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Care Home Contract Negotiations

Local Authorities have for several years now faced an ongoing need to produce savings and efficiencies in the face of an ever dwindling budget. More recently care for the elderly has become an area where Local Authorities look to produce savings through renegotiating care contracts and introducing price freezes or reductions.

However time and again the courts have found against Local Authorities for failing to meet their statutory obligations.

In two recent cases the High Court has once again quashed the decisions of Local Authorities to fix rates for nursing and residential home providers. These cases provide valuable lessons for both sides of the negotiating table.

The cases demonstrate that for providers it is important to act within deadlines and ensure that things are not left to the last minute. If changes are pushed upon you which you are unhappy with it is always advisable to seek legal advice, but if negotiation isn’t possible, for financial reasons, then always make it clear that you are unhappy with the contract to reserve your position.

Where negotiations take place full disclosure of the relevant details means that Local Authorities cannot rely on incorrect information to alter your contract.

Business plans may include projections for Return on Capital which is a legitimate source of investment for nursing & residential homes and a legitimate reward for owners. Whilst the value of Return on Capital may be disputed, the Court has inferred that omitting Return on Capital would be difficult to justify by a Local Authority especially if this would lead to home closures.

For Local Authorities the Courts have made it very clear that the setting of budgets is for you to decide, but on a sound basis. It is therefore vital that revised figures can be fully justified as well as any modifications to agreed models being explained. Arbitrary changes or changes which are not fully justified run the risk of being found unsound.

Equally Local Authorities must ensure that they have correct information. If accurate information is available there is no excuse for not using it, if it is not available then providers and the Local Authority should attempt to agree a way forward.

Local Authorities should also be mindful of the public sector equality duty imposed by the Equality Act 2010 and ensure that an equality impact assessment of detriments to protected groups (i.e. the elderly and disabled) is undertaken and mitigation measures identified and implemented. Failure to fully comply with this requirement can result in Local Authority decisions being quashed. 

Finally, as with all Local Authority decisions, reports to decision making bodies and minutes of meetings must be comprehensive. If the evidence says one thing and the report says another, or if the minutes do not show consideration of a relevant factor then once again the Local Authority is creating a risk of challenge.

A point for both providers and Local Authorities to bear in mind is that when an agreement expires which has a bonus or a discount, unless both parties agree that bonus/discount ends as well. Residents right to choose their nursing or residential home cannot be impeded by a bonus/discount which is applied to the Usual Price.

Written by Vaughan Jones.

About the author

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Vaughan Jones

Vaughan Jones is Partnership Chair and a specialist in Corporate Law.

Published: Monday 3rd June 2013
Categorised: Corporate Law

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