The Guardian: What happens when councils want to cut the cost of residential social care?

Enter the fee-reduction specialists

When managers see Ray Hart and his team coming, they sometimes bolt the door. “People don’t like us doing what we do,” he admits. “But we are what we are. As an accountant, I don’t presume to be a particularly popular person. I’m used to it.”

Hart is commercial director of OLM Financial Management, a company that has become notorious in the social care sector for its work on behalf of councils and NHS primary care trusts (PCTs) wanting to cut the fees they pay for residential care of people with learning disabilities and severe mental health problems. So far, it has succeeded to the tune of more than £9m in annual savings.

‘Go to hell’

“We were incandescent with rage about their attitude to cost reduction,” says Stewart Wallace, strategic director of CareTech, a leading commercial provider of residential care and support. “In the end we said: ‘You can go to hell.'” Many others voice similar sentiments, only less politely.

To Hart, it is all water off a duck’s back. He has been in the business of forensically analysing providers’ costs since his days as an assistant director of East Sussex county council between 2001 and 2005. The OLM model, called MyCareCosts, was developed some five years ago and has since been used by 85 councils and PCTs, achieving a typical saving of £150-£200 on a weekly care package costing £1,700.

However, Hart says it is “not unusual” to make a saving of £500 a week on a single package. In one extreme case, involving a person receiving intensive support, there was a weekly saving of £5,000.

Charges for residential care vary widely, especially in the field of learning disability. The work of OLM, which has now examined more than 4,000 individual cases, and the use of the freely available “care funding calculator”, developed in East Sussex and Hampshire, are slowly building a body of evidence of what ought to be the norm. According to Hart, eliminating excessive costs in this way is much more preferable to cutting services altogether.

As an example, he cites a case where a council or PCT may have commissioned one-to-one support for six people with high levels of need at a particular care home. On investigation, it is discovered that the six are being supported by only three staff at any one time. Negotiations to lower the contract price then ensue.

“It’s not about catching them in the act,” he says. “It’s about making sure that commissioners get what they pay for. Normally, it’s that the service has changed over time. It’s not something that has been purposely done.”

Hart denies that OLM works on a percentage basis that incentivises his 17-strong team to search for savings. In 95% of cases, he says, the council or PCT pays a flat fee. Of all cases referred to the team, which includes former care providers and commissioners as well as accountants, 14% are assessed as good value for money at an initial, desk-based stage, as are 26% more after visiting the residential home. But the remainder – six in 10 – do produce savings.

Despite the anger of some providers, none has yet taken a case to court. “I’ve been threatened a few times,” says Hart. “But if it went to court, all the figures would come out in the open. That’s not in anybody’s interests.”

Hart suggests that some “enlightened” providers are now collaborating with OLM on addressing anomalies in their cost base before being referred by commissioners. He says good relations have been established with, among others, CareTech and non-profit operator Turning Point.

This is not quite how CareTech sees it. Wallace insists that the company, which supports almost 1,500 people with a learning disability, flatly rejected OLM’s ideas for cost reduction. But he admits that CareTech did then deal direct, and “purposefully and productively”, with the commissioners who had engaged Hart’s team. Later, CareTech invited OLM to have general talks. “I suppose, if we were being generous, you could say their intervention provoked our bilateral discussions with local authorities,” says Wallace. “I wouldn’t say they are our bedfellows, but we can tolerate them.”

Adam Penwarden, director of learning disability services at Turning Point, says he has dealt satisfactorily with OLM over services the operator provides in Wiltshire and Hertfordshire. “It’s not in our interests to simply refuse to speak with an organisation that a local authority has chosen to work with. With just one exception, every authority we provide services for, whether they use OLM or not, has asked us to make savings,” he says.

Tough but fair

What sets OLM apart, Penwarden says, is its growing database that enables it to judge with some accuracy the reasonable parameters of cost elements within a care contract price, allowing for regional market variation. In the east of England, for example, OLM has worked in 11 of the 13 local authority areas.

Although Penwarden doesn’t use the exact words, his impression of OLM could probably be summed up as tough but fair. However, he warns: “We would be concerned if they came back to us to make more savings in the same service. Once or twice might be fine, but three or four times would get very tricky.”

2nd February 2011 | Subscription Required