In need of care

Nursing homes have had enough of receiving whatever rates local councils feel like paying and many are turning to the courts. Belinda Schwehr asks: is the state shirking its duties?

Various legal proceedings are considering the allegation that local authorities have been getting away with underpaying care homes for years. Having made the most of over-supply, councils typically pay less than the cost of seven nights' accommodation in a Travelodge, for 24-hour residential and nursing care of people too vulnerable to live independently at home.

The environmental standards in the new Care Standards Act, the minimum wage, the recruitment crisis in social care, and steadily rising land values have led to a downsizing of the market by around 10 per cent in the past 18 months. This trend has resulted in an under-supply and a consequential shift in the balance of power.

Care homes in different parts of the country have united and started to agitate for a 'fair' price related to the actual cost of care plus a reasonable profit. Councils with fixed-term contracts but ongoing duties to the people already in those beds, have faced revolt at their usual approach to commissioning – traditionally involving the unilateral imposition of a fee along with the message, 'take it or leave it', and the plaintive plea, 'we haven't got any more money'.

The more sophisticated councils have suggested that providers accept their offers and have the balance 'topped up' by a resident's relatives. This is all very well for rooms that are offering a better than standard service, but providers have finally woken up to the inequity of charging private clients more than council-placed clients for exactly the same services. They make the point that the law expects neither them nor the resident's relatives to subsidise the statutory duty of the authorities to fund standard care for those who cannot afford it themselves.

Those providers whose contracts have already expired without formal agreement for renewal have been assisted by the stand taken by a Mr Jones against the Isle of Wight council, for his right to a quantum meruit, to claim for services performed. Having stipulated his terms for future provision of services before his contract expired, he successfully sued the council in the local county court for the excess amount after that received from the council. The judge remarked that the statutory duty to provide care imposed a heavy responsibility to avoid the spectre of residents who are dependent on the council but in private sector beds, and unprotected by contract.

Two of Durham's care homes are awaiting judgment in a similar scenario. In Lincolnshire, 12 homes represented by Mayer Brown Rowe & Maw's public law group are about to issue proceedings for around £300,000 between them, in the absence of a last-minute offer.

Use of the public law courts has not been so successful. Two sets of homes have brought judicial review proceedings against authorities, challenging their price-setting approach and unwillingness to negotiate on a fair basis. The judgment in Birmingham Consortium of Care Homes v Birmingham City Council went against the homes, but on the evidence rather than lack of standing or any wider principle. More than 75 per cent of the other homes in the area had ultimately accepted the price offered, so it was impossible to establish that the offer was unreasonable or arbitrary. However, Mr Justice Burnton emphasised that the council had to bear in mind the existence of its absolute statutory duty to provide care for all those assessed as being in need of care and attention. In another case, where there are simply not enough beds available at the price the authority is prepared to pay, the duty will not be able to be discharged, taking into account the inappropriateness of routinely placing people too far away from their partners, relatives and communities – and the fees will have to increase.

A third route available to providers is the Competition Commission. Nursing home group BetterCare has already used the Competition Act route and established that social care commissioning, although it is a public service, is an 'undertaking' for the purposes of the competition framework. The Directorate General of Foreign Trade argued that there was no economic activity in question because the activity was the purchase of care for those who could not afford it for themselves, in respect of which there could never be a private sector equivalent. The tribunal refused to accept that point, citing the existence of charitable provision, shared costs between users and families and cross-subsidy from privately contracting users, and finding that there was nothing quintessentially governmental about the provision of care for vulnerable people. The imbalance arising from the possibility that the care homes would be bound by the competition framework while the councils would not was a major factor in this decision.

No decision has been made about whether the stance of the Health and Social Care Trust was actually anti-competitive – this now has to be reconsidered by the Director. The evidence included the fact that the trust's own beds cost £70 per week more than the trust was willing to pay private sector suppliers. However, the possibility of exemption still exists on the basis that the competition rules would 'obstruct' the performance of functions of general economic importance. Then again, it would be hard for any government to champion the public private partnership as the best-value route for public services while excusing the state for an approach towards that partnership based on its own market position as dominant purchaser, which actively distorts competition.

From the lawyer's viewpoint, there will be issues as to which remedy, if any, is the most powerful. One route the Competition Commission offers is the prospect of a penalty; the Administrative Court route leads to the potential invalidity of the offered fee; the quantum meruit route brings a money judgment, but only for services already rendered so is not for the long-term future. The existence of a continuing contract between the home and the authority would prevent a quantum meruit action, and would be likely to make judicial review impossible, because of the caselaw around the public/private law divide. It also remains to be seen whether the Administrative Court will require providers to use the Competition Commission route first, as an equally efficacious and convenient remedy to judicial review.

The moral for lawyers must surely be that health and social care law is becoming steadily more mainstream, for high street and commercial firms.

Belinda Schwehr is a senior lawyer in Mayer Brown Rowe & Maw's public law group