Why has the CMA warned care home operators about contracts with residents?

It has now published guidance that relates to all care homes and nursing homes for the over-65s, regardless of residents’ funding methods, which could have wide-reaching implications for businesses in the field.

All of this came about after press reports of families being asked to pay accommodation and service charges after the death of residents, as well as stories about residents finding hidden charges in their contracts and receiving unexpected bills and confusing requests for top-up payments.

In addition, earlier this year a leading care home provider was made to pay 1,500 people around £2m in compensation after charging upfront fees to those who had not actually secured places in a home.

Can the industry do better? The CMA seems to think so. Its new guidance tackles four key areas of concern, namely: (1) the provision of accurate and sufficient upfront information; (2) treating residents fairly – this includes ensuring that any contractual terms must be fair or risk being found unenforceable; (3) quality of service – care and building standards and equipment must be provided in accordance with standards imposed by industry regulators including the Care Quality Commission (CQC) and the Health and Safety Executive and building regulations; and (4) handling complaints – processes should be fair and easy to find, navigate and use.

To ensure compliance, care home providers will, at the very least, need to review and consider amending all contracts with current and future residents; business practices; internal policies and procedures; client-facing marketing materials; and training provided to customer-facing staff. Quite a tall order.

And the costs of non-compliance? This review looks as though it will have sharp teeth. Non-compliance can result in enforcement actions including court action to force changes of practice or contract terms; requiring compensation to be paid; or even the bringing of criminal prosecutions. Non-compliance also affects grading by the CQC and risks significant reputational damage to operators, as the regulators have a name-and-shame policy.  

The CMA has indicated it will begin a review in November to assess levels of compliance. Given the clarification of the law at this stage, ignorance will not be an excuse and the hope is that developers and operators will seize the opportunity to embrace the guidance and avoid those sharp teeth.

Guy Sackett is a partner and Craig Weston is a senior associate at Irwin Mitchell