Another council loses High Court battle over fees for care home providers

Redcar and Cleveland Borough Council has become the latest local authority to be successfully challenged in the courts by care home providers over its proposed level of fees.

The claimants in Redcar and Cleveland Independent Providers Association & Ors, R (on the application of) v Redcar and Cleveland Borough Council [2013] EWHC 4 represented more than 80% of homes for the elderly in the area.

The dispute followed an annual review which took place in March/April 2012. The claimants sought to challenge two decisions:

• The decision to set the particular rates for 2012/13 effectively reducing the rates below that which the council paid the previous year; and
• the decision to remove from the authority's provider list all care home operators who did not agree to accept the council's new contractual framework by 23 April 2012.

The claimant advanced a number of grounds of challenge. These were that:

1. the council had failed or failed properly, contrary to relevant guidance, to assess and to take into account the actual cost of care;
2. in failing to equip itself with knowledge of the actual cost of care, the council had not been in a position properly to assess the risks to care homes and their residents contrary to its obligations under Article 8 ECHR and/or common law;
3. in failing to equip itself with knowledge of the actual cost of care the council had been unable to give proper consideration to the longer term financial viability of care homes, despite having stated that this was a consideration to which it had regard in the formulation of the fee rates for 2012/13;
4. the council failed properly to consult with care home providers; and
5. the council may not, consistent with the relevant statutory directions, maintain a closed list of care homes in which it will place residents.

His Honour Judge Gosnell ruled that, on the facts, Redcar and Cleveland had failed or failed properly to assess and have due regard to the actual costs of care, in particular in relation to local factors.

The judge said his finding on the first ground meant he did not have to make a ruling on the second and third grounds.

On the fifth ground, he said that the claimants succeeded to a limited extent.

HHJ Gosnell did, however, conclude that the local authority complied with its duty to consult.

The judge declared that the 12 March 2012 decision to set the fee rates for 2012 /13 in the rates specified in the letter of 16 March 2012 was unlawful. (The council had in fact decided not to put in place its decision to reduce payments by £14 per week.)

HHJ Gosnell also said the claimants were entitled to a declaration that they should not be excluded from any list of care homes with whom the council is prepared to contract (on its own terms).

He also ordered the defendants to make a new decision to fix fees for the 2012/13 period and was prepared to hear representations as to how long this process is likely to take.

Cllr Sheelagh Clarke, Cabinet Member for Health & Social Wellbeing at Redcar and Cleveland, said: “Whilst we are disappointed with the result, it is a fact that we have paid the highest rate for residential care of any local authority in the North-East.
 
“The council has always been committed to making sure people in residential care receive a high-quality service. However, in these difficult financial times, we must make sure that we receive value for money and make every penny count."

Cllr Clarke added that the local authority would now undertake a new fee-setting process in consultation with providers to make sure that it paid the right price for the right care.

"The council is also proposing to introduce a new quality reward scheme, which would be implemented in April this year," she said. "The scheme is designed to help improve the quality of care for residential care home residents by rewarding financially those homes that continue to improve the standards of care.” 

The Redcar and Cleveland case is the latest in a series of disputes between local authorities and care home providers.

In November last year, Devon County Council vowed to appeal a High Court ruling that it breached the public sector equality duty when setting care home fees for 2012/13.

The council said it wanted “to draw a line in the sand over future legal challenges and put a stop to ‘excessive, costly and unreasonable bureaucracy’ surrounding the legal interpretation" of the duty.

HHJ Milwyn Harman QC ruled that Devon had failed to give sufficient consideration to equalities.

Following the ruling, Devon conducted an extended impact assessment but decided against changing its fee structures or levels.

Only a month before, Newcastle City Council also vowed to appeal an adverse High Court ruling over the rates it proposed paying providers, similarly claiming it was time to “draw a line in the sand”.

HHJ Gosnell, who also heard this case, found in favour of the claimant care home providers on all four grounds they put forward. These included that the council had failed to inform itself of the costs to care home providers of providing services before setting its rates and so acted contrary to the relevant guidance.

Newcastle’s director of commissioning Rachel Baillie said about its plans to take the case to the Court of Appeal: “At the heart of this issue is an important point of principle. We believe that whilst the council has a moral and legal duty to look after our most vulnerable people, we have no duty to guarantee healthy profits to the companies that do it on our behalf.

“We cannot continue to spend a large proportion of our social care budget – which will come under increasing strain over the years ahead - on what we believe is an unsustainable industry which suffers from chronic over-capacity sustained by unrealistically high profit margins.”

She also expressed the hope that the courts would give councils the guidance they needed to reach agreement with care home providers in a way that was “reasonable and affordable in the current financial climate”.

In February 2012, Neath Port Talbot Borough Council recorded a rare win following a challenge to its rates for 2011/12, when it proposed an overall increase of more than 5%.

However, in 2011 a string of local authorities lost cases. They were Pembrokeshire County Coucncil (twice – once over its original decision and then again over its retaken decision), Sefton Council and Leicestershire County Council.

Philip Hoult