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27 March 2018 0 Comments
Posted in Health & Social Care, Opinion

Cross subsidisation in care homes – Government response

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More than half of care home places in the UK are comprised by local authority-funded residents. However, due to many factors, not least the negotiating power of local authorities and the squeeze on their finances, it is thought that local authority fees are provided near to or at cost for care home providers. Therefore, in order to make this a viable financial model, some care home providers will charge self-funding clients more than their local authority equivalents, which is known as “cross-subsidisation”.

The CMA Report

In 2016/2017 the Competition and Markets Authority (CMA) studied over 11,000 residential care and nursing homes that offer support to older people in the UK. They looked into the issue of “cross-subsidisation”, and whilst they found that self-funders could pay up to 40% more than local authority residents for their care, the CMA did not recommend that the practice be banned. Instead it called for additional funding for local authority social care.

Government response

On 5 March 2018, the Government published its response to the CMA report. It has accepted (or accepted in principle) all of the recommendations put forward by the CMA.

The Department of Health and Social Care has said that “the CMA identified two broad concerns about the care homes market. Firstly, that those requiring care need greater support in choosing a care home and greater protections when they are resident. Secondly, that the current model of service provision cannot be sustained and that the sector is not positioned to attract investment to meet future needs.”


The CMA put forward its recommendations in the following themes:

  • capacity: planning must be of such quality as to ensure that there will be sufficient capacity to meet future need
  • consumer protection: to improve compliance and ensure protection for the customer both when choosing a care home and when a resident in a care home
  • consumer information: to improve communication and interaction between the consumer and the care home.

Next steps

Moving forward, the Government has said that it will:

“publish a Green Paper by summer 2018, setting out plans for improving care and support for older people and how to tackle the challenge of an ageing population…

…Ahead of the Green Paper, we will continue to work with the CMA and the adult social care sector to implement the CMA’s recommendations to improve consumer information and protections.”


Local authority fee rates continue to be a pressing issue and providers should continue to negotiate this matter with local authorities. With experience in dealing with a number of different local authorities in contract negotiation on behalf of providers we have the experience to help. Contact our Health & Social Care team on:

0800 182 2495     Email

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