Home care market: understanding and mitigating failure

The CHIP commissioning team ran a roundtable discussion in October 2021 with the East Midlands ADASS team and the Nuffield Trust to explore understanding and mitigating failure in the home care market.


  • The Nuffield Trust was commissioned by the LGA and ADASS to deliver a ‘pre-mortem’ style roundtable, to understand the potential causes of, and solutions to, provider failure within a region. 
  • In preparatory meetings, it was agreed that failure in council-funded home care (domiciliary care) - as opposed to residential care - is of significant concern at present. 
  • The roundtable brought together local and regional commissioners, providers, and regulators from the East Midlands region. The aim of the session was to identify the causes of failure; the problems that could arise when dealing with it; and potential actions that could be taken to mitigate impacts and prevent failure in future.
  • The following draws together a summary of the main discussions during the session with existing knowledge and evidence of the home care market and broader social care context.
  • It first outlines the root causes of failure in the region as identified by participants, then identify actions that could be taken by different people in the local system to mitigate impacts, prevent future failure and to better manage providers on the brink of exiting the market.

What is a pre-mortem?

A pre-mortem is a structured exercise where participants imagine themselves in a future scenario where failure has occurred and work backwards to avoid failure. In this case, we examined failure of the local home care market and discussed how the current situation could be handled differently to mitigate known challenges and prevent widespread system failure.

Example questions posed to participants

  • How did we get here?
  • Which opportunities were missed to prevent the situation arising? Why?
  • What can we start/stop doing now to prevent the situation escalating? What can we do differently in future to stop this happening again?
  • Who needs to take action/do things differently?

Conceptualising failure

What is market failure in this context?

Provider failure can take a number of forms but the main three discussed in this work include the following (note that not all are mutually exclusive): Quality failure (of an individual provider): this would occur where a provider would be forced to hand back contracts over quality or safety concerns, usually following a poor rating by the regulator (CQC).

Financial failure (of an individual provider): this would occur in the event a provider was no longer financially viable due to cash flow issues.  System failure: this would occur where large numbers of people were waiting for care and support, and what was available was not of good quality – due to an undersupply of care providers. 

Focus in the East Midlands

Although there was concern among participants about closures of individual large home care providers which provide care across the region, the main focus of concern at present is on wider 'system failure' where demand for care cannot be met by current capacity. Participants were in agreement that, while they are accustomed to pressures in the social care provider market, the situation at present feels unusually severe and that system failure felt like a realistic scenario in the near future rather than a distant prospect.

Context in the East Midlands

  • Geography: High levels of rurality in some councils
  • Regionality: It was noted that a significant proportion of providers (particularly larger providers) operate across many council boundaries – and employ people across a wide geographical area. 
  • Demand: There has been sharp growth in demand for home care driven in part by changing preferences & impact of COVID-19
  • Market: Entry and exit in home care is relatively common nationally (CQC) and this trend has been observed in this region
  • Funding: Reduction in national funding to councils has put pressure on fees paid to providers.

What factors contribute to failure

Participants were asked to look back in time to identify the key factors that had contributed to the situation of system failure they found themselves in. The factors are interlinked and complex but fall into four main categories, each of which are explored next, alongside potential actions for preventing or mitigating the situation now and in future. Recommendations for different parts of the system follow.  


Provider funding and financial management


Market management and intelligence


Rapid increases in demand: The ADASS summer survey found that demand for care rose sharply over summer 2021. The waiting list for care assessment, review and placement rose by 26 per cent June – August. Participants in the East Midlands event indicated that this national trend was reflected in what they were seeing in the region. The rapid increase in demand for home care in the East Midlands is felt to be due to factors similar to those across the country: principally, people being nervous of residential care due to the perceived risks of COVID infection as well as concerns over visiting restrictions. As a result, demand for residential care has dropped and demand for home care has increased. 

Rising complexity: Some participants at the event also reflected national shifts in complexity. Rapid discharges from hospital combined with people who may have held back from accessing care during the pandemic meant that service users coming into the service have a greater acuity of need on average than pre-pandemic. 

Decreasing capacity: Councils across the country (and strongly echoed at the East Midlands event) are finding it increasingly difficult to find sufficient capacity in the market to meet the heightened demand. Local contextual factors, such as rurality, add a layer of complexity in meeting demand and in considering the preferences of clients (e.g. around timing of visits). .

Key reflections: Council commissioners at the event reflected that, pre-COVID, a provider exiting the market could be relatively well managed by moving their contracts onto other providers, but this was no longer possible as the remaining providers are unable to take on new placements. The mismatch between capacity and demand was felt by many commissioners and providers at the event to be acute and growing. Councils across the region shared different approaches to identifying providers that are struggling.

Potential areas for action: There may be scope for councils and providers to work more closely together to co-ordinate approaches to contracting There is potential for councils and providers to more proactively discuss packages of care to ensure they are appropriate to need. Councils could more systematically learn from each other's approaches to identifying early warning signs of a provider struggling – there may be a role for regions in facilitating this providers should be encouraged to be proactive about flagging to councils that they are struggling.

Case study: One local authority - where service users were particularly spread out and hard to get to -was currently grappling with over 300 people waiting to begin home care.

Provider funding and financial management

Fees: It has been documented that pressure on council budgets has resulted in many councils being unable to pay providers rates that adequately cover costs and incentivise innovation (NAO 2021). According to recent data, only one region in the East Midlands was able to pay higher, on average, than the Homecare Association’s minimum price for care of £21.43/hour, and there was significant variation across the region (Homecare Association 2021). At the same time, providers have been facing rising costs as a result of covid-19 (e.g. staff sickness, PPE) and increases in the national living wage. 

Profit margins: Home care providers who are focused on the publicly-funded market run on tight margins (2019 rates; NAO 2021), and as such are vulnerable to sudden cost pressures. One provider at our roundtable described average profit levels at around 2-2.2.5%, a figure in line with the NAO’s recent report which finds that 39% of the largest for-profit home care providers had a profit of less than 5% (in 2019; NAO 2021). Narrow margins mean providers are less able to absorb sudden cost increases and are less able to invest in new infrastructure.  

Cash flow issues:  Short-term cash flow issues were described as the key factor that could push a provider over the edge. Several providers at the event described challenges in obtaining affordable insurance, and recent hikes in fuel and energy costs have created additional pressures. These external cost pressures can lead to providers to experience issues with short-term cash flow. Some at the event have turned to factoring companies. 

Key reflections: Participants reported that the combination of the long-standing pressures on council fees, combined with current drivers of cost, meant the scale of these pressures on home care providers felt unprecedented. It was not clear from the conversations how widespread the use of factoring companies is but that is an indicator of serious cash flow issues and likely to put further pressure on already tight margins.

Potential areas for action: Councils should make efforts to understand the extent of use of factoring companies at  the point of procurement and beyond. Councils could proactively discuss with providers actions they could take to help manage financial flows

Case study: Commissioners described to us some recent experiences of providers handing back contracts at very short notice (less than 24h) due to cash flow issues. Some of these issues were linked to factoring companies being used by providers.  


Recruitment and retention challenges: While the care sector has traditionally experienced challenges around recruiting and retaining staff, the pandemic has exacerbated these pressures. Low pay and unfavourable contractual conditions (e.g. zero hours contracts and lack of career progression) have been long-standing issues. Economic conditions are such that social care providers are competing with other (often higher paid) industries and changes to immigration rules mean employers cannot easily recruit from abroad. COVID continues to heap pressure on the workforce: for example, one commissioner had faced a very sudden hand back of contracts from a provider whose staff were all self-isolating. 

Competitiveness of providers: Compared to other sectors, home care providers have limited flexibility to compete against other businesses to recruit staff. Our participants referred to competing sectors, such as health and retail, who were attracting their staff.  £9/hour is the average rate of pay for care workers in the East Midlands (Skills for Care 2021). In an extreme example of this competition, Amazon had recently opened up a warehouse in the East Midlands region with a £3,000 sign-on bonus for staff. 

Key reflections: Providers’ ability to recruit care staff was clearly felt by all participants to be the biggest pressure on the system. As one provider described it, “we’ve never had a negative trend of leavers versus joiners before”, leading providers to compete over staff (but not over contracts). Another recalled that they had lost 20 per cent of their workforce at the beginning of the pandemic from staff leaving from fear of Covid-19 – a 20 per cent they had not been able to recuperate recover in the last 18 months. 

Potential areas for action: Councils could take proactive action to engage with staff in exiting providers to ensure they don’t leave the sector Action could be taken at national level to remove obstacles in the recruitment process (e.g. accelerated access to driving licenses) 

Case study: One agency at the event had interviewed over 250 people for an entry-level care job, of which 170 were deemed to have the appropriate qualities to work in social care. Of those, only 45 attended the induction training, and around 80% of these people were unable to drive, meaning they could not easily attend home visits further than 10 minutes from their place of residence. Having then understood the nature of the work, only 10 continued to full employment, and even then some of the new recruits had restrictions on their working hours as they were in receipt of benefits. The agency felt that the sector’s bad name as a result of the pandemic had put many people off considering employment in social care. 

Market management

Local commissioning capacity: Downward pressures on budgets in recent years have had a knock-on effect on the capacity councils have for commissioning. Councils across the country vary in size and experience of their commissioning teams, and this can affect the level of knowledge they possess about their local markets and the extent to which they can develop and sustain relationships with providers. This national picture was reflected in conversations at the event.  Managing unplanned exits. Councils who attended the event said their biggest concern was where exits could happen unexpectedly. Commissioners recounted experiences of providers handing back sizeable contracts “at the very last minute” – such as 60 packages with no notice. Reasons given for unplanned exits included CQC inspections, use of factoring companies, and sudden changes to staffing such as self-isolation. 

Signposting support: Participants at the event gave examples of challenges that can be faced by new provider companies. Some participants had experience of new companies that had been set up by ex-care staff, with excellent knowledge of care, but with limited experience in business management. They felt that there could be better signposting of existing support (through Skills for Care for example) to ensure new entrants thrive. 

Key reflections: Some participants suggested that limited commissioning capacity in some councils hindered their ability to be proactive – meaning councils would only be able to take action when problems with providers became confirmed. One commissioner asked providers whether the councils they worked with were doing enough to support them and a constructive conversation then explored what more could be done (reflected in recommendations).

Potential areas for improvement: Better signposting of existing available support for providers; improve links between commissioners and providers; share good practice across councils for managing unplanned exits; providers and councils should have regular contact where any issues can be flagged early.

Case studies: Some councils had made emergency payments over a fortnight to “buy more time” to ensure they could smoothly shift staff and packages from the exiting provider to an incumbent provider with limited impacts on those drawing on care.

Recommendations: councils

Communication is the next big thing [after funding] and giving reassurance to staff who have a deep relationship with the clients they see… A joined approach between the local authority and new provider can make the difference around how people feel.”

Short term recommendations

  • Foster a more collaborative approach between councils across a region to enable greater pooling of resources, knowledge, and information across the region. Pooling of knowledge could help to develop a more comprehensive view of the dynamics of the market. Where this is not already the case, regional cross-council intelligence-sharing could be made into a more formalised and regular process. This could include:
  • A more coordinated approach to procurement could avoid the situation where multiple councils engage in re-procurement at the same time, creating administrative burdens and financial instability. Exchanging learning around managing provider exits within an area, and sharing good practice around risk registers and identifying early warning signs of provider struggles.
  • Increase visibility, be more proactive, and offer reassurance towards struggling providers and their staff to foster a more open culture where issues could be flagged early and collaboratively addressed. Improved commissioner-provider relationships have the potential to generate robust knowledge of the critical points at which an organisation can be supported and may prevent provider exit.
  • There is a key role for the council in preventing staff from losing their employment. A more proactive approach to managing provider exits could help with retention rates as it is likely that a provider exiting the market is a key point at which a member of staff may be tempted to move sectors. Councils could engage better with staff around their concerns and appeal to their commitment to their clients as an incentive to remain with a new provider. This reassurance around continued employment and service continuity is more often given in residential care in the event of provider exit, and learning could be transferred to home care. 

Practical recommendations

Providers hoped that commissioners could take a more relationship-based approach to working with them. For instance, through:

  • regular conversations with a consistent contact within the local authority
  • joint meetings between commissioning teams and providers, which could connect providers around shared challenges
  • building ‘incentives to grow’ for providers into contracts.

Councils could be well placed to help providers retain and reward care staff at little cost – perhaps by securing priority access to fuel or shopping hours, or by partnering with local businesses to get staff discounts akin to those we often see for NHS workers.

Recommendations: providers

Engage in mutual aid initiatives: Mutual aid and collaboration between providers was seen by both commissioners and providers to hold many benefits and to be achievable without divulging commercially-sensitive information. Several providers who attended the roundtable were members of local care and support alliances, and were very receptive to new members. There is scope for more experienced providers in care alliances to offer support to new market entrants, for instance sharing learning or signposting resources to help with business management.

Come forward to councils early with concerns: Several commissioners highlighted emergency situations where a provider had handed back contracts with little to no notice. One council had, several years ago, gone as far as having to send council staff out to deliver care to ensure people drawing on care did not lose out. Reasons highlighted for unexpected exists from the market included:

  • accumulation of issues outside of providers’ control
  • challenges around business management
  • limited awareness among managers of the extent of systemic issues.

Flag packages that could be adapted as people’s needs change. Several providers noted they had identified a small number of care packages that could be changed or reduced as need had changed, and could potentially free up some capacity. Providers should continue to work collaboratively with councils to identify whether care packages can be changed appropriately, according to people’s needs. Some participants noted that while in some councils this happened “seamlessly”, in others these conversations had been more difficult.

Peer support systems, the local care alliance, can perhaps give providers spaces to talk about areas where their business might be wobbling, and that they wouldn't necessarily go straight to the local authority about.”

Practical recommendations: It is clear that the earlier a provider can approach the local authority with concerns, the more easily the situation can be managed. Providers should seek as much as possible to proactively identify potential issues and work with the council to try and mitigate these – or at the very least mitigate their consequences if they are outside of providers’ control.

Recommendations: system-wide

Department of Health and Social Care

Short term: Better cross-departmental coordination on specific issues. Delays in accessing to driving licenses (approximately six months) were exacerbating the already excessive staffing pressures. Participants questioned whether the Department could have a role in coordinating government departments to accelerate access for people working in social care. In the event of future fuel shortages, the Department should also consider putting social care staff on a priority list to access fuel.

Short term: Support with insurance. Many providers were struggling to get themselves reinsured, which was putting pressure on their cash flow. The Department coordinated cross-government collaborative working in the Winter of 2020-21 to understand access to insurance for providers and is continuing to do so ahead of Winter 2021-22. The extent of reinsurance issues should be appraised and action taken to support providers where necessary. 

Medium term: Facilitating better data/intelligence. Supporting and improving councils’ ability to undertake market shaping could also include developing councils’ infrastructure around data and intelligence, for example assessing how the use of Market Position Statements can be improved to aid with market shaping investment. 

Care Quality Commission

Medium term: Participants suggested some areas of improvement for the regulator around more supportive relationships with providers and commissioners. For example, CQC could have a more proactive approach to registration and continuous registration, identifying and inspecting new entrants at an earlier date and signposting managers to helpful resources such as Skills for Care’s resources on management, leadership, and staff development. Local authority networks and provider alliances can also help to identify these resources.