Lee Peart talks to HC-One’s chief executive James Tugendhat about how the company is investing in the provision of long-term, sustainable, quality care

HC-One’s refinancing in March 2021 saw the consolidation of its £570 million debt. With US-based health and property investor Welltower and private equity owner Safanad taking majority control, the business was put on a sound, long-term financial footing.

At the same time, HC-One launched a major investment programme in its homes, which included a refurbishment programme of more than 200 of its homes, The company also decided that it was not the best owner and operator of 52 of its then 328 care homes.

“We made the decision we couldn’t be all things to all people and there would be certain geographies where we wouldn’t have scale, or the local authority fee rates weren’t sustainable, or the building was sadly no longer fit for purpose,” Tugendhat says.

“The really important thing for us is that our homes should be able to meet the dementia needs that our communities have, and should be located in areas where colleagues can get to work and afford to live, and are in geographies where local authorities are committed to sustainable funding over time. That’s where our portfolio is today and we see the opportunity to bring more homes of high quality with committed workforces into our family.”

The refurbishment programme is seeing HC-One invest almost £100 million just in its environments, which Tugendhat described as the “single biggest ever investment in local authority funded care environments”.

More than 100 care homes have been refurbished under the programme with a further 30 to follow this year.

The upgrading of the company’s largely purpose-built portfolio was further consolidated with the acquisition of 37 services from Ideal Carehomes in October last year.

“Ideal represented a really great fit for us because of their expertise gained with being owned by developer LNT,” Tugendhat says. “Ideal have a long history of knowing where to locate homes with a very similar view to us about where you can best site homes so that colleagues can afford to live nearby and you can meet the right need in the community.

“The acquisition was really a way of teaming up with another group that would accelerate our new build programme, both by bringing in homes that are still in the opening stage and by building our expertise in where to site homes and how to develop them.

“On top of that Ideal are very much about serving the mainstream and as we look to renew the overall portfolio it gave us an opportunity to bring in some newer homes in geographies that are contiguous with our existing geographies. Our homes are all nearby but not overlapping so we could really play to our strength and expand our footprint.”

As HC-One continues to invest in its environments, Tugendhat says further acquisitions are likely this year but adds these would not include any of the Four Seasons homes currently on the market.

“We would want homes that are in the right places for us and the right age,” Tugendhat says. “I know that many of the Four Seasons homes are good homes, but they wouldn’t be our focus.”

Workforce

As equally importantly as investing in its environments, HC-One is investing in its workforce in order to provide quality, long-term care. The care home operator has raised wages by around 10% each year over the past two years and plans to do so again this year.

“We spent £32 million last year alone on increasing salaries,” Tugendhat notes. “One of the things that I am most proud of is that over the last three years we have moved from being largely a National Living Wage employer to a largely Real Living Wage employer.”

Over 80% of the company’s 20,000 staff are now on the Real Living Wage, however this has not prevented friction with its unionised workforce, members of the GMB, over pay and working conditions in recent months.

A recent GMB survey found four in ten HC-One members had considered leaving due to pay levels, while members at its Victoria Park care home in Coventry voted to strike last month over working conditions and the sacking of their care home manager.

While acknowledging the union survey highlighted “some real issues and some really difficult individual cases”, Tugendhat argues it was “not representative” of the HC-One workforce as a whole, with around 3,000 to 4,000, or about one in five of the company’s workers unionised.

The HC-One boss points to the company’s 50% improvement in staff turnover last year as evidence of growing staff satisfaction levels.

“I don’t think you get a 50% improvement in turnover if a workforce is feeling worse, not better,” he argues. “I don’t think you’re able to recruit well ahead of the sector if people feared you are a worse place to work. Our internal colleague survey shows people feel really proud of where they work, but we can only keep doing more. We pay above the sector with a much higher rate of local authority than most and therefore we have lower income, but have still invested ahead in higher wages.”

Around 70% of beds are taken up by local authority fee payers.

Vacancy rates and staff turnover rates are both far below the average for the sector, Tugendhat highlights. He says HC-One’s aspiration is to have all workers earning at least the Real Living Wage and called on local authorities to continue to partner with the business on achieving that aim.

“We have Scotland, Wales and a dozen or more local authorities in the UK supporting us to pay the Real Living Wage to all colleagues in care,” Tugendhat notes.

With many local authorities in financial distress, however, he acknowledges there are many examples of “very poor” fee increases and spot prices well below the cost of care. With these local authorities concentrated in the most deprived areas of the country, Tugendhat echoed concerns raised in the Care Quality Commission’s ‘State of Care’ report in October of an emerging two-tier care system as care providers exit from local authority provision in areas that need it most.

“We can’t compete in those geographies and my fear is that we will just see more and more local authority care leave and you will end up with the least supply in those places that need the most local authority funded care homes – and you will get into a terrible spiral,” he warns.

The care home leader stresses the adoption of a fair cost of care as the only means of averting a looming national crisis.

When asked by Caring Times whether he believes in a national rate for the cost of care as is the case in Scotland for example, Tugendhat comments: “I think we need both a national fair cost of care and a fee rate set at local authority level.”

The HC-One chief executive says government needs to strike the “right balance between funding formulas and recognising that every local authority has different circumstances and different community needs”.

He adds: “I would like to see a mixture of national formulas and criteria while recognising that the commissioning expertise is still with local authorities and the NHS on the ground and that each community is different, and that no local authority should be below what their numbers show is a fair cost of care, which is a position not where providers are making more money but one that sustains pay and will encourage more investment not less.

“There’s a real opportunity, whichever government is in power, to have a nationally organised sector that encourages the right investment to deliver quality through the workforce with a locally delivered sector where we understand local nuances and needs.”

A Labour government?

Tugendhat welcomes work done by the Labour Party and The Fabian Sector on a national care service, as well some recent thinking on reform by the Department of Health and Social Care and the Conservative government.

With Labour still riding high in the opinion polls and a general election expected later this year, Tugendhat says he is “excited about what Labour can offer”, while welcoming that all political parties are thinking about how they can better organise the care system.

While welcoming Labour’s policy announcements on national pay bargaining for the care sector and investing in quality through the workforce, Tugendhat says the opposition’s comments on private equity ownership of care providers were “prone to being misinterpreted”.

He adds: “If you look at the work shadow care minister Andrew Gwynne and shadow health secretary Wes Streeting have done on the national care service and the Fabian report, what they have talked about is the importance of better organising the sector and of making the current model of care delivery work better for the taxpayer and those receiving care, and the duty of owners to be responsible , and to be full UK taxpayers which is what we are.

“Wherever our ultimate international owners may sit, all our entities are subject to full UK tax. I agree we should be responsible owners. I don’t think they are targeting a given ownership model, but what they are targeting is responsible ownership and behaviour.”

A crucial national role

Tugendhat says HC-One remains “100% committed” to continuing to play its crucial national role in being by far the largest care home provider of local authority funded care.

“It’s a real privilege to create homes in which our teams can deliver the care that people want and that their condition and circumstances require,” he concludes.

“So many colleagues love the job they do because of the difference they can make and our job as a provider is to keep making that ever more possible and I hope that government keeps working with us to create an environment where we can keep doing that.”

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