any discussion about a positive solution to meet the financial pressure has to be understood by both sides," he says. "If there was more dialogue, even with the 2% decrease in fees, maintaining a viable business would be achievable."
Howard Milliman, director of commissioning and referrals at Advanced Childcare, another children's homes provider, says this approach has worked well for his business. "The most challenging part of dealing with local authorities is in the early stages," he says, "when we're establishing the balance that sits best with the needs of the young person and the local authority and what we can provide."
Milliman strongly supports creating contracts with local authorities as a way to guarantee income. Advanced Childcare has fixed agreements with Birmingham, Manchester, Oldham and Wolverhampton, and has just finalised a tender with Blackpool. "As a result of our contracts we have an occupancy rate of between 95% and 100%," Milliman says. "Part of that is the need of the local authorities to get value for money, but we do have a very open referral process."
Milliman emphasises that his company's homes are never "dumped on" simply because a local authority has a child to place and an obligation to Advanced Childcare. "If a young person has a need that means they wouldn't fit into one of our homes, then we wouldn't expect the authority to place them with us."
Despite the stability such contracts can bring, there are potential downfalls to the system. Rome says small providers can suffer if too many councils operate this way. "The larger providers are perceived as more able to engage in the tendering process because it can be quite arduous, requiring a lot of resourcing from the provider just to keep responding to the questions put to them," he says. "So the small providers, I think rightly, are concerned that they're not equipped for it." The refusal of many local authorities to sign up to the national contract for residential care placements can also lead to a lack of consistency in tendering processes.
Limitation on choice
Another possible tension caused by contracting is a limitation
on choice. "In an ideal placement, the social worker would be able to look at
all options," says Rome. "If you go into a tendered contract, you may
not get the same level of choice. There may be choices within that
provider, but there might not be a choice with another organisation that
could be better suited."
Concerns about decisions based on business and financial considerations rather than what's best for the child are not restricted to discussions of contracts. More children's homes providers are owned partly or wholly by private equity firms, raising questions about commercial intentions.
"People are concerned about a natural tension between what could be seen as a very business- and finance-focused shareholder and a set of vulnerable, volatile young people," says Rome. "How does an organisation work at the borderline between the pressure to make a financial return and the need to do everything you can to meet the needs of some very challenging young people? It can make the business itself relatively unpredictable and that can be difficult for anybody with a finance focus – it's difficult to make forecasts."
Rome says, however, that private equity's presence in the sector is too recent an addition to gauge accurately and the benefits may yet show themselves.
Gallagher agrees: "Private equity has the advantage of bringing capital investment into the sector. That can be a good thing as long as providers know how to get the most out of it. You need to be specific in your use of the investment – otherwise best practice can be eroded."
Molly Garboden
1 February 2010
