2020 UK Care Homes Trading Performance Review - Occupancy down 8.5% by mid-year 2020 Operators adapt quickly and show resilience - Knight ...
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Occupancy down 8.5% Operators adapt quickly Additional government
by mid-year 2020 and show resilience funding until March 2021
2020 UK Care Homes
knightfrank.co.uk/research
Trading Performance
ReviewCARE HOMES TRADING PERFORMANCE 2020 CARE HOMES TRADING PERFORMANCE 2020
INTRODUCTION FIG 1 | Regional spread of 2020 survey FIG 2 | Regional share – Knight Frank survey vs
Total UK stock
Knight Frank survey Total UK market
20%
SCOTLAND
Nursing care home
Personal care home 15%
2020 has been a year like no other, and especially so for the
UK care home sector which has adapted immensely well to a
challenging operating environment NORTH
EAST
10%
NORTHERN
IRELAND
NORTH
WEST
YORKS & THE
HUMBER
5%
T his year, we have adapted our annual Care Home
Trading Performance Index to incorporate the usual
account for two-thirds of the sample, versus one-third for
personal (residential) care homes. This reflects the survey’s
EAST
MIDLANDS
WEST
MIDLANDS
industry-leading benchmarks for the 2019/20 financial year, weighting towards the corporate market, with most group- WALES
EAST OF
ENGLAND
0%
but also any changes in performance that occurred from April owned homes registered to deliver full-time nursing care,
South East
East of England
North West
Yorks &
The Humber
West Midlands
South West
Scotland
London
East Midlands
North East
Northern Ireland
Wales
onwards when the pandemic emerged. This has allowed us to including dementia care. Figure 2 also shows how the LONDON
SOUTH
measure the impact of Covid-19 across the sector. A special regional split of this year's sample mostly mirrors the total SOUTH EAST
Source: Knight Frank
WEST
thank you this year to all the operators that have helped to UK market. The only clear exception being Wales, where our
keep the survey sample as robust as ever. sample is slightly underweight.
As you can see from Figure 1, our survey includes care Source: Knight Frank Source: Knight Frank, Tomorrow's Guides
homes spread far and wide across the UK. Nursing care homes
FIG 3
2020 RESULTS AT A GLANCE
THE
SURVEY IN
NUMBERS OCCUPANCY AVERAGE WEEKLY STAFF COSTS EBITDARM
(% OF INCOME)
FEES (% OF INCOME)
87.9% 89.2% 87.4% £889 £766 £953 58.0% 55.1% 59.0% 26.8% 28.5% 26.3%
FINANCIAL YEAR
112k 1/4
2019/20
Care beds of UK care All Care Personal Nursing All Care Personal Nursing All Care Personal Nursing All Care Personal Nursing
home market
Q2 2020
71% 67 819
79.4% £938 61.3% 26.2%
Counties Occupancy declines by 8.5% Fees increase for the COVID-19 adds to staffing Limited impact on profitability
of the corporate
and island UK towns between March and June, but 10th consecutive year and a challenges, but the Adult thus far in the pandemic, but
group market Social Care Infection Control
dependencies and cities recovers 1.2% by October 2020 further 5.6% is showing in the a challenging period ahead.
(more on pages 4 and 5) 2020/21 financial year. Fund provides a buffer. (more on pages 10 and 11)
(more on pages 6 and 7) (more on pages 8 and 9)
2 3CARE HOMES TRADING PERFORMANCE 2020 CARE HOMES TRADING PERFORMANCE 2020
Tracking the pandemic FIG 6 | Occupancy changes during Q2 2020 FIG 7 | Average occupancy by region, 2019/20
financial year vs Q2 2020
Following the outbreak of Covid-19 in tracking shows an estimated recovery of 1.2% now in place among large group operators, 2019/20 FY Q2 2020 UK: 2019/20 FY UK: Q2 2020
March there was a clear concern for care in the third quarter as death rates normalised who report being in a much stronger
20%+ GAIN 100%
operators regarding the direct threat of and operators have begun to confidently admit position than in March. As of the end of
the virus to residents and staff, but also new residents. There remain concerns over a October, we had not seen a meaningful
10% to 20%
concern surrounding the tracking and second wave, but rigid testing procedures are increase in care home fatalities.
monitoring of the situation. Since then, 90%
0% to 10%
we have been working with many major
FIG 4 | UK care home occupancy rate
operators to provide an objective weekly Covid-19
OUTBREAK No change
measure of occupancy levels. While this 80%
is separate from the annual Care Home
88.9%
89.2%
89.4%
88.9%
89.3%
88.8%
88.4%
88.3%
87.9%
87.7%
87.8%
87.6%
87.2%
87.2%
Trading Performance Survey, the data 0% to 10%
80.6%
collected provides a timely indication of
79.4%
70%
occupancy levels across the market and 10% to 20%
will serve to track the pace of recovery in
months to come. 20% to 30%
Figure 4 shows how occupancy 60%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q2 Q3
fell by 8.5% across our main survey
Northern Ireland
Scotland
Wales
North East
North West
London
East of England
West Midlands
Yorks &
The Humber
South East
East Midlands
South West
/07 /08 /09 /10 /11 /12 /13 /14 /15 /16 /17 /18 /19 /20 2020 2020 30%+ LOS S
respondents during the second quarter
Source: Knight Frank
Source: Knight Frank
of 2020. However, our additional weekly
South West
0% 5% 10% 15% 20% 25% 30% 35%
Percentage of surveyed care homes
OCCUPANCY
Source: Knight Frank Source: Knight Frank
M ajor operators are equipped to
deal with outbreaks of seasonal
recorded in Scottish care homes in this
period ¹, suggesting that Covid-19 has
surveyed have experienced either no
change in occupancy or even made
Despite the challenges, the data shows how resilient major care flu and diseases such as dementia and directly and indirectly resulted in over gains over the summer. This section
providers have been over the summer period Alzheimer’s, but Covid-19 has been an 30,000 excess deaths across the UK care of the survey has excluded homes that
unprecedented challenge. home sector. received block bookings from the NHS,
Fears of substantial occupancy and therefore any gains reflect usual
What has this meant for
loss seemed justified in March, when business. Figure 6 also shows that of the
occupancy rates?
academic studies were suggesting case homes that lost occupancy in Q2 2020,
FIG 5 | Care home deaths registered in England & Wales
fatality rates of 15-20% for those over As shown in Figure 4, the uptick most lost between 0% and 10%. In many
All other deaths in 2020 Covid-19 deaths All deaths 2019 the age of 80, and higher for those with in mortality produced an 8.5% cases, declines were less than 5%.
multiple health conditions. The rapid decline in occupancy across the
9,000 Regional comparison
discharge of vulnerable elderly people UK. Encouragingly, mortality rates
8,000
from NHS hospitals and into care homes normalised by early June and we No region of the UK has been sheltered
7,000
also posed an additional challenge. have since seen a steady rise in new from the virus, although occupancy
6,000
Over six months on, we can admissions, helping to stabilise has generally dropped lower in
5,000
retrospectively assess the impact occupancy levels. Pent up demand more densely populated and urban
4,000
of the outbreak on the care home is expected to support a recovery regions. This has been the case in
3,000
sector. ONS data, compiled from the in occupancy, but stringent testing London and the East Midlands where
2,000
General Register Office, shows that procedures for new residents and some occupancy has slipped to 75-76%.
1,000
from 1st March to 7th June there were hesitancy among enquiring relatives Densely populated regions have seen
0
05 12 19 26 02 09 16 23 01 08 15 22 29 05 12 19 26 03 10 17 24 31 07
approximately 29,178 excess deaths may soften the pace of recovery. more severe outbreaks, but greater
Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Mar Apr Apr Apr Apr May May May May May Jun (over and above 2019 levels) across care There are varying stories across demand for care beds could facilitate a
Source: ONS, General Register Office homes in England and Wales (Figure 5). providers and individual homes. As swifter recovery in occupancy as new
Close to 2,000 Covid-19 deaths were also shown in Figure 6, 28% of homes admissions return.
4 5CARE HOMES TRADING PERFORMANCE 2020 CARE HOMES TRADING PERFORMANCE 2020
FEES AND FIG 9 | Average weekly fees, by region and care
type 2019/20
FIG 10 | Funding split by region
FUNDING OF CARE Nurising Personal UK Avg Nursing UK Avg Personal
Private-pay (self-funded) LA funded
NHS funded Other funding
£1,200
100%
£1,100
£1,000
80%
£900
£800 60%
5.5% 4.9% 5.9% 3.9% 5.5%
£700
40%
£600
£500
20%
£400
£300
0%
South East
London
South West
East of England
West Midlands
Wales
Scotland
East Midlands
North West
Yorks &
The Humber
Northern Ireland
North East
South East
South West
East Midlands
West Midlands
Yorks &
The Humber
East of England
Wales
North West
Scotland
London
North East
Northern Ireland
UK
2019/20 saw care home fees increase across our index by a further 6% year-on-year,
averaging £889 per week across all care types.
AL L C AR E N U R S I N G C AR E P E R S O N AL C AR E P R I V AT E - P AY LA
Source: Knight Frank Source: Knight Frank
Source: Knight Frank
C AR E T Y P E FU NDI NG TY PE
S teeper rises in recent years look
less dramatic in real terms when
Region: As shown in Figure 9, there is
significant variation in fee levels across
Further fee uplifts have Fee uplifts in the 2020/21 financial year (preliminary)
adjusted for inflation. As shown in regions and more granular localities
Figure 8, care home fees have increased within the UK. Fee levels in Southern
occurred in the new
50% in nominal terms since 2008/09, England tend to be higher than the
financial year, recorded
but inflation-adjusted growth amounts North of England, matching the higher
from April to June 2020 This year we are also able to report funding types. Homes in our sample that are is making its way into the residential care
preliminary data on changes in fee levels primarily funded by local authorities have seen sector. It is not yet clear if these rises
to only 8% over the same period. staff costs seen in the South. In the
in the new financial year. As shown in a 5.5% rise in fees in Q2 2020, suggesting will be permanent or temporary, with the
Operators continue to adjust 2019/20 financial year, fee increases
Figure 11, further fee uplifts have been that some of the additional £3.2 billion funding government yet to finalise a long-term
fees to counterbalance a number were seen across all regions of the UK,
unanimous across both care types and supplied to local authorities by the government solution to the care funding crisis.
of increasing costs, in particular except Wales, where average fees for the
staffing costs. Furthermore, with personal care segment held flat at £650
much of the care home real estate per week. FIG 8 | UK Average weekly
FIG 11 | Average weekly fee uplifts for 2020/21 financial year (Q2 2020)
fee growth
market older than twenty years, extra
Funding type: The majority of care
revenue is increasingly needed to fund Nominal
homes derive their funding from a
refurbishments and upgrades. We expect Real Terms (less RPI inflation)
combination of local authorities and
this trend to continue going forward as
private-paying residents (self-funded). £1,000
many existing homes will need to adapt
As you can see from Figure 10, the split
the design and layout of their facilities
varies significantly across regions. In 5.6% 4.9% 5.9% 4.0% 5.5%
as a legacy of the pandemic.
the North East and London, a significant £800
What determines fee levels? amount of residents qualify for full
local authority support, or at least part-
Care type: The average weekly fee for
funding. In contrast, more affluent areas £600 AL L C AR E P E R S O N AL C AR E N U R S I N G C AR E P R I V AT E - P AY LA
a nursing home in the UK in this year's
like the South East and South West of
index was £953, compared to £766 per
England derive more of their income
week for personal care homes. The £400
from private-paying residents. Average
premium is due to the level of care C AR E T Y P E FU NDI NG TY PE
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
weekly fee rates in the UK private-pay
provided, with nursing homes typically
market measured £1,086 in 2019/20,
designed for higher-dependency Source: Knight Frank
compared to £746 a week for local
residents requiring full-time medical Source: Knight Frank
authority funded fees.
care delivered by qualified nurses.
6 7CARE HOMES TRADING PERFORMANCE 2020 CARE HOMES TRADING PERFORMANCE 2020
COSTS per registered bed per annum. We
suspect certain property costs to jump
outbreak and this could turn a relatively
small outlay into a larger one unless
across the UK. Our index shows some
noteworthy variation across countries
in the new financial year as a result of more support is given to operators. Food in the UK with food costs in Scotland
Covid-19. Soaring indemnity insurance costs also increased by 3.1%, measuring (£1,489 per bed) close to 10% lower than
premiums have been reported since the on average £1,629 per occupied bed food costs in England (£1,646 per bed).
TABLE 1 | Staff costs, agency costs and resident to staff ratios 2019/20
As operators look to support their workforces
during the pandemic, increasing staff costs remain
a significant challenge
STA FF C O STS, PE R Y E A R- ON -Y E A R STA FF C O STS, % AG E N CY C O STS, % RESI DENT: STAFF
RE SIDE N T P. A . CHA N G E OF IN C OM E OF STA FF C O STS (RATI O*)
Nursing Care £29,322 4.0% 59.0% 9.9% 0.85
Personal Care £21,351 4.1% 55.1% 6.2% 0.58
Staffing All care £26,956 3.9% 58.0% 9.0% 0.76
FIG 12 | Average wage rates, per hour
Following the trend in recent years, staff
2018/19 2019/20 Source: Knight Frank *Includes all nurses and carers. Part-time staff calculated as half a staff member
costs across the index increased 3.7%
to an average of £26,956 per resident
per annum for the 2019/20 financial
year. Further increases to the National £16.90
Additional costs prompt Adult Social Care Infection Control Fund
Living Wage (NLW) have contributed to
this, especially for personal care homes.
For those over the age of 25, the NLW
increased by 4.9% in April 2019 followed The most obvious additional cost that operators spent as much as 61.3% of May, the fund will inject a much needed
by a further increase of 6.2% in April NURSE resulting from the pandemic is that of income on staffing in the second quarter £1.15 billion to support infection control
2020, to reach £8.72 per hour. personal protective equipment (PPE)2. of 2020 (Figure 13). This partly reflects a and related staffing and recruitment costs.
As a percentage of income, staff To gauge the extent of these costs we reduction in income, but is also down to Local authorities must ensure that 80%
costs represented 58.0% of income asked operators to detail spending on increasing staffing costs. of the grant goes directly towards care
in the 2019/20 financial year and are PPE before and during the pandemic. Any further escalation of staff costs homes within their geography, including
especially high in the nursing care While noting significant variation across may be contained by the Adult Social Care private homes. This will certainly provide a
sector. There are a number of reasons for operators, our analysis shows that Infection Control Fund. Introduced on the 13th lifeline for many homes.
this. Pay scales are significantly higher operators spent an average of £160
£16.04
for skilled nurses, with the hourly rate per bed per annum on PPE during the
almost double that of a carer (Figure 12); 2019/20 financial year, compared to FIG 13 | Staff costs as % of income, since 2009/09
Workforces are larger – our index shows £260 per bed during the second quarter 62%
that for every nursing home resident, of 2020 alone. While these numbers 61%
there are approximately 0.85 full-time may seem small, PPE will represent a 60%
nurses or carers employed to ensure £8.75 significant extra cost to operators 59%
the appropriate level of care (Table 1); over the course of the pandemic and 58%
Finally, nursing homes are more heavily even beyond. 57%
reliant on agency staff, whose use always As well as PPE, irregular spending 56%
CARER
costs a premium (Table 1). on staffing will have added to existing 55%
high staff costs. Many care homes have 54%
Property and food costs
had to remunerate and support existing 53%
Property costs (which we define staff during periods of isolation, while at 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
£8.33 /09 /10 /11 /12 /13 /14 /15 /16 /17 /18 /19 /20 Q2
as utilities, council tax, insurance, the same time recruiting new staff to fill
Source: Knight Frank
repairs and day to day maintenance) gaps in the workforce. Our survey shows
increased by 3.7% across the UK in Source: Knight Frank
2019/20, reaching on average £2,399
8 9CARE HOMES TRADING PERFORMANCE 2020 CARE HOMES TRADING PERFORMANCE 2020
PROFITABILITY additional funds provided via the Adult
Social Care Infection Control Fund may FIG 16 | EBITDARM as % of income, by region and care type 2019/20
only partially show up in our mid-year Nursing Personal UK Avg: Nursing UK Avg: Personal
numbers, but will be a vital cushion
35%
against the additional cost of the
pandemic for many care homes. 30%
The challenge of Covid-19 is by
no means over, but operators have 25%
demonstrated an ability to limit the
20%
human and financial impact of the
Care operators have demonstrated an ability to limit the
virus so far and are in a strong position
human and financial impact of the virus so far 15%
as we approach winter. Going under
the radar are the broader long-term 10%
issues of the funding crisis in care
and Brexit, the latter of which serves 5%
to reduce the pool of migrant carers
0%
and nurses at a time when they are
East Midlands
North East
West Midlands
East of
England
Yorks &
The Humber
South West
North West
South East
Scotland
London
Northern
Ireland
Wales
desperately needed. Hopefully a legacy
of the pandemic will be to raise the
profile of these issues.
A
s shown in Figure 14, profitability market. As illustrated by Figure 15, a are weighing on margins in the nursing
has been on a downward trajectory third of group-owned care homes traded care segment of the market, which is Source: Knight Frank
Source: Knight Frank
over the last decade. The 2019/20 at EBITDARM margins in excess of 30% challenged to deliver 24/7 nursing care
financial year was no different with in 2019/20, while only 5% made a loss. to residents. The South East, London,
average EBITDARM margins declining In most regions, profit margins are Wales and Scotland are the only
to 26.8%. Despite the broad story, there higher across the personal care sector, exceptions to this trend. A larger
is a huge amount of variation within the as shown in Figure 16. High staff costs private-pay market, supported by FIG 17 | EBITDARM margins, 2019/20 financial year vs Q2 2020
higher fees, has helped to raise
profitability in the South East, while 2019/20 FY Q2 2020
occupancy rates well in excess of 90%
FIG 14 | EBITDARM as % of FIG 15 | Distribution of
income, since 2008/09 EBITDARM margins, 2019/20 are supporting earnings in the Scottish
26.8% 26.2% 26.3% 25.9% 28.5% 27.3% 37.3% 37.1% 20.6% 20.4%
and Welsh nursing segments.
33%
Summarising the financial
40% or more 30%-40%
32% impact of Covid-19
20%-30% 10%-20%
0%-10% Loss making As shown in Figure 17, EBITDARM
31%
margins have seen little decline so
30% far, falling by only 0.6% in the second
5% 11%
quarter of 2020. Limited declines are
29% 11%
also consistent across care types and
28% funding models. A lot of this must
21%
be credited to care operators and the
27%
22% social care workforce who have rallied
26% to protect residents, support the
AL L CAR E N U R S IN G CAR E P ER S O N AL CAR E P R IV AT E- P AY LA
wider healthcare system, and made
25% Source: Knight Frank
30% significant personal sacrifices in
2008/09
2009/10
2010/1 1
201 1/12
2012 /13
2013/14
2014 /15
2015/16
2016/17
2017/18
2018/19
2019/20
the process.
Fee uplifts in the new financial year CAR E T Y P E F U N DI N G T Y P E
and additional government support
Source: Knight Frank
Source: Knight Frank Source: Knight Frank have also helped to support trading
performance across the sector. The
10 11FORWARD VIEW
continue to champion the incredible is something we certainly recognise
performance of care home operators as advisors, but the willingness of
and their workforces during the many providers to contribute in our
pandemic. While the British media surveys confirms that you do too. I’d
has at times conveyed a hysterical like to thank all the operators that
Julian Evans FRICS
image of care homes, an occupancy have once again submitted their
Head of Healthcare
loss of only 8.5% across a sector that data for the purposes of our annual
deals in caring for the most vulnerable Trading Performance Review. In
demographic in society is an incredible particular, I would like to thank those
This year’s trading performance
feat, and testament to operators. operators that have participated in
survey has made two things even
Looking forward, group operators are our weekly occupancy and mortality
clearer to me. Firstly, this crisis has
now in a much stronger position, and tracking since March 2020. Thanks
demonstrated the resilience and
for a whole host of reasons. to you, our datasets have provided
capability of our residential care
valuable intelligence to the market
sector. Undoubtedly, the pandemic Secondly, the crisis has demonstrated
in 2020 and creating better and more
has tested and will continue to the huge importance of reliable, real-
usable healthcare data will form a key
test operators financially well into time data across the broader healthcare
part of our strategy for 2021.
next year, but it’s critical that we sector and within residential care. This
Front Cover: Graysford Hall, Leicester, Sanders Please get in touch with us
Senior Living
Footnotes:
Healthcare Senior Living
(1) 1,973 Covid-19 deaths were registered with the National
Records of Scotland (NRC) between 22nd March and 27th Julian Evans FRICS Tom Scaife
September 2020.
Head of Healthcare Head of Senior Living
(2) Our survey is based on PHE definition of PPE, including
disposable gloves, fluid-repellent masks, and eye protection. +44 20 7861 1147 +44 20 7861 5429
Please note additional costs may have been incurred through
julian.evans@knightfrank.com tom.scaife@knightfrank.com
the purchase of cleaning products, hand sanitiser and tempera-
ture checking instruments.
Recent Publications Patrick Evans MRICS Commercial Research
Head of Corporate Valuations Joe Brame
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Why is investment 6 key trends Case studies: Germany,
+44 20 7861 1757 Senior Analyst (Healthcare)
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disrupter to construction never been more important re-development will be essential
Healthcare European patrick.evans@knightfrank.com
knightfrank.com/research
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Kieren Cole MRICS
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+44 20 7861 1563
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