Social care: care home market – structure, issues, and cross-subsidisation (England)

The care home market in England is now dominated by private providers, although the market is not concentrated. The “Big Four” providers account for only 15% of all care home beds, while the top 25 account for 31%; a feature of the care home market is the prevalence of small and medium sized providers.

Unlike the NHS, social care is not free at the point of use; a means-test is applied to determine eligibility for local authority funding support. Local authority-funded residents account for more than half of care home places (in both residential and nursing settings).  However, local authorities have considerable negotiating power with care homes, and, combined with pressures on local authorities’ finances, it has been shown that the local authority fees paid on average are near to or at cost.  Some care homes therefore seek to charge self-funding clients more than their local authority counterparts, which is known as “cross-subsidisation”. 

In its November 2017 report, the Competition and Markets Authority (CMA) examined the issue of “cross-subsidisation”, and while finding that self-funders typically paid some 40% more than local authority residents for the same care, the CMA did not seek to ban the practice but instead called for additional funding for local authority social care so that they could increase the fees they paid to care homes, among other measures. The Government response to the CMA’s report is expected before the end of February 2018.

This note applies to England only.