Ray Hart 04 April 2018

The scrutiny of foster care costs

The cost of fostering has been in the press recently as figures have been published stating that independent foster agencies (IFAs) are increasing the cost charged to local authorities for placing children with families.

According to one report the average weekly fee for council registered carers is £396, while it rises to a staggering £759 for IFAs; 92% higher. All of this embroiled against a backdrop of multi-million pounds dividends for investors and huge director salaries.

Such highly inflated fees give rise to one very important question; why aren’t foster care costs subject to the same level of scrutiny as other social care costs?

To look at foster care prices we need to examine the market from a more traditional demand and supply angle. With all areas of care this feels uncomfortable as we are talking about real people and the good work that they are doing, in this case looking after vulnerable children. However, like all areas of care in 2018, there is private provision and this needs to be examined and controlled or the market will be the one controlling the price of care.

The Independent Fostering Agency market has many common factors with other segments of the care market. There is rising demand for services and some areas of supply shortage. This has led to rising prices that can feel like they are out of control. However when looked at from a national level, an Ofsted report published in February stated as at 31 March 2016, 61% of fostering places were filled and 23% were vacant. The remainder were not available at that time or for sibling use.

The vacancy level when coupled with rising prices suggests something is wrong with how services are commissioned at a national level, and the cost control surrounding them. Local commissioners are left with no choice but to pay the ‘going rate,’ where investment in unlocking the current vacancies or stimulating more foster carers in some specialist areas, may help in the long term to bring down prices.

The market is of mixed ownership but some providers are in private hands or backed by private investment. The current scenario of rising prices has brought with it the type of private investment common in areas where profit levels are rising, such a private equity.

There have been calls in the industry to remove private sector involvement from the fostering market and to return to a publicly provided service. However, the range of competition if controlled correctly can be of great benefit in bringing investment and improving the range and type of service available; and this is something that we must stay mindful of. As always it is about striving for balance between encouraging competition and not having a complete ‘free market’ in an area where the public sector buys 99 per cent of the care.

The situation is very similar to the Learning Disabilities market a few years ago. After a period of sustained price rises in the early 2000s, the Learning Disabilities market went through a fundamental change with more emphasis being place of value for money and transparency of costs. This manifested itself through the creation of various costing tools and calculators and some providers going through ‘open book’ accounting processes. The aim of these exercises was to bring down the profit and other associated ‘non-care’ costs whilst maintaining investment in staffing.

As with all initiatives, it was not wholly successful with some providers maintaining high profit levels and recently a significant cost pressure in staffing not being recognised but the overall position is that the market is a lot more cost conscious than it was 15 years ago.

So how can this be applied to IFA placements? The fundamental issue is about devising a system that protects the investment in foster carers themselves whilst capping the level of additional overhead cost.

This can be achieved through costing models as introduced in other sectors, caps on profit levels, procurement models that encourage cross working between authorities and also investment in new models of delivery that remove the areas of rising prices. These examples of best practice in other areas can be used to control the market more.

All of this is accomplishable if we can move away from the debate on public vs private or thinking nothing can be done. If we put the focus on why the costs are rising, then a more stable market can be achieved.

Ray Hart is director at Valuing Care

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