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OFT to examine price transparency in the care homes sector

35/04     3 March 2004

The OFT is to carry out a study to assess the impact of price information on competition and choice among nursing and residential care homes for older people. The market is worth approximately £9 billion per year. 
Download the full text of the OFT's reasoned response to the Consumers' Association super-complaint (pdf 232 kb).

The OFT plans to launch a market study in the near future in response to an informal super-complaint by the Consumers' Association. The study will examine:

• the context in which older people and their relatives make choices about a care home and how this affects competition in the market
• the ease with which prospective residents and their representatives can obtain sufficient clear and accurate information on fees and extra charges
• whether contracts offer sufficient transparency and protection against unreasonable price increases.

The study will assess price transparency for both self- and publicly-funded residents. This includes the transparency of core fees, top-up fees and payments for additional extras. 

In its complaint, the Consumers' Association raised a number of other concerns in relation to this market, such as the overall quality of contracts between care homes and residents, whether information flows are sufficient, the financial independence of residents and the adequacy of complaints procedures. The OFT does not propose to include these in its study. This is largely because of other relevant work already in hand or planned by the OFT, other government departments and regulators (see note 4). For example, the OFT only recently issued guidance on unfair terms in care home contracts and is currently taking enforcement action against a number of care home providers. The OFT has also published a consumer leaflet designed to help potential care home residents and their advisors assess whether the terms in a care home contract are fair (see press release 12/04).

The OFT was also asked to assess whether public authorities have buyer power and set fees that fail to cover the costs plus a reasonable margin of providing care home services. Of relevance this aspect of the super-complaint were the OFT's conclusions in the recent BetterCare decision under the Competition Act (see note 5). In this decision, the OFT stated that paying low purchase prices is only likely to amount to an abuse of a dominant position in exceptional circumstances. That remains the OFT's view.

 John Vickers, OFT Chairman, said:

'Serious questions have been raised about the adequacy of price information for potential care home residents and their representatives. Our study will make a thorough assessment of this and other factors which may have a bearing on competition and consumer choice in this market.'

NOTES

1. The market study will be carried out under section 5 of the Enterprise Act 2002, which came into force on 20 June 2003.

2. The Enterprise Act makes provision for designated consumer bodies to make super-complaints. A super-complaint, as defined by section 11(1) of the Act, is a complaint submitted by a designated consumer body that 'any feature, or combination of features, of a market in the UK for goods and services is or appears to be significantly harming the interests of consumers'. The Consumers' Association's (CA) application for designated status was being considered by the Secretary of State for Trade and Industry when it made this submission to the OFT on 5 December 2003, and has yet to be determined. The OFT decided nevertheless to treat the super-complaint as if the CA had been a designated consumer body and respond accordingly (see OFT statement).

3. Section 11(2) and 11(3)of the EA02 requires that the OFT must, within 90 days of receiving a super-complaint, publish a reasoned response saying what action, if any, it proposes to take.

4. The Department of Health is currently working to provide guidance on commercial contracts to providers and commissioners of care homes , and the OFT has offered to give its views on whether the terms and conditions proposed comply with the Unfair Terms in Consumer Contracts Regulations 1999 (where appropriate). The Welsh Assembly is considering producing similar guidance and the Scottish Executive has said that they would consider a similar initiative.

The Commission for Social Care Inspection takes over regulatory responsibility for care home providers from the National Care Standards Commission in England in April 2004. They are planning to improve care home inspection reports and to work with care home providers to identify criteria that can be used to assess service levels. Consumers will also be able to use the CSCI's website to search for all the care homes in their local area and find out more about the homes they are interested in.

The Care Standards Inspectorate for  Wales is currently working to make care home inspection reports more accessible by publishing copies on their website and also plans to make these reports more consumer friendly.

The Care Commission in Scotland is currently examining ways of making care home inspection reports more valuable to consumers and are working towards publishing these reports on their website. The Commission is also committed to producing an internet based register of care homes in Scotland, together with details of the services offered by each.

The OFT also notes that many of the recommendations set out in its 1998 report into the care home sector Older people as consumers in care homes (120 kb) have been addressed by the National Minimum Standards for care homes recently introduced in England and Wales, and National Care Standards in Scotland. Similar standards are currently being established in Northern Ireland.

5. The OFT's BetterCare decision under the Competition Act 1998, is published on the Public Register, reference CA98/09/2003. This covered the alleged practice of setting excessively low purchase prices by North & West Belfast Health & Social Services Trust (see also press release 171/03). 

6. Download the full text of the OFT's reasoned response to the Consumers' Association super-complaint (pdf 232 kb).

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