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6 June 2018 0 Comments
Posted in Health & Social Care, Opinion

CMA propose sweeping changes to service user contracts

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Hazel Phillips in our Health & Social Care team provides an update on CMA guidance on how care providers should comply with consumer legislation in respect of service user contracts.

Last week, the Competition and Markets Authority (CMA) issued their long-awaited draft Guidance designed to help care home providers comply with their consumer law obligations. This Guidance is (with the exception of already finalised provisions on the charging of fees following death) subject to consultation. Final Guidance is due in the autumn.

If implemented in its current form (which we consider is likely) the proposals contained in the draft Guidance will have wide-reaching implications for the way in which care providers (i) provide information to prospective service users prior to admission and (ii) the terms on which contracts are entered into. The draft Guidance proposes significant changes to way in which many providers currently operate and is likely to require all providers to make operational changes. These will bring practical challenges, particularly where emergency placements are required.

Key areas include:

  1. Information: providers will need to provide prescribed information to prospective residents at three separate stages: on first contact, before they accept an offer of a place and on confirmation and finalisation of the offer. This includes an indication of the weekly fees charged and what they cover.
  2. Charging of upfront fees and deposits: the charging of both security and reservation deposits will be closely scrutinised and careful consideration will need to be given to whether reservation deposits can be justified as consumer-friendly at all. Sunrise Senior Living has already agreed to pay back £2m in compensation to former residents for charging upfront fees without making it clear what the money would be spent on.
  3. Charging fees on death: final guidance indicates that providers will only be able to charge fees for up to 10 days from death.
  4. Increasing fees: provisions permitting providers to increase fees without reference to limited specific factors and without reference to the method of calculating the change will be at risk of challenge.
  5. The use of guarantors: where fees are guaranteed by a third party, the clauses covering this will need to be very clearly worded and explained.
  6. Funded Nursing Care (FNC) payments: contracts which don’t mention how changes in FNC will be handled will be deemed unfair.
  7. Fees when a person is absent: fees must not be charged in full for a underdetermined period when someone is absent. A discount must be applied and action taken to establish the next steps after a fixed period of time has evolved.
  8. Third party top-ups: a separate contract will be required where it has been agreed with the local authority that the payer will pay the home direct.

Failure to implement the Guidance may put providers in breach of consumer legislation. This could result in enforcement action by the CMA, Trading Standards, CQC and residents.

What should providers be doing?

Our view, having read the Guidance, is that most providers will need to amend their current service user contracts to some degree to ensure they do not fall foul of consumer legislation.

Whilst the Guidance won’t be finalised until the autumn, the CMA is already scrutinising the practices of larger groups, such as Sunrise. We would encourage providers to review their practices and contracts with a view to implementing change as soon as possible.

How our Health & Social Care team can help

We have developed a model contract which is compliant with consumer and mental capacity legislation but also draws on our experience of resolving contract issues for and protecting providers. It caters for both residential and nursing homes. We also developed a separate contract for domiciliary and community care providers. If the CMA issue a model contract, it is unlikely it will protect providers in the same way.

If you would like to find out more please contact: Hazel Phillips, head of our Health & Social Care team, on:

01225 730 166     Email ushazel.phillips@roydswithyking.com

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