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Economies of scale don’t work for home care contracts

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Easy savings can be made by councils linking up to buy essential kit in greater bulk but when this rationale is applied to increasingly large public service contracts, the results may be false economies, not to mention poorer outcomes for people who use the services.

On the BBC Today programme recently, chief inspector of social care Andrea Sutcliffe was quizzed on allegations that a large domiciliary care agency had clipped short some of its visits in order to make more time for staff to travel between appointments. While some larger agencies stay focused on quality, there are numerous reports of older people being fitted into a schedule that is efficient from a staffing point of view, or being seen by a different carer every day.

This can be the hidden cost of economies of scale: a service seen only as the sum cost of its staff hours. The best home care agencies are retreating from untenable council contracts into the private purchaser market. Some areas may soon find themselves without a viable, safe home care provider willing and able to respond to tenders. This will be disastrous for older people and will lead to more expensive contracts, as commissioners make stressed purchases.

The problem stems from buying outputs rather than outcomes. If we are to save the council-commissioned home care industry, we need to establish the cost-benefit case for holistic, personalised home-based care and support. This will cost more per hour, but much less per person if integrated health, care, housing and social support can help people avoid hospital and stay connected and independent.

A 100-bed care home may be more cost-efficient than a ten-bed one, but support that is personally tailored to maintain an individual’s health, housing and social life could reduce the need for such an expensive model in the first place.

It’s easy to understand economies of large scale but we need to understand the hidden costs and the hidden economies of small scale. How much more social value can small community organisations bring than large agencies? What percentage of income is spent on the frontline by a micro-scale home care agency with no back office or shareholders, compared with an industrial-scale agency?

Instead of developing bigger contracts that become increasingly distant from what individuals need and want, we need a more sophisticated notion of value than the cost of staff time, kit and drugs. Citizens have more potential to do this than commissioners alone.

One approach would be to help the growing number of self-funders and personal budget and direct payment holders to pool their expertise and buying power to develop local marketplaces and potentially, far more real value.

Alex Fox, chief executive, Shared Lives


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