Management quality is a key factor for smaller operators, as it is with any owner-managed business. In the residential care sector specifically, the owner-operator will be from a caring background rather than a business background and will have either acquired or expanded existing businesses as a result of generous credit terms or rising property prices.
All too often with many of the businesses we see in the sector, whilst management has survived in benign economic times (with low interest rates), they need external support to drive change and turn around under-performing businesses. An engaged, well led management team that is responsive to issues facing the sector will be critical to the immediate viability and longer term success of the business.
Many residential care home operators work from converted residential properties. It is generally accepted that properties converted into residential care homes are more expensive to operate and maintain than purpose-built homes. The better operators of converted homes will be making adequate provision for maintenance costs and ensuring appropriate funding is in place to cover any one-off material capital expenditure items.
Regulation and governance
A number of high-profile incidents have placed the sector under the media spotlight and regulation continues to be a key feature of the sector as government seeks to protect some of the more vulnerable members of society.
The Care Quality Commission (CQC) remains the primary regulator and ensures homes and operators comply with standards through monitoring and regular inspections. Inspection reports contain ratings from inadequate to outstanding are published on the CQC website.
As with school league tables, people are likely to research the destination home for a loved one and an adverse CQC report should result in an alternative home being sought; particularly where a service user is entering residential care for the first time.
Where a home is performing badly and inadequate ratings are given, the CQC will take action against the home and/or operator. The action taken by the CQC can range from issuing requirement or warning notices (which set out the improvements required and by when), to closing homes and removing and rehousing residents. In extreme cases, where people are harmed or in danger of harm, operators may be subject to criminal proceedings.
Adopting and maintaining appropriate policies and procedures within homes is a key part of ensuring compliance with regulatory requirements. This clearly requires investment and ongoing monitoring by management which inevitably increases costs for the operator.
Well-funded homes with strong management teams that are aware and compliant of current regulations and able to quickly adapt to changes are, in our experience, generally stronger financially. Unfortunately, the opposite is also often true.