How the country gets the most from the independent residential sector in these challenging times

September’s Care Conversation event heard from Southern Cross Healthcare CEO Jamie Buchan about the outlook for the independent residential sector in a challenging climate.

‘Southern Cross is very big by any standards, and certainly for this industry,’ Jamie Buchan told delegates. The organisation had been created through a series of acquisitions and now had 44,000 staff and 33,000 residents in more than 750 homes. Of these, however, only five or six were freeholds. ‘We pretty much lease everything,’ he said.

Along with the rest of the sector, Southern Cross faced a challenging macro environment, he told delegates, with the average length of stay in a care home now 13-14 months. ‘These are very, very frail older people with a much higher dependency than ever before, at a time when fees are being reduced. The cost pressures are relentless.’

Sixty per cent of the organisation’s costs were staff related, he said, alongside 22 per cent rent and 13 per cent home running costs. ‘It’s a thin model with high operational gearing, and costs don’t move in a linear fashion. There are regulatory issues – we need a certain number of staff per resident – and rents are inflexible.’

To a degree the industry was in a ‘perfect storm’ he stressed, with huge revenue challenges combined with the pressures of maintaining people in their homes for longer and the upcoming Comprehensive Spending Review. ‘The macro environment is in turmoil,’ he said.

Southern Cross, however, had put in place a programme of transformation, based in part on the New Horizons programme launched last year. Before the current management team had taken over there had been no real vision for the business, he said, with poor morale, high staff turnover and negligible marketing. However the new team had successfully set about improving care standards, aligning the business with the needs of the market and community and enhancing revenue while controlling costs.

‘Having better quality staff is good business in our business,’ he said. However, the industry as a whole needed to address staff issues, he stressed. ‘We need to get much more real about terms and conditions.’ The Care Quality Commission’s abandonment of the star ratings system had also been a ‘huge disappointment’, he said, and risked bringing about a ‘plethora of costly care standards’.

Southern Cross had now established a core function charged with driving service quality, he told delegates. However the industry as a whole needed to become much more comfortable with talking about selling in the context of care. ‘Sales is a dirty word in this industry. But there’s a linkage between sales and marketing and driving up standards – it should be a virtuous circle.’

The new executive team had been decentralising the organisation, he said, moving it closer to carers, home managers and residents. ‘That’s a huge intervention in a business of our scale. We’ve got a very small head office and everything else is out in the field.’

In terms of the future, the personalisation of health budgets was a positive development – ‘you can have a much better dialogue’ – and the industry was undoubtedly moving further in the direction of privately-funded residents. ‘The health service will also have to outsource more, and local authorities will have to partner with providers,’ he said.

When it came to industry priorities, however, cost transparency was essential, for example in shining a spotlight on local authority inefficiencies. ‘We also desperately need to get real about what funding mechanisms should be – commissioning needs to take a new shape. We’re also real fans of streamlined regulation,’ he said, with Southern Cross one of the few organisations in the sector that actively regulated its own homes. The current regulatory situation was ‘hugely time consuming and confusing’ for the industry, he told delegates.

The future also promised more consolidation in the industry as a whole. ‘If you look down the pipe you see acuity requirements going up, regulatory requirements going up, training requirements going up and the personalisation agenda requiring better marketing. Larger operators will be needed to drive the industry.’