Gulf between public and private pay profitability widens

The polarisation between care homes operating on a predominantly private or public pay model continued apace last year, according to LaingBuisson’s Care of Older People UK Market Report 26th edition. The move by many operators who traditionally based their business on local authority placements into operating high-end self-pay homes seems well-founded. While the private pay market remains buoyant, in the public pay sector profits are going down. For example, Four Seasons Health Care, whose estate is primarily made up of local authority commissioned places, saw its EBITDAR as a percentage of revenue fall from 24.1% in 2011, 19.9% in 2012 to 17.8% in the first three quarters of 2013. Barchester Healthcare, meanwhile, enjoyed a level of 30.4% in 2011 and 31.3% 31.1% in 2012 (see table overleaf) on its estate of predominantly private pay clients.