PLC Public Sector reports:
The recent decision of the High Court in R on the application of Forest Care Home Ltd and Others) v Pembrokeshire County Council highlights the tension between a local authority’s obligation under the National Assistance Act 1948 (NAA 1948) to provide the statutory care services that it is required to do and its fiduciary duty towards those who provide public funds.
The claimant company, Forest Care, owned and managed four care homes for the elderly. A number of the residents had been placed there by the County Council under its section 21 obligations in the NAA 1948; this section charges local social service authorities with the responsibility for making decisions as to who requires care and accommodation by reason of age, illness or disability. Under its section 21 duty, the County Council entered into a residential care services contract (umbrella service contract) with Forest Care but in relation to each resident placement the County Council and Forest Care signed a contract to provide residential/nursing accommodation and care that was specific to the particular resident. These individual contracts, which were expressly subject to the terms of the umbrella service contract, stated that the County Council’s scale of reimbursement for services were reviewed annually and revised charges, if applicable, would apply from a date in early April of each year.
Until 2008, the County Council had applied a historical weekly rate, which was increased annually to reflect inflation and similar factors; by the end of that financial year the weekly rate was £368. However, for several years, care providers including Forest Care had complained about the rates that were being paid and the Council therefore agreed to assess its fee rate based on an economic model. The model which it adopted, the Laing model, used data from those local care homes of a certain size which responded to the Council’s survey but, in populating the model in terms of level of care, the Council used national benchmark figures rather than the locally collected data and no differentiation was made between those residents who required nursing care and those who did not. In May 2009, the Council prepared a draft report concluding that, on the basis of the Laing model, the appropriate standard weekly fee per resident was £390 but that in future years an incentive to improve standards would be set at a maximum of £25. In June 2009, the Council accepted the recommendation in the report and for 2009-2010 set the weekly fee at £390, backdated to 1 April 2009.
In May 2010, the Council took a decision (for which there was no contemporaneous documentation) that because of the increasing financial constraints on the Council there would be no increase to the level of fee for the financial year ending 31 March 2011. In reaching that decision, the Council took into account:
- Its revenue budgets for that period.
- The fact that social services budgets were to be frozen.
- The fact that private sector residential care homes had not presented additional material evidence to justify an increase in funding.
At a meeting in June 2010, the Council informed Forest Care that the standard weekly rate was to continue to be £390 although the parties subsequently disagreed as to whether that rate had been fixed or was an interim rate pending the Council’s financial review. Although Forest Care continued to press for an increase in the rate to reflect their increased costs of service provision, the Council was adamant that the rate would remain at £390 and therefore Forest Care issued a claim for judicial review contending that such a fee was not commercially viable and that the Council had erred in setting the rate. In particular, it submitted that the Council had:
- Adopted a methodology which failed to deal properly with capital costs.
- Failed to use appropriate local data on the average number of care hours spent on each resident per week.
- Failed to recognise that the residents who required nursing care (for which the local health board was responsible) also required more non-nursing care for which the Council was responsible.
- Failed to take into account data from all care homes in Pembrokeshire, having based its calculations on data from only larger homes in the area (that is those homes with more than 20 or more registered places).
- Taken its decision based upon costs data collected from the financial year ending 31 March 2009 and, in calculating the rate, had failed to take into account factors such as inflation and the introduction of new Working Hours’ Regulations in April 2010 which increased the minimum holiday entitlement from 24 to 28 days.
- When determining the fee rate, taken into account its own limited resources which was an irrelevant consideration.
- Acted unlawfully in preventing Forest Care from seeking a contribution towards its costs from residents’ next-of-kin over and above the fee set and paid for by the Council. (In relation to this ground of challenge, the court agreed with the Council’s contention that there was no relevant public law decision that attracted relief in the Administrative Court and that by seeking a third party contribution Forest Care was in breach of their contracts with the Council.)
However, the High Court found that the Council’s decision-making process had been flawed and that, when deciding to retain weekly fees for 2010-2011 at the previous year’s rate, the Council had relied too heavily on the need to contain spending on care without giving sufficient consideration to the impact that decision would have on the quality of care provided to residents and the effect of rising costs on the care providers. It therefore ordered the Council to reconsider the rate and reach a decision by 31 January 2011. In accordance with that order, the Council took a decision to increase its weekly fees from £390 to £448.
The decision of the High Court, which will place pressure on local authorities to increase fees for care providers, reflects the 2010 guidance issued by the Welsh Assembly Government, under section 7 of the Local Authority Social Services Act 1970, which guidance:
- Notes the need for authorities charged with commissioning to take account of the providers’ costs and the factors that may affect them on the basis of good local evidence (paragraph 6.7).
- Confirms the need for authorities commissioning care services to comply with the Wales Improvement Programme policy of Best Value, which requires authorities to balance cost and quality (paragraphs 4.3 and 5.14).
- Notes that fee setting must take into account the legitimate current and future costs faced by providers as well as factors that affect those costs and the potential for improved performance and more cost-effective ways of working (paragraph 6.2).
Although a potential or even adverse consequence for providers or residents (or both) will not necessarily be determinative of a decision, and an authority does not have to guarantee that its decision will not have adverse consequences for some interested party, an authority cannot make a decision that may have such consequences without proper consideration of all the issues and compelling reasons for the decision that is taken. That requires an authority to identify any relevant risks and then assess those risks in terms of the chances of the adverse event occurring and the seriousness of the potential consequences if it does. For more information on decision-making and how an authority can avoid a legal challenge, see our practice note.
The Forest Care case demonstrates that even in the current difficult financial climate local social services authorities should not set contract prices mechanistically but should have regard to providers’ costs and efficiencies and planned outcomes for people using services, including patients. They should ensure that when making strategic or individual decisions, they have proper regard to the consequences such decisions will, or may, have on both providers and the residents of care homes, that they have a mechanism in place to discuss costs and performance with providers and ensure that their fee setting process take into account.
- The legitimate current and future costs faced by providers, as well as the factors affecting those costs.
- The potential for improved performance and more cost-effective ways of working.
However, it also important that this decision is contrasted with the position where an authority is not contracting with another party in order to fulfil a statutory duty. In this case, the authority’s decision was amenable to judicial review as it impacted directly on its compliance with section 21 of the NAA 1948. Where an authority contracts for a service other than to fulfil a statutory duty, it will be free to agree such financial provisions as it can negotiate with the other party. It will then be able to act in accordance with those provisions by, for example, refusing to grant an annual increase in the contract price payable if the contract allows it to do so.