Frost Perspectives

Long Term Care in the UK – The Need for Change

Aug 22, 2016

LTC.jpgKey Challenges Today

Changing demographics will continue to have a significant impact on the long term care (LTC) market in the United Kingdom. The ageing population will have a major impact on the organisation and delivery of healthcare, and there will be a focus on chronic diseases, such as Alzheimer's disease, heart disease, and osteoporosis, rather than acute illnesses. Although a high proportion of older adults are helped by friends and family, many pay for their care whilst some are partly or fully covered by the government through local funding. LTC can range from a low level of care including cleaning and shopping support to high intensity care for older adults within care homes. The key trend is that the demand for care will continue to increase because of increasing life expectancy and ageing.

The current LTC funding model is generally thought to be outdated and has faced criticism for failing to adequately protect those individuals with limited wealth. With life expectancy increasing, disability rates are also likely to rise and as a consequence, so is the cost of LTC. There has been increasing concern that reforms are required to address how the United Kingdom should pay for LTC of older adults. The key issue is that LTC residential services are expensive, both for individuals and the government.

There are different levels of care accommodation to suit different stages in life and the level of care required. Some residential homes are run by local authorities, but most residential care homes and all nursing homes are in the independent sector (approximately 90%). Many local authorities have outsourced care to the private sector in recent years in order to save costs.

Key Trends and Future Opportunities

The number of care homes in residential settings, both public and private has increased over the last few years and is expected to increase in the future. The demand for residential care is the largest in the private setting. In future the private residential sector will grow further as the public sector becomes less involved in the provision of care. In addition, a higher proportion of older adults will also self-pay, boosting the private sector further. There is a high potential for new players and service types in the private sector.

There has been a strong public policy to encourage non-residential care; however, this has not resulted in a dramatic shift in this direction. Over the most recent years there has been increased outsourcing to private providers by local authorities. Cuts in spending have affected residential care providers less than non-residential care providers in the private setting.

A key trend seen by major participants in the market is that they have diversified into speciality areas of care. The key benefit is they offer greater financial benefits and generate higher revenue. Many providers have launched niche products catering for specific market segments. For example, Sunrise Assisted Living has used its US models and transferred them into the UK offering very high specification facilities offering independent living, dementia care, and nursing care. Another trend is high price residential hotels or residences which could possibly be registered as residential homes and aimed at the higher end of the market to capitalise on the growing private residential market.

There are a number of opportunities that companies can capitalise on when delivering care and services to older adults. A large section of older adults continue to work beyond retirement age and want to continue to keep active both physically and mentally. Their skills could be used effectively post retirement age and they could potentially become a valuable part of a supportive workforce. Therefore, the changing lifestyle of retirement is an area which companies could focus on in future, particularly as older adults have different priorities and needs when in the same age bracket. This can provide new interests and opportunities. In addition, those with more disposable income would be keen to carry on and pay for services which provide an interest for them.

Other emerging models of independent living include close care, housing with care, extra care, and very sheltered housing. The key benefit for older adults is that they maintain their independence with their own accommodation. As new technologies make a greater impact in the future (such as telecare and telehealth), there is greater opportunity for new providers to enter the market. They would not only provide equipment but provide services around the technologies. This means older adults will have more choice and freedom when living in residential and non-residential settings because of greater interaction and easier connection with family and friends. This leads to a better and more pleasant experience, particularly in residential settings.
The government has an important role to play in order to attract new players, service types, and supply chains. As the care home market in the United Kingdom is fragmented and competitive, the government needs to provide specific criteria for vendors in order to ensure greater choice for older adults. The type of services needs to be widespread in order to ensure older adults have enough choices.

In conclusion, the LTC market will benefit from various demand factors, mainly ageing population trends. The other drivers in the market which will influence the demand of services range from changing demographics, sources of funding and expenditure, consumer trends, technology trends, political trends, and regulation trends. There are opportunities not only for care home companies, but also for technology and service companies to support the growing private residential sector in the United Kingdom.

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