NON-PAYROLL COSTS


Non-payroll costs are calculated by dividing total costs excluding payroll costs by total revenue. Figure 4 shows non-payroll costs for the nursing and personal care sectors.


The elderly care sector has generally seen costs fall during the early years of our dataset until 2009. During 2010 both sectors rose, however the sectors then started to diverge, with an overall downward trend in nursing non-payroll costs contrasting with a broadly rising long-term trend in personal care.


Over the last year, non-payroll costs in the personal care sector have fallen 0.4 percentage points to stand at 16.6%, following a static position seen at our last review. Over the last ten-year period, personal care has recorded a low of 14.7% in 2009 and a peak of 17.5% in 2014, since when levels have generally edged downwards, dropping 0.9 percentage points to the current level. Over the last year, whilst there has been a fall in percentage terms, the percentage movements noted mask underlying cost increases, due to rising ‘total income’ levels and are broadly in line with inflation.


In the nursing sector, non-payroll costs have fallen by a significant 0.8 percentage points over the year to 13.8%. This is the third consecutive year we have noted falls and the current level is the lowest seen over the past 10 years. Levels are now 2.0 percentage points lower than the peak of


15.8% in 2010. The rising ‘total income’ seen in the sector has again masked a nominal actual cost increase.


When measuring cost pressures in the long-term elderly sectors, we take a mean of the average food and energy costs for our base year (2002) which has been adjusted in relation to the relevant CPI Indices. To clarify, CPI represents a broader population than RPI and produces weights for items in the shopping basket using a breakdown of household expenditure taken from the national accounts.


Average food costs per person per week have remained broadly static over the last few years, despite the significant fall seen during 2017, which appears to have been largely wiped out by the rise in 2018 (see Figure 5). The average food cost across the elderly care sectors stood at £26.70 pppw in H1 2018, up from £23.80 in 2017, but is more consistent with the level of £27.00 in 2016. Whilst we have generally noted increasing food costs in our dataset despite a falling CPI Food Index, the data for 2017 and H1 2018 reveals encouraging signs that operators finally appear able to make some savings in this regard.


Energy costs for the combined personal care and nursing sectors fell from £14.70 pppw in 2016 to £14.00 in 2017, before seeing an increase in H1 2018 to £15.60 (see Figure 6). Since 2012, our data shows energy costs have increased slightly, however the CPI Energy Index has fallen significantly over this period, recording a further fall since our last review.


KEY POINTS


PERSONAL CARE


HAS FALLEN 0.4 PERCENTAGE POINTS


SINCE H1 2017


NURSING CARE


HAS FALLEN 0.8 PERCENTAGE POINTS SINCE H1 2017


FOOD COSTS FELL IN 2017 BUT


ROSE IN H1 2018 TO £26.70 PPPW


ENERGY COSTS FELL IN 2017 BUT


ROSE IN H1 2018 TO £15.60 PPPW


12


HEALTHCARE MARKET REVIEW 2018


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