Following the recent Competition and Markets Authority market study into the care sector, our expert partners at Ridouts Solicitors have shared an article discussing how this might impact care providers and what care providers can do now to avoid potential criticism.  

Read below for the full article from Errol Archer, Senior Associate Solicitor, at Ridouts Solicitors.

The Competition and Markets Authority shines a light on the care home sector.

A number of care home owners have asked us whether the Competition and Markets Authority’s (CMA) “market study” into the sector will affect them or whether there is anything they should do now to head off any possible future criticism of their organisation.  

CMA market study

The CMA announced its market study of the care home sector at the beginning of December and is due to publish an interim report in May of this year with a final report due in November. The CMA will be looking at whether care home practices are fair from the perspective of residents. They will consider, for example, whether:

  1. The information care homes provide to prospective residents and their families is adequate
  2. Contracts used by care homes are balanced and fair or whether they contain hidden charges or permit unlawful ‘top-ups’
  3. Large deposits or upfront payments are required without clear explanations
  4. Care homes increase fees unexpectedly, knowing that most residents will be reluctant to consider moving elsewhere
  5. Residents must give an unreasonably long notice period to leave
  6. Care homes respond properly to complaints by residents about contracts or charges

The CMA will also look at the regulation of the market and competition generally between care homes in the sector.

Can care homes opt out of the study?

Now that the CMA has commenced the market study, it can use its investigatory powers and is likely to write to selected care home providers requesting:

  • Copies of relevant documents e.g. standard resident contracts, records concerning the frequency and size of fee increases and records of complaints about fees
  • Copies of relevant financial information
  • Attendance of senior staff at interview at CMA’s office to give evidence

Failure to respond to such a request may result in an ‘administrative penalty’ in the tens of thousands and it is a criminal offence to alter, suppress or destroy any documents requested.

The short answer to the question is therefore “No” but legal advice should be taken if approached by CMA or if uncertain how to respond to them or if there are concerns over the disclosure of sensitive information.  Care homes should bear in mind that the CMA may follow up the study with enforcement action under consumer law against individual providers.

Action to take now

In light of the CMA market study, care homes would be well advised to:

Look at the information they give to prospective residents and their families about the service provided and the related costs – ensure this is clear, easy to understand and where any services will require an additional charge, that this is highlighted and the level of the charge is made clear

  • Consider revising the standard contracts used to ensure that they are concisely drafted in plain English and avoid unnecessary ‘legal speak’
  • Identify and consider revising any contract terms that unduly favour the care home e.g. short notice periods for fee increases but long notice periods if the resident wishes to leave the home or no reduction in fees if the resident is away from the home for an extended period
  • Consider formulating their own short policy document explaining how they comply with consumer law and ensure transparency in respect of fees

The care home sector is worth around £16 billion a year with approximately 433,000 people in care home places. Citizens Advice published a report on hidden charges in care homes last year and Age Concern highlighted the issue. With CMA having now joined the bandwagon, the sector should expect a spotlight to be shone on consumer protection, contract terms and fees for the next few years.

With the current financial pressures on care homes, the answer will not be reduced fees but rather a focus on transparency and clear communication with residents and their families. This should avoid complaints arising but when they do, care home managers must be able to demonstrate that they have been taken seriously and handled promptly.    

Clear communication, transparency and straight forward contracts are the key to avoiding complaints over fees and breaches of consumer law.