Does outsourcing enable the survival of good care homes? A longitudinal analysis of all care homes in England, 2011–2023

Introduction

The ageing population has resulted in increased demand for care, which has made the organisation, regulation and funding of adult social care a policy priority.1 Many countries are struggling to finance this demand and are increasingly turning to the market in an attempt to optimise care quality and increase the capacity of the sector. This is typically achieved by outsourcing services to a competing market of public and private (both for-profit and non-profit third sector) social care providers.2 However, research suggests that decades of outsourcing have not delivered in terms of improved quality of care or capacity.3 4 Understanding why markets are currently not delivering their intended benefits is crucial for the future provision of social care.

Outsourcing not only functions through a competitive market, but it also shifts provision from public to privately owned (often for-profit) providers. In England, more than 95% of all care home provision is private, of which more than 85% is run by for-profit services.5 Private sector provision of adult social is also on the rise internationally.6 7 Most care homes (60%) in England serve a mix of state-funded and self-funded residents, and there are very few homes (less than 1.5%) that only accommodate residents funding their own care.8 This means that most care homes receive income from both private self-payers and the state. However, the population of self-funding residents is increasing, and, in 2023, this group constituted 37% of all care home residents.8 The impact of this client mix in terms of the supply and quality of provision is not well understood, in part because of a scarcity of care home level data on the funding status of care home residents.

Research on the impact of for-profit ownership has found that for-profit care homes deliver worse quality than public and third sector (non-profit) care homes.3 9–11, and the evidence suggests that the pursuit of profit influences the behaviour of providers in ways that negatively impact the quality of care and residents.12 However, it is unclear whether the profit motive also impacts the performance of competition, regulation and market oversight on a broader scale.

A key reason for this knowledge gap is that little attention has been given to the patterns of care home closures among for-profit, public and third sector providers. In England and internationally, outsourcing was intended to improve care supply and quality and to reduce costs through competition and by promoting consumer choice among residents.12 13 If these intentions were realised, one would expect outsourcing to result in the closure of poorly performing providers, and the survival of the best quality services. While existing research shows that ownership matters in terms of incentives and performance,4 14 15 little is known about whether outsourcing has enabled ‘good’ providers to thrive and poor-performing care homes to close, as would be expected in a well-functioning market.

Care home closures play a crucial role in the functioning of the sector, serving as a mechanism to regulate, adjust to changing resident preferences and improve overall performance. Closures are a multifaceted outcome. It can represent a reactive mechanism that removes poorly performing operators to protect residents from poor services while closures also have the potential to cause disruption and trauma to residents and create substantial added costs to local authorities (LAs).16 17 It can also serve as a way for the sector to adapt to shifting preferences among care residents, such as domiciliary care. The closure of underperforming care homes is crucial for protecting residents, but if the sector is poorly regulated, closures may be driven by factors unrelated to care quality in ways that can harm accessibility and resident equity. For instance, if the financial survival of care homes is not determined by service quality, but by being able to attract affluent residents, the accessibility of care provision will depend on the prosperity of the area rather than residents’ needs.

Research on the US care homes has found evidence to support this concern. Several large-scale observational studies have found that area poverty and proportion of Medicaid residents impact the risk of closure.18 19 Further, there is evidence suggesting that the quality of services is worse in deprived areas.20 US research has also found that for-profit care homes are less likely to close than public and third sector homes21. Yet, the relationship between ownership and area deprivation is not well understood. For example, it is unclear whether for-profit homes are less likely to close simply because they most frequently operate in less deprived areas. In such cases, care home closures may reflect area deprivation rather than care home quality.

While equivalent research in the UK context is limited, the current evidence suggests that home closures in England are influenced by both care home quality and area characteristics.22 23 Using care home data in England from 2008 to 2010, Allan and Forder found that higher inspection ratings and lower levels of local competition were both linked to a lower risk of closure.23 A more recent analysis looking at the association between domiciliary care supply and closures using 2014–2016 data, also found that higher quality, as measured by Care Quality Commission (CQC) inspections, was associated with a lower risk of closure.22 Further, the analysis did not establish an association between increases in domiciliary care and care home closures, which suggests that at-home services have not substituted residential care. Both studies identify a link between inspection ratings and risk of closure, but the investigated period of each study is relatively short (2 years) and is, therefore, unable to reveal patterns and changes over time.

None of the existing work analyses how determinants of closure vary according to ownership. This is an important research gap, as the provision landscape in England has undergone a gradual ownership transformation in favour of the for-profit sector. It is not clear if this development is due to a disproportionate number of closures among public and third sector homes, higher rates of for-profit openings, nor whether the determinants of closure vary by ownership. Industry regulators have continuously raised concerns that care access is worsening in the most deprived parts of the country.24 This trend has not been evaluated against the growth in outsourcing in adult social care.

Materials and methods

Results

Descriptive results

As of October 2023, 85.41% (12619/14774) of all active care homes in England were operated by for-profit sector (table 1). More third and public sector homes closed relative to for-profit homes. Of the closed care homes with an inspection rating, 20.46% and 24.98% of the closed homes were rated ‘inadequate’ or ‘requires improvement’. Most (77.31%) of the currently active care homes are rated ‘good’, with around 18.5% being rated ‘inadequate’ or ‘requires improvement’. Areas with higher deprivation had a greater proportion of closed care homes.

Table 1

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Characteristics of active and closed homes as of October 2023

From 2011 to 2023, there were 8346 care home closures (see online supplemental figure A1 for the count of closures by year). The proportion of closures relative to openings varied by ownership status (figure 1). The proportion of for-profit care home openings has increased over time and, by 2022, 93.9% of all new care homes in 2022 were for-profit, compared with 76.6% in 2010 (figure 1A). The proportion of closures has shifted over time, with for-profit homes accounting for a slightly larger proportion of all care home closures in recent years (figure 1B).

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Figure 1

Number and proportion of care home openings and closures, 2010–2023.

Figure 1C shows that this is because the absolute number of for-profit homes has increased, and that the proportion of yearly closures relative to the number of active homes is consistently lower among for-profit homes, even in recent years. For example, 17% and 6.6% of public and third sector homes that were active in 2012 closed that year. Therefore, from 2010 to 2023, there has been a for-profit growth with more for-profit openings and fewer closures, compared with the public and third sector. The number of active providers across ownership and the raw number of closures and openings over time can be found in online supplemental figure A1 and A2.

Determinants of closure

Third and public sector homes were more likely to close compared with for-profit homes (p<0.001), even after controlling for quality, area deprivation, and other covariates (table 2). Ownership status was associated with the risk of closure, with public and third sector homes being 1.80 and 1.55 times more likely to be closed than for-profit care homes. Better inspection ratings were strongly correlated (p<0.001) with a lower risk of closure. Care homes rated Outstanding and Good were much less likely to have closed than homes rated with at least one Inadequate rating. Area deprivation was also associated (p<0.01) with closure, with care homes in less deprived areas less likely to close, after controlling for covariates. The results were robust to model specifications (see online supplemental table A2 and figure A3).

Table 2

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Logistic regression results on the determinants of care home closure

While ownership status, care quality and area deprivation all uniquely predicted risk of care home closure, we found that the magnitude of the effects of care quality and area deprivation varied by ownership status (figures 2 and 3). For all ownership types, poor care quality and higher area deprivation were associated with an increased likelihood of closure (figure 2). However, the effects of care quality and area deprivation were the largest and most consistent among for-profit care homes. The predicted probability of closure was higher for public and third sector homes across all inspection ratings, except those rated ‘inadequate’ (figure 1A). The difference in closure risk was largest for homes rated ‘good’—public and third sector homes rated ‘good’ were 7.6%-points (p<0.001) and 5.9%-points (p<0.001) more likely to close than for-profit homes with the same rating (see online supplemental table A8).

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Figure 2

Predicted probability of closure by inspection ratings and deprivation deciles by ownership. This figure models the two-way interaction models of the risk of closure by ownership and quality (panel (A)), and ownership and area deprivation (panel (B)). The model controls for the full range of covariates and fixed effects as the adjusted model in table 2.

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Figure 3

Differences in predicted probabilities of closure across inspection ratings, ownership and area deprivation. This figure models the interaction effect of closure for ownership and quality, and ownership and area deprivation. Panel (A) shows the difference in closure likelihood between third/public sector versus for-profit (FP) homes across different inspection ratings. (B) The differences in closure likelihood between deprivation deciles. (C) The difference in closure likelihood between third/public sector versus for-profit homes across different deprivation deciles. The model controls for the full range of covariates and fixed effects as the adjusted model in table 2. LA, local authority; TSO, third sector organisation.

Additionally, the risk of closure was, on average, higher in the most deprived areas for for-profit homes, but most of the differences were not statistically significant (online supplemental table A5). However, the closure probability across deprivation decile varied by ownership: LA and third sector homes were generally more likely to close than for-profit homes in the more deprived places in England (figure 3). For example, public and third sector homes were 13.2%-points (p=0.025) and 7.6%-points (p=0.030), respectively, more likely to close than for-profit homes in the most deprived decile (online supplemental table A9). In the least deprived decile, this difference was not statistically significant between public and for-profit provision, whereas third sector homes are 9.0%-points (p=0.001) more likely to close than for-profit homes. The differences in the risk of closure were not statistically significant by deprivation deciles between third and public sector homes.

Inspection ratings of active and closed homes

The difference in inspection ratings between closed and active providers was substantially larger for for-profit homes, whereas the quality of closed/active public and third sector homes did not generally vary statistically significantly from one another (figure 4A). Care homes ratings were, on average, worst in the most deprived areas, but in our models we find that this is only the case for active for-profit homes. Active for-profit homes in the most deprived decile are more likely to be rated poorly compared with the least deprived decile.

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Figure 4

Predicted probability of being rated ‘outstanding’/’good’ versus ‘requires improvement’/’inadequate’ across closure status (active/closed), ownership and area deprivation. This figures visualises the three-way interaction results between ownership, closure status (closed/active) and area deprivation. The outcome for all models is inspection rating (‘inadequate/’requires improvement’ vs ‘good’/’outstanding’). Panel (A) shows the predicted probabilities for being rated ‘good’ or ‘outstanding’ by ownership and area deprivation. Panel (B) shows the difference in predicted probabilities between public/third sector and for-profit provision for closed and active homes and for the least and most deprived deciles. The model controls for the full range of covariates and fixed effects as the adjusted model in table 2. See online supplemental figure A5 for the raw distribution and online supplemental tables A6 and A11 for the difference in predicted probabilities. IDAOPI, Income Deprivation Affecting Older People Index.

Quality differences between for-profit and third and public sector homes were highest in the most deprived areas for both active and closed homes (figure 4B). Active public and third sector homes in the most deprived decile were 17.7%-points (p<0.001) and 12.4%-points (p<0.001) more likely to be rated ‘outstanding’ or ‘good’ compared with ‘requires improvement’ or ‘inadequate’ than for-profit provision (online supplemental table A11). In the least deprived decile, these differences are substantially reduced, with active third sector homes being 7.7%-points (p=0.002) more likely to be rated ‘good/outstanding’ than for-profit provision. These differences were even larger in closed homes, suggesting that good homes have closed in deprived areas. The difference between active public and for-profit provision in the least deprived decile is not statistically significant.

Discussion

This is the first longitudinal study of care home closures in England that uses complete data on all care home closures, 2011–2023, and inspection ratings, 2014–2023. Our results can be summarised by five findings. First, since 2011, the closure rate of for-profit, public and third sector care homes has remained fairly consistent, but because fewer third and public sector homes have opened relative to for-profit homes, public and third sector provision has substantially diminished over time. Second, our results show that care homes were more likely to close if they are (a) operated by the public or third sector, (b) located in a deprived area or (c) rated poorly by regulator inspections. Third, we found that public and third sector homes rated the same as for-profit homes are generally more likely to close. Fourth, the closure of public and third sector homes appears to have negatively impacted the quality of care in the most deprived areas. We find that care home inspection ratings are, on average, worst in the most deprived areas, but only for active for-profit care homes. Fifth, the best active homes in deprived areas are operated by public and third sector homes. We do not find evidence that inspection ratings for public and third sector homes are influenced by area deprivation.

This may have implications for aggregate provision. Reports by both the CQC, interest groups, and other regulators have found that adult social care is struggling to meet demand, and the sector has continuously been diagnosed as fragile, neglected and underfunded.33–35 This development is often reported to be due in part to inadequate public funding and neglect, which has created undesirable knock-on effects on the two-tier system of state-funded and self-funded residents. It has long been argued by the sector that funding for state-funded residents is insufficient,34 36 and research has shown that care homes are increasingly forced to cater to self-funded residents for financial survival.37 If the survival of care homes is determined by access to self-funders, this will exacerbate inequality in market-based provision. At worst, it can lead to severe equity issues, in which competition for quality primarily applies to prosperous areas, leaving residents in poorer areas without access to the care they need. Data from the Office of National Statistics confirms that care homes in less deprived areas have a higher proportion of self-funders.38 Our results corroborate this development in two ways.

First, we found that area deprivation is a significant determinant of closure, and care homes of all ownership types are more likely to close if they operate in deprived areas. This underscores an enduring association between area deprivation and care home survival, even after adjusting for quality and ownership. Second, despite the higher average quality of care provided by public and third sector homes in deprived areas compared with for-profit providers, these homes are at a higher risk of closure. This raises concerns about the vulnerability of care homes that provide high-quality and much-needed care but operate in economically disadvantaged regions. The implications are unsettling—the performance of public and third sector care homes seemingly does not shield them from closure, highlighting the challenges reported by the CQC in sustaining access to high-quality care in deprived areas.24 Addressing this issue is critical to avoid exacerbating existing inequalities and ensuring that residents have continued access to the care they need.

Limitations

The main limitation of this work is the lack of existing data on potential key variables at care home and resident level. These can be summarised by the following points. First, our analysis does not include information on the funding status of residents nor on care home occupancy rates or top-up fees, as such statistics are not currently available at provider level over time. Most care homes serve a mix of state-funded and self-funded residents,8 and the lack of analysis on how this influences care provision is a key gap in the literature. Second, financial information on care homes is not publicly available, and our analyses, therefore, do not include variables related to the profit, debt and deficits of care homes, which may influence performance. Third, it is well known that the sector struggles to retain qualified staff and that there is widespread staff shortages.39 There is some evidence suggesting that work conditions are poorer in the private sector,40 but more work is needed to explore this association. Fourth, the impact of a care home closure can be severe and traumatic for residents.16 While our work has revealed important insights in terms of the ownership-specific patterns in the determinants of closures, more work is needed to document the consequences associated with care home closures on residents and LAs.5 Most closures involve personal, economic and health costs, which are, therefore, key outcomes in the evaluation of the marketisation of care.

Conclusion

Our findings suggest that while quality and deprivation are key determinants of care home closures, they operate differently for different types of care homes, which provide new insights into the functioning of the adult social care sector in England and its use of outsourcing. Outsourcing was implemented with the intention to enable the best provider to operate, irrespective of ownership.13 Existing work on the determinants of care home closures has found that quality matters for the survival of care homes,22 23 which at face value appears in line with the intention of competition. However, past research has also shown that quality of care is typically lower among for-profit homes.3 11 At the same time, for-profit provision has continued to grow. To explain this contradiction, we find that the determinants of closure vary according to ownership, which suggests that ownership does matter and that the policy intention to dissolve the distinction between for-profit, public and third sector ownership13 has not succeeded. The difference in quality between active and closed public/third sector homes was substantially smaller compared with for-profit homes, suggesting that public and third sector provisions have closed despite their ratings. Furthermore, it appears that churn in the for-profit sector has not resulted in better performance, as active for-profit homes continue to underperform other ownership types, especially in the most deprived areas.