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Council advised of outcome of new care home business cases

Issued: 7 May 2010

A report being presented by three Council directors to The Highland Council on Thursday 13 May says there is no economic case for the Council to build five new care homes when the resulting costs will be higher than those incurred by procurement of places from the independent sector.

The report by Steve Barron, Director of Housing and Property, Harriet Dempster, Director of Social Work and Alan Geddes, Depute Chief Executive and Director of Finance concludes that while the economic, environmental and social benefits of building a new care home in Fort William, Grantown, Inverness, Muir of Ord and Tain are worthwhile, they do not in themselves justify the scale of the investment required and do not represent best value for the Council.

Councillors are recommended to:

a. agree to seek the views of interested individuals and
organisations over the next four weeks; and

b. consider the business cases (including a summary of the views
expressed in the four week period) at its next meeting on 24 June, in
conjunction with the proposed Capital Programme for the period 2010/11
to 2014/15.

The report, commissioned by the Council in December last year, takes
into account:-

i.Revenue and capital costs,
including comparisons with the current revenue operating costs of the
care homes;

ii.Future demand for
residential care, including nursing care and the capacity, both from
within the Council and through the Independent Sector in the five

iii.Comparative costs within the
Independent Sector; and

iv.The Social and Economic
impact on the locality

It notes that some of the current Council homes are deemed to be in a very poor physical condition and all fall short of modern standards therefore it is not an option to continue with the current provision.

The directors stress there is no evidence to suggest that service standards in Council run care homes are higher than in the independent sector.

They say: "There is current capacity in the care home market to absorb current levels of demand. The demographic forecast indicates an increase in frail older people. However, advances in assistive technology and the expansion of care at home aims to support more people in the community. This will mitigate future demand for care home places.

"The current Joint Community Care Plan does not envisage commissioning further places but rather seeks to redesign services to promote independence at home. Notwithstanding this, the market remains lively and there is confidence that should there be a need for further places the independent sector will respond.

"In each of the five locations there are a number of alternatives (both current and planned) to the existing care home and these are mapped within a 30, 45 and 60 minute drive distance. The risk of closure of an independent sector home is low but it does happen."

The financial analysis focuses on a Net Present Value comparison of the costs of building and operating each of the new care homes against the costs of procuring the same number of care home places from the independent sector (for clarity, it should be noted that the independent sector refers to both private and not for profit providers).

The comparisons of Net Present Values in the Financial Analysis sections of the Business Cases demonstrate that over 20 years the NPV costs to the Council of building and operating each of the new care homes would be significantly higher than the NPV costs of procuring the same number of places (plus day care where appropriate) from the Independent sector.

© 2010 Highland Public Services Partnership.
Project part-financed by the European Union (European Regional Development Fund) within the INTERREG IIIB Northern Periphery Programme