Peter Davis and Andrew Hockley - CMA’s care homes market study - Tuesday 18 July 2017

The Competition and Markets Authority’s (CMA) study of the care home sector had begun last December, head of BLP’s Antitrust and Competition Group, Andrew Hockley, told delegates in his introduction, with a remit to look at care homes and nursing homes for the elderly across the UK, understand why they may not be working well for residents and their families, and identify potential solutions. This had followed complaints from Age Concern, Citizens Advice and others.

Eight months into the study, an update paper had been published that identified many of the same problems as a previous study from 2005, and although in many ways this painted “a bleak picture” the CMA had not initiated a market investigation – something that would have resulted in orders requiring the industry to change its practice.

“When I read the first half of this document I was struggling to see why the answer was no market investigation,” Peter Davis told the seminar. “In other sectors, the issues identified have led to enough concern for the CMA to want to go further.” Potential explanations for this included the sheer number of organisations active in the sector and lack of national concentration, the study’s findings on profitability, and a “general reticence to get sectors with very significant social funding too involved in a political hot potato without a clear route towards solutions”, he pointed out.

However, despite the cost and resources involved, “if we thought there were serious problems then an investigation would at least be an opportunity for an evidence-led process with reasonably sensible thinking about the issues at hand”, he stated. “So the positives are that we avoid the costs, but for stakeholders who might welcome some scrutiny in terms of the regulatory framework, this is clearly a missed opportunity”.

The evidence presented in the document had also been “pretty thin’ in places, he said. “Some aspects of the findings don’t jump out as obvious, and there are a lot of questions around consistency and persuasiveness. So in one way – limited regulatory oversight, at least in the short-term – it’s a great outcome, but in other ways it’s not.”

Although non-ministerial, the CMA was still a government body, which meant the “role of politics is certainly there”, he stressed. At a practical level, CMA staff would be meeting with relevant teams in both government departments and local authorities, and ordinarily the CMA would be working behind the scenes to secure stakeholder buy-in, he explained. “They will only cross swords with these departments when they believe the place the government wants to go is the wrong place.”

In terms of the study’s findings, choice was not working as it should when it came to driving improvements, delegates heard. However, while this was a response “everyone could end up living with” it was also surprising in the context of the CMA’s evolution of ideas. “The direction of travel has been towards scepticism around information-driven solutions alone for market problems”, and the study also focused on choice regarding initial purchase decisions rather than barriers to switching provider.

While other issues raised included competition and redress, consumer protection and investment and funding challenges, overall “the remedies discussed seem to be very preliminary”, he told the seminar. “With a few exceptions, we’re really dealing with generalities and direction of travel here.” The CMA had not done any serious analysis on the impact of capacity in terms of limiting choice, for example, although it had set out concerns regarding the growth in the number of potential care home residents between now and 2030, and barriers to expansion such as local authority funding.

“Their real concern is whether there’s an incentive to build in advance of this growth. The world they’re painting is one where we have all that demand and no capacity, and as a result fees go up in a way that the market won’t be able to respond to at the time. It’s an interesting question as to whether that’s the case.”