Agenda item

The chair invited the below to introduce themselves and provide and provide an overview of the plans to deliver a new nursing home:

• Cllr Evelyn Akoto , Cabinet Member for Health & Wellbeing
• David Quirke-Thornton,  Strategic Director, Children’s & Adults Services
• Catherine Brownell, Head of Sustainable Growth North, Planning and Growth

Cllr Evelyn Akoto , Cabinet Member for Health & Wellbeing began by setting out the context for the provision of a new nursing home.  Demand for new nursing home places is predicted to rise from 292 in 2024 to 387 in 2034. Currently 70 % of current placements are in borough, however this will need to increase provision to meet demand. The cabinet member said her challenge to officers has been to ensure high standards are met and sustained; that that our residential home care charter and other standards are met ; and that we keep local people views in mind through the process. She asked officers to keep this in mind when in their presentations and responses to the commission. 

Catherine Brownell, Head of Sustainable Growth North, Planning and Growth provided an overview of the market led approach that the paper provided set out:

The market led approach relies on the interest coming from market specialists.  The expectation is of a high-quality offer, given the attractiveness of the land being offered by the council and the calibre of providers this will attract, particularly the opportunity to provide care in central London.  The officer explained the mechanism used to go out to market will in include policies such as Residential Care Charter and Fairer Future pledges to ensure our values are taken forward. The process of choosing a provider would include visiting providers.

The officer also gave an overview of other options considered but not pursued, as outlined in the paper provided:

A land disposal, where the land is offer to the market, and a development comes forward. This is usually general needs housing. This site is not well suited for housing as there are height restrictions, however this will not impact on a care home, as these are usually low or medium height, moreover the local community is supportive of a care home and the location is well suited in terms of local amenities , including transport.

Direct delivery and the paper set out why this is not being pursued:

• The Capital Monitor Funding allocation of £16m for a new nursing  care home has been largely expended with the purchase of Tower Bridge Nursing and there is no further capital budget allocation. A cost analysis for a new care home  at today’s rates would be circa £25-30m.

• Undertaking the delivery itself would involve entering into a tie-in agreement with an operator over a 4 year development period , which is unlikely to be feasible relationship. In the absence of this there is a risk of the design being less suited to a future operator.

A developmental partner through a procurement process.  Procurement differs from the market led approach as in this method the council sets what it wants. These requirements are then put to the market. The market then has to show the council to what degree they are meeting these requirements and the offer is accessed against a set criteria.  The paper sets out why the council are not doing this, which is that a procurement is a longer and more costly process than a market-led process. The Procurement Act 2023 set out the requirements that must be met. An alternative, and less onerous approach, involves using Framework  however, the framework route restricts the bidding entities to those on a Framework lot. A procurement route is suitable where specific, or tailored, output requirements are sought that are beyond the requirements of statutory bodies, however in this case, there are no bespoke or specific programme requirements.

David Quirke-Thornton,  Strategic Director, Children’s & Adults Services explained that the council has a duty to meet the needs of local residents and have to look to the future trends. A decade ago more people were going into residential care however now the borough is seeing  less people going into residential care because there are other options like Extra Care, housing services, health care, but the borough are seeing more people requiring nursing care. The people entering nursing care  are older, frailer and often come with dementia. Often people are now staying for one two years which is less than previously. While some people do want to be placed out of borough near relatives , many people want to have the option to be near family and friends and live locally .

The experts in healthcare are the NHS and they do lead provision of nursing care home in other places, outside of London.  The possibility of a NHS delivered nursing home has been discussed with the NHS locally however they have said there is not the capacity to recruit, as this is difficult in London. 

The Strategic Director said that the different models to deliver a nursing care home take different amounts of time to deliver and capital investment.  The council has chosen to prioritising capital on housing, which he supports.

He spoke in favour of the market led approach, noting  this is a great site for a care home and could generate a very good offer from a quality provider. He said that there are good quality care home operators , including independent family run care home providers, that would be interested, particularly given the ideal location.

He provided assurances that a market led approach would seek to involve key stakeholders in the decision making.

The chair then invited questions and the following points were made:

• Members asked how a quality will be achieved through pursuing the market led approach and in response officers said this will  assured in part  through the obligations for the  building to go through planning process to meet nursing home standards. In addition the financial aspects will be overseen by the Strategic Director of Finance to ensure a good money deal. In terms of operators the Strategic Director said that the council  would only entertain providers working  in a number of local authorities and they would visit their current provision  ,  as well as seeking input from colleagues in other boroughs and the  CQC.  Through this the council  would seek to ascertain their business approach and how they support senior management, as good care home managers are key.

• There was a discussion on the nature of independent  family run business ; the value this may  offer, if this includes share holder investors,  how accurately this can be ascertained or defined,  and if the benefits can be sustained over the longer term. 

• There was a discussion about population needs of people requiring a care home and a member spoke about people with dementia who are physically well but in a more difficult middle stage , and if care home provision is currently adequate for this cohort. The Strategic Director spoke about  the growing population with dementia and people living in Extra Care, but also on occasions requiring  residential care use . In order to receive nursing care people must meet a high NHS threshold.

• A member asked why this had  not been treated to a Gateway 0 process at the outset, with a report to cabinet,  in order to undertake an initial the strategic assessment of all the options prior to arriving at the market led approach. The member referred to  another councillors view, who is the social care lead for Unison , and conveyed their opinion  that a market-led approach is still a procurement strategy, simply via a slightly modified route , and as such ought to be  subject to the Gateway 0 process.  In response theHead of Sustainable Growth North, said that this is not a  procurement process as defined by legislation, and rather a very different approach . Instead this is  going  out to the market for a product, model , and offer .  This approach is about casting the net widely and seeing what comes back. 

• There was a discussion on  how much modelling had been done to look at both the impact on the quality of care and the costs of delivery each model , on the revenue budget. There are hidden costs of such as ongoing quality assurance costs that may be higher . A member commented that there  are potentially higher care cost that impact directly on fee paying residents and indirectly on the council if later done the line care, if fees fall on the council once private reserves are exhausted. Council owned nursing homes tend to charge less that than privately own homes.

• The member suggested that this is not  zero cost to the council but rather but zero capital investment, furthermore the  council’s  revenue  account is under particular pressure , and a direct delivery model may reduce costs here. In addition, there was the risk that the council may have to pay out millions to buy back a building in a crisis as the council did for Tower Bridge. It was proposed that the Direct Delivery option warranted further exploration..

• The Head of Sustainable Growth North said that council modelling suggests that it can expect 50 beds offered back on a 100-bed home through the market led approach.

• There was a discussion on how the council will mitigate risks, and a question on if  the market led approach is seeking to offload risk  . The cabinet lead said that transparency and accountability will delivered by a paper going via the cabinet process and in addition this will be offered to scrutiny.

• The Strategic Director spoke about biggest risk is a company owning the building and then cashing in via Private Equity.  He went through the history of former care homes being sold off by Local Authorities, which were initially run by staff groups. These were then often sold off to larger private providers, for a profit. The business model used by the large providers, such as Southern Cross, utilised a lease back arrangements to profit, whereby the care business was divided into two, with one part acting as operator delivering care and the other business owning the building asset and charging rent from the operator. In the latter stage, Private Equity enterprises such as Terra Firma brought care home groups and the costs of paying back the Private Equity investment also had to be factored into the business model. The major underlying reason for the demise of Southern Cross, and other care providers existing the market, was not the price being paid for care offered by councils, but  rather the legacy of successive previous owners cashing out.

• A member asked the officer if the market led approach is considered a land sale. The officer clarified that this is a sale of long lease; the length has not been decided, the longer the lease the more valuable.  The member asked if rent would be charged by the council on the land and the officer clarified that rather than rent on the land there would be a deal whereby the land lease  owner builds the care  home and in return the council get a certain number of places in the home rent free. 

• The member asked for further clarification on if in that case can the owner of the land lease could sell the building  to Private Equity as happened with Southern Cross / Four Seasons / Terra Firma, and then charge rent to the care home operator , in a similar fashion to the lease back arrangement  .  The Strategic Director clarified that this in this case because there will be a care contract, with break clauses, which means the council cannot be charged rent , only ‘hotel’ ( care services) for places reserved through the land deal. In addition, the Strategic Director said that there will be other care contract obligations , around the care operation. 

• The Strategic Director said there is a Unit Costs of Health and Social Care that has a floor and ceiling . This annual publication, produced by the Personal Social Services Research Unit (PSSRU), provides estimates for the cost of various health and social care services, including nursing homes, community services, and children's services. The publication typically includes a floor and ceiling for each unit cost. This means that for a specific service, like a nursing home stay, there's a minimum cost (the floor) and a maximum cost (the ceiling) that is expected. The Strategic Director explained that the land deal reduces the cost per room per night ( but there is a supplement for living wage). This will be addressed  further  during the process by the finance team.

• Officer commented that 60 years is the lifetime that a building is predicted to last when built to high sustainability standards. 

• A member said it is a shame that the council cannot build their own home and floated the idea of borrowing as other councils have done .  The member also commented that a market led approach would likely attract a for-profit operator who would come with a profit motive rather goodness of heart . In addition, 50 beds did not sound that attractive . In response it was noted that if the council borrowed between 20 - 25 million then the council would need to carry this as a burden on our finances , whereas in the market led  model the council get  50 beds free of rent; which is a pragmatic approach.  Care home providers profit margin is in the order of 3-5% so not that hugely lucrative .

• There was a discussion on direct delivery design.The Head of Sustainable Growth said the council is not well placed to carry out the design of a nursing care home building, and does not have experience .  A member queried if it was really necessary to link up with an operator to deliver the design, given there are several examples of different operators delivering care in the same buildings that the council own;  Anchor  previously ran the homes now deliver by Agincare, and more recently Tower Bridge has switched operator.

• There was a comparison made with the council funding, delivering and designing schools, and a question whether this was analogous and with the predicted demographic changes towards an older population the council  ought to take on more responsibility for provision of care homes, as it does presently for schools.  Officers were asked how schools are built and designed .  The Head of Sustainable Growth confirmed that the council do design and deliver schools directly and that in these situations some distance from the head teacher is considered advisable . The Strategic Director commented that he does agree there is a place for the public sector to deliver directly and in the children's space, the council are building two care homes, enabled by government grants, and intend to run them in house.

• Members suggested that more research is conducted on models under consideration and that this include looking at the impact of all models on the revenue account and the overall financial and quality implications of different care models. In addition it was suggested that further work was done on a possible NHS partnership