Jonny Landau considers what the Sefton judgment means for the care sector.
Following a year of unprecedented challenges to the care sector, a High Court judgment on fees offers a welcome ray of hope. The Sefton Care Association and several of its member care homes successfully challenged Sefton Council’s decision to freeze care home fees in a case which will have wide implications for the care sector.
About the Judgment
In February 2010, Sefton Council informed care providers that there would be no increase in fees for 2010/11. Later that month, representatives of the Care Association met with the council at which meeting the council stated that it was facing a significant overspend on community care in 2010/11 and given the economic climate, was not able to support any increase in fees for that financial year. Unlike in previous years, the council did not consult with providers about the freeze before making a decision. There was similarly no consultation with providers (nor even communication with providers) about a proposal to maintain the freeze over the following three years to make savings to address budgetary pressures.
The High Court found that Sefton’s decision to freeze fees was unlawful. The reasoning was as follows:
1. Local authorities are required to follow statutory Guidance or otherwise provide good reasons for departing from it.
2. In any event, a local authority may not take a substantially different course from Guidance.
3. The Choice of Accommodation Directions provide a statutory right for a service user to be accommodated in residential care of his choice providing that this would not require the authority to pay more than they would usually expect to pay having regard to his assessed needs. This is generally known as the ‘usual cost’ of care.
4. Guidance has been issued on the Choice of Accommodation Directions which includes the following:
(a) The usual cost of care should be sufficient to meet the assessed needs of supported residents in residential accommodation.
(b) A council should set more than one usual cost where the costs of providing residential accommodation to specific groups is different.
(c) In setting and reviewing the usual costs, councils should have due regard to the actual costs of providing care and other local factors.
(d) When setting its usual cost(s) a council should be able to demonstrate that this cost is sufficient to allow it to meet assessed care needs and to provide residents with the level of care services that they could reasonably expect to receive if the possibility of resident and third party contributions did not exist.
5. In addition to formal statutory Guidance, the Department of Health issued an Agreement between the statutory and independent social care, health care and housing sectors which stressed the need for commissioners to work in partnership with providers and not use their position of dominance to drive down prices.
6. It made little difference whether or not the Agreement constituted formal Guidance; the council was still bound to either follow it or justify departing from it.
7. In fixing the fees, Sefton failed to adequately to investigate or address the actual cost with the Claimants which breached the Guidance and Agreement.
8. The Council’s risk assessments regarding the fees freeze would be invalidated if it emerged that the usual cost falls significantly below the actual cost.
9. Sefton also failed to have regard to local factors as its decision was not based on costs at all.
10. The Council also failed to consult with providers and that failure alone would have been sufficient to justify quashing the decision to freeze fees.
Two main propositions arise from the judgments:
(1) Local authorities must set rate(s) of usual care based on the ACTUAL cost of care; and
(2) Local authorities must adequately consult with providers when setting the rate.
What this means for providers
Providers are concerned that fees do not reflect the true cost of care in their area can have increased confidence about the chances of success of challenging the rates in public law as well as in private law. Contract law, a private law remedy, only protects providers from commissioners unilaterally reducing rates in breach of contract. Sefton goes further by providing a remedy where local authorities do not necessarily reduce fees, but fail to reflect increases in costs associated with general inflation and other cost related matters (such as increases in minimum wages).
Providers facing freezes should contact their commissioners and ask them to either provide reasonable increases or otherwise provide details about how the usual cost rate was set and the process of consultation. In many cases, such correspondence alone may be sufficient to result in a positive response as the local authority may have failed to follow the correct procedure and may be keen to avoid legal challenges. In other cases, commissioners may seek detailed breakdowns of costs and providers may need to provide such information if they wish to persuade commissioners that proposed fees are insufficient. Of course, any information shared should be provided on a written undertaking that it is not shared or used for any other purpose. If these strategies are not fruitful, providers can consider seeking legal advice to challenge the local authority relying on the Sefton judgment.
The judgment is undoubtedly good news for both service users and providers. The risk of high quality services exiting the market due to operating losses is now somewhat mitigated. The message for commissioners is clear: whatever budgetary pressures they may face, it is not acceptable to unilaterally impose fees that fail to reflect a truly fair cost of care.