Children's care providers dispute ‘harmful’ profiteering rhetoric

In its latest report examining how local authorities plan for sufficiency of accommodation that meets the needs of children in care and care leavers, Ofsted describes the relationship between some local authorities and private providers as both “important” and “fragile”.

“These relationships are not always formalised, despite being recognised as crucial. This means that links and information are sometimes lost when staff move,” states the report, which also suggests that “providers now have more power in the market and are able to choose which children they take”.

Coupled with calls by sector leaders, including chair of the Independent Review of Children's Social Care Josh MacAlister, to ban, or cap, profit-making by children's social care companies, providers say this would lead to a dramatic drop in sufficiency of placements available to local authorities with children with complex needs worst affected.

Instead, providers and commissioners are urging relationships with local authorities to be rebuilt.

Profit-making debate

Providers and commissioners question a “harmful and unhelpful” rhetoric that “all private providers are making a large profit”.

The Association of Directors of Children's Services (ADCS) criticised a report by the Competition and Market Authority (CMA), commissioned by MacAlister and published last year, over its “failure” to recommend a cap on profit-making within the sector despite it noting that the largest 15 providers of children's homes placements have, on average, seen profit margins of 22.6 per cent from 2016 to 2020 with average prices increasing from £2,977 to £3,830 per week over the period.

Kevin Gallagher, managing director of Amberleigh Care, a specialist therapeutic care and education provider, admits that some providers are “clearly charging excessive fees and taking advantage of emergency situations”, but adds that “we also have to account for the real risks in trying to manage complex risky behaviours in the community, with an inconsistent regulatory response”.

The Children's Home Association's (CHA) State of the Sector report 2022 suggests that not all private providers are making large profits and that the sector as a whole should not be characterised in that way.

“The majority of providers report significantly lower profit levels than those highlighted in the case of the largest providers, with almost half of providers surveyed reporting both declining levels of profit and deterioration of financial reserves,” it states. “Multiple pressures are highlighted as heightening the need for fee increases.”

Gallagher warns that a swift move to ban or cap profit-making providers would lead to a “sharp drop” in providers for children.

Peter Sandiford, chief executive of the CHA, says that “decreasing providers' income, at a time of acute demand, is a strategy that would fail”.

This is echoed by ADCS president Steve Crocker (see below), who argues that the risks associated with provider failure or withdrawal from the market are significant to children. “Should this happen, no single local authority could step in,” he adds.

‘Cherry picking’ claims

The CHA's State of the Sectorreport also disputes claims by local authority leaders, cited by Ofsted, that providers are “cherry picking” children with the least complex needs.

Based on a survey of its members, the CHA states that the report “provides reassurance that, despite rising demand for placements, providers continue to place the needs of children and young people ahead of maximising occupancy and profit”.

“Providers have a responsibility to match the needs of children and young people to those of others in their care; this is reported as a key reason for rejecting placement referrals,” says Sandiford. “Such professional matching practice is often incorrectly perceived as ‘cherry picking’, when in fact, providers must and do place the needs of children and young people over any financial motivation to ‘fill beds’.”

Gallagher argues that his organisation – which provides care for young males who have exhibited inappropriate or harmful sexual behaviours – would not, for instance, offer a placement to a “young girl who is a victim of sexual abuse”.

He adds that commissioning and procurement by local authorities cannot be based on cost alone, accusing some local authorities of “mismanaging the market”.

Council commissioning “favours the cheap and the bulk”, he says, “but that's not what the needs are telling us”.

“If you are a young person requiring residential intervention, then you have multiple and complex needs, rooted in trauma and that you deserve and require a formal therapeutic response – therefore all children's homes should be therapeutic by default,” Gallagher adds.

Training need

The CMA's report, published in March last year, described the position of local authority commissioner's working to secure placements for children as “weak”.

This view is echoed by private sector experts who say more training is needed to support local authority staff in “managing the market effectively”.

A report by What Works for Children's Social Care, published ahead of the publication of the Care Review's final report last year, suggested the majority of councils in England need greater support to better forecast the needs of children entering care alongside a greater understanding of commissioning and procurement within this current market.

In response to the report MacAlister suggested that “on top of dealing with budget cuts, too many local authorities are failing to navigate and shape the marketised system of care for children”.

Experts, including Gallagher, agree with Ofsted's view that relationships between local authority staff and private providers are “crucial” to securing timely placements for children that meet individual needs.

“What works in day-to-day work, are the strong relationships between quality providers and social workers/placement teams,” he says, adding that “quality” is determined by experience of senior staff and “providers being able to deliver exactly what they say they will”.

A commissioning expert, who asked not to be named, says that often providers are reticent to work with certain local authorities due to poor experiences, which sees prices pushed up to ensure contracts are adhered to on both sides.

They explain that providers are taking children into their care based on referrals where “some of their needs or risky behaviours have been omitted”.

This risks providers “losing money if staff become unable to work due to stress and are replaced by agency workers on higher salaries or other children and not able to be housed in the same accommodation as children displaying such behaviour”, they say.

The expert shares anecdotal evidence from private providers who claim that these local authorities can also be slow to find more suitable “follow-on” placements for such children, leaving providers further out of pocket.

This means they will charge the same local authority more for subsequent placements to “mitigate” further financial losses, the expert explains, adding: “It's not just necessarily the cost of the placement per week – it's probably paying for a load of other stuff that it's having to subsidise”.

Relationships among agencies working to support children alongside local authorities should also be a focus of council's looking to improve sufficiency planning, Ofsted recommends.

Its report states: “Relationships between local authorities, health commissioners, providers and other relevant stakeholders also lead to information-sharing, better planning and joined-up funding. All of these relationships should be built into the sufficiency strategy.”

Strengthening joint bids from such agencies could lead to better relationships with providers of private placements, it adds.

Trust-based solutions

Looking to the future, the commissioning expert says “trust needs to be repaired from both sides”. It is a sentiment echoed in Ofsted's report, which is based on evidence submitted by local authority commissioners.

It finds that for some local authorities “providing additional information sometimes meant that providers would consider a child who they might not have been willing to care for if they had only been given the usual, more basic information”.

However, this was more successful when local authorities had good relationships with providers, “because the local authority staff could talk to the providers about the child's strengths and answer the providers' questions about anything that concerned them”, it states.

“We have the chance to change the negative ‘roar’ into a celebratory ‘cheer’,” says Gallagher. “The whole system is not broken, but its dysfunctional in parts and has the risk of worsening if we don't change the way we plan, commission and support it.”

Meanwhile, Ofsted's report concludes that “the impact of a lack of suitable accommodation on children is stark. Living in safe, caring homes with adults they trust can have a lasting impact on children's sense of belonging and self-worth”.

It adds that to provide this, “relationships between local authority staff and providers are clearly important”.

“They are beneficial to both sides and help local authorities to secure homes for children with complex needs,” the report states.

Providers and commissioners agree that the current situation is “doing more harm than good” when it comes to delivering high-quality care for children. To address this they say there needs to be a reset in relations, with a move towards partnerships based on mutual trust.

ADCS VIEW
WE NEED A STRATEGY FOR THE RIGHT HOMES IN THE RIGHT PLACES FOR ALL CHILDREN

By Steve Crocker, president of the Association of Directors of Children's Services

Children in our care deserve to live in homes that meet their needs as close as possible to the people and places they know. However, finding placements for children when and where they need them is a significant challenge because demand far outstrips supply.

Local authorities pay tens of thousands of pounds per week for places, yet providers can pick and choose which children to accept and at what cost. The Competition and Markets Authority has recognised the current market is not serving children well, all while the largest providers make “materially higher profits”.

Children's services have long operated in a mixed economy with private, voluntary and community providers involved in the delivery of services locally. However, the entry of private equity into the provision of fostering and residential care placements, and an ever-shrinking group of private providers is concerning, as is the eye-watering levels of borrowing and debts held by some private companies offering care placements. The risks associated with provider failure or withdrawal from the market are significant to children. Should this happen, no single local authority could step in.

ADCS has long called for the government to initiate a shift away from profiteering in the placements market and invest in new, not-for-profit provision, or help local authorities to do so.

The cost of placements is very worrying and financially problematic, but we also question whether the current offer meets the needs of children today, particularly where their needs are increasingly complex. Caring for children through homes that are fit for purpose, not maximising profits should always be the priority.

A comprehensive national placements strategy is needed to ensure the right homes are available in the right places for all children who need them, including our most vulnerable with complex needs.

REGIONAL CARE COMMISSIONING
PLANS GET CAUTIOUS WELCOME BUT CONCERNS REMAIN OVER FURTHER STRUCTURAL REORGANISATON

Drawing on evidence from the Competitions and Markets Authority (CMA), the Care Review put forward plans for the creation of regional care co-operatives (RCCs), new bodies that would consolidate functions currently performed by individual local authorities.

RCCs would be responsible for ensuring there is sufficient care provision in an area and planning for future needs; establishing and running new public sector fostering, residential and secure placements; and commissioning voluntary and private sector provided care.

Kevin Gallagher, managing director of Amberleigh Care, says that while the proposal risks “creating another layer between local authorities and services on the ground, the idea of more regional thinking is the right direction”.

“In more recent years and during a period of economic squeeze, demand for children's homes has been on the rise, as has complexity of need, so the diversity of specialist provisions required has increased.

“The reality of this is that some services can and should be commissioned locally, some will need to be sub-regional or regional, and there may even be a need for some national services – with rising complexity of need and technical systems as you see lower volume with higher acuity of need,” he says.

“Commissioning is a key vehicle to change the shape and profile of the sector – more audit of needs at regional level, more use of practice frameworks in specifications, that helps determine who is equipped to do what, hold providers to practice account much more robustly, demand social value, demand real and effective young people's voice in service design and delivery. These are the routes to increasing quality but also achieving better value from limited resources,” Gallagher adds.

Andrew Rome of Revolution Consulting warns a move to a regional approach reflects the weak position of councils when purchasing care places.

He agrees with Gallagher that, while regional structures may improve some elements within the residential care market, “another structural reorganisation misses the opportunity to focus on harmonised approaches to identifying need”.

“Agreeing focus and commitment levels among the participating local authorities is as much of a challenge as the commissioning of providers,” according to Rome.

However, Jonathan Stanley, manager of the National Centre of Excellence for Residential Child Care, says the use of regional commissioning will not “mitigate” the increased use of children's homes as a last resort.

“RCCs are not an intervention in the current process of destabilisation, dysfunction and domination,” he says, adding that, “it does not introduce meaningful assessment to ensure the right placement first time and it does not address right place at the right time for the right child”.

Stanley favours a focus on so-called relational commissioning which prioritises children's individual needs.

The government had not published its response to the Independent Review of Children's Social Care at time of going to press.