Lessons from America for the UK care home sector

US experiences over the past 20 years can help inform the debate about how to meet the long-term needs of older people, by Scott Phillips

The UK care home sector is in a difficult position. In addition to being a crowded, competitive market, it’s becoming increasingly clear that we need to find innovative, lower cost ways to meet the needs of older people.

There are many similarities between what is happening in the UK and what the US experienced in the late 1990s.

In 1997 the US government dramatically cut spending for health and social service programmes, and as a result, many large nursing home companies either filed for bankruptcy or were forced into voluntarily restructuring.

This led to a realisation of the gravity and cost of meeting the long-term needs of older people. In particular, it was recognised that in the long run it is much less expensive and more effective to provide health and social services in the home than in a hospital or care home setting (a view backed up by research published by both the US National Institute of Health and the congressional Medicare payment advisory commission); and that the government cannot afford to pay the cost of long-term residential social or health care services for the entire population.

Instead, individuals must be expected to assume responsibility for their housing needs in old age, with the government providing a safety net for the poor, and a regulatory structure to appropriately govern the private market.

The US is still resolving and responding to these challenges, but some significant progress has been made. One result has been the rapid expansion of privately-funded assisted living (that is, residential social care) and continuing care retirement communities. These are age-restricted communities that combine independent apartments or homes with residential social and nursing care beds.

There are now more residents living in such facilities than in government-supported nursing homes. The UK has almost no similar communities in operation, yet in the US these are highly successful when combined with effective and available home care, and one of the most effective strategies to contain cost while also making available a wider range of services to be available.

Care providers will have to increase productivity year-on-year. Single care homes in an increasingly diverse market will have significant difficulties containing their costs. One of the most effective strategies to meet this challenge, without negatively affecting residents’ lives, is either to group a number of care homes together, or to provide services within a defined local area to residents with different needs. Such “care clusters” mean providers can secure economies of scale.

As demand for services for the elderly and the disabled grows, discussion by policymakers and care providers is shifting away from focusing only on price, to the mix of what will be needed and where, physically, services should be located, whether private home, care home, hospital and so on.

The NHS and local authorities are seeking to lower the cost of health and social care without compromising on the quality and care provided in high-cost institutional settings, by moving care to less restrictive settings that will balance cost with individual independence.

Without such changes, local authority budgets will be overwhelmed. The private sector can play a role in anticipating the structure of the future market and investing accordingly. The experiences in the US over the past 20 years can help inform this process.

Scott Phillips is managing director of Bolt-HMP