Now is the time to acquire state funded care homes

Care homes have taken a huge knock lately. Covid has scared the general public, and the motivation to ‘put’ a loved one into care is lacking across the nation. It’s understandable- after all, care homes tend to become the scapegoated villain when things go wrong. This has, along with Covid deaths, led to a general reduction in occupancy across the UK.

A care home’s financial sustainability (in care we use the word sustainability to soften the terminology of ‘profitability’) depends on occupancy vs staffing- most other costs are relatively fixed (see upcoming post). This model of care provides the incentive to deploy minimal staffing, whilst maximising occupancy. Let us not argue here about morality, ethics, or anything else. Let us look at the business model. CQC, quite rightly, require sufficient staffing levels to provide safe care. That means, if a model is truly ‘perfect’, a home would be full of low needs residents, requiring minimal staffing. Utopia. Not reality. The reality of the matter is that, by the time residential care is considered, people do not generally have ‘low needs’. This is especially true of homes who wholly or majorly rely on LA funded placements- the government simply will not fund care unless there is no viable cheaper alternative.

So why should we look to acquire homes reliant upon LA funding? There is a lot of talk at the moment about a shake up in care. What that looks like, nobody fully knows, but for the first time in memory, there are people ‘in the know’ who are making waves. In the coming 12 months, if not the coming 6 months, there is evidence to suggest that a government level cash injection is coming. Now consider the following:

A care home, following covid, has an occupancy of around 70%, the finances are poor, and the owners are drained. They’re looking to sell. Their occupants are generally LA funded, and the EBITDA is probably red or near break even. Buy it (following DD of course). Why? Occupancy will increase. We are about to see a huge influx of beds being required due to people not being assessed, or being looked after by homeworking or shielding families, for the past year. Then fees may well go up. Plus, if looking at EBITDA multiples as a valuation, you’re going to get a steal.

Substantive Justice vs. Formal Justice

Most people would agree that the role of law is to achieve justice, however justice is a term which can only be defined subjectively; it relates to an individual’s moral standpoints. A utilitarian may argue that justice is served when the greatest good is done for the greatest number, whereas a Marxist may assert that justice is done only when all is equal in terms of wealth distribution. Justice may be easier to define holistically if its antonym ‘injustice’, in meaning that which is unfair, is appreciated. It is useful to categorise justice into ‘substantive justice’ and ‘formal justice’ when attempting to comprehend its nature.

Substantive justice pertains to the need of law itself to be just, whether created through legislature or legal precedent. What is considered just may vary from person to person, yet the prevailing moral leaning of society will often dictate whether a law is seen as just

Formal justice is concerned with ensuring that legal principles are applied in a fair way. This means there must be a following of legal rules; all like cases should be treated alike and, conversely, unalike cases should be treated unalike. A lack of bias is essential when a judge is hearing a case, and procedure must be applied evenly and equally to all.

Substantive justice and formal justice differ in that formal justice’s jurisdiction lies in the procedural domain of following rules, whereas substantive justice seeks to ensure that the rules themselves are fair. Formal justice is concerned with treating like cases alike, and substantive justice must specify what counts as alike. Formal justice is easier to apply rigidly if one asserts that all laws, whether fair or not, if applied equally to everyone, are therefore just. Substantive justice, on the other hand, has the complex task of ascertaining exactly what is fair.

There can be conflicts of justice when the two try to operate side by side. Before 1991, there was no offence of rape within marriage. The case of R V R [1991], which created the offence, showed considerable substantive justice for society as a whole, however formal justice may not have prevailed. I recently read a blog postwhose address I fail to recall, which commented on an aspect of the works of A.V. Dicey, which pertained to legal procedure, saying that “in principle no law should have retrospective effect”.

We expect law to be fair and just in its principles and in the way that they are applied. We do not just expect substantive justice, or formal justice; we expect something entirely more complex and incredibly difficult to achieve: a synergy of the two.