Actions Speak Louder Than Words

How do you respond to a negative and often damaging narrative, which continues to perpetuate the stereotype that private equity investors are only in it for the short term, they leverage companies to the hilt, and then strip them back for the sake of profitable returns?

When the media agenda is so fixated on high profits and painting social care investors in a bad light, it’s difficult to know how to respond – do you attempt to defend and define your position with conviction, or do you step away from the noise and allow the debate to continue regardless?

The interesting thing about the raft of reports and reviews that have been conducted by the likes of the Independent Review of Children’s Social Care led by Josh MacAlister and the Competition and Markets Authority (CMA), is when you delve deeper into the findings it’s often balanced and pragmatic. And yet the headlines say different.

So what’s currently being written about the social care sector and the part that ‘big profit’ providers and private equity investors are playing?

The Independent Review focuses on the radical changes needed to overhaul children’s social care, but it does come with a recommendation of a windfall tax on the profits of private care providers to help fund reform of the “broken” commercial market for children’s residential care and fostering. However, the publication of the CMA’s market study into children’s social care brought with it headlines, including “Action needed on dysfunctional children’s social care market.” “UK has sleepwalked into dysfunctional children’s social care market.” “Children’s social care generates excessive profits.”

The Association of Directors of Children’s Services (ADCS) also added fuel to the fire in its response, when it said it was disappointed that the CMA did not go further on limiting for-profit provision or placing a limit on prices or profits. “Profiteering through public money on the basis of meeting children’s needs is unacceptable,” said ADCS President, Charlotte Ramsden. 

But, this is a complex story, in a complex market, dealing with complex and vulnerable individuals. This goes far deeper than the sensational headlines and deserves far more understanding and balance.

Yes, there are businesses that are clearly making ‘higher profits’, but profits should not be seen as a dirty word. Without financial stability and a well-functioning and profitable business, children’s homes simply wouldn’t exist – something the Independent Children’s Homes Association (ICHA) agrees with in its position statement. “Opening children’s homes is expensive,” it says. “The development of a new residential service requires significant investment from the independent sector, involving significant borrowing and associated risk. For organisations to be able to borrow the necessary high levels of capital, viable business models that generate profits are expected.”

We firmly believe that sustainable commercial success really can align with powerful societal impact and positive change for everyone, but it has to be bedded in excellence, decency, sincerity, collaboration and creativity.

As such, we take a different approach when responding to such reports and the one-sided headlines that inevitably follow. It’s not about jumping to the defence of investors, or staying quiet on the subject; it’s about digesting the reports, listening to our experienced leaders who are working on the ground, and enhancing the way in which we operate to make us even more transparent, accountable, and efficient across our portfolio of social care businesses.

Our management philosophy is to operate a simple and care-centric community of businesses that focus, first and foremost, on delivering outstanding care and support. But it’s more than just sentiment, it’s about action.

So how are we changing, as a result of the CMA report and the Independent Review? We intend to implement additional internal governance measures that help us to respond appropriately when the issue of ‘expensive placements due to high levels of need’ arises. At a local level, our experienced managing directors will continue to lead decisions on care planning and matching decisions. However, our board, who are very experienced in social care, will give oversight to any children’s home placement over a certain threshold. Whilst higher fees are the exception rather than the norm, we feel it is important to have such oversight to ensure that as a community of businesses we are not profiteering. In addition, the board will take a view on profit margins of such placements, rather than care planning decisions, and ensure that additional support that is promised is delivered. 

This proactive change is for two reasons. Firstly, we want to ensure is that young people who need higher levels of support and care have the same excellent outcomes as any other and, as such, risks and costs should be reduced over time, reflecting the progress and achievement made, crucially for the child but also for the provider. Secondly, we want to ensure that what is being charged doesn’t have a larger profit margin and that the business is not profiteering as a result. This is a key point and one that will be stated clearly to Local Authorities and other stakeholders.

We are very aware of our moral obligations towards public expenditure (VfM) and ultimately to the children who must remain at the centre of everything we aim to achieve. It’s essential that costly placements are routinely assessed and reviewed to take account of the levels of care and support provided. This promotes trust and assurance in the provider from a commissioning perspective, leading to better working relationships and an assurance of further business.

If an investor is focused, first and foremost, on delivering outstanding care and support, with a clear expectation that sustainable excellence will be achieved and maintained, then they will subsequently be able drive an outstanding provision that is user-focused, and one that provides meaningful solutions and targeted outcomes.

While the debate will undoubtedly continue over private sector profits and the involvement of private equity within the sector, what the recent findings should do is create a meaningful conversation around the topic of placing purpose over profit and the role ethical investment can play in addressing the concerns of investigating authorities and campaigners alike. But what is really key is action; positive change that cuts through the headlines and ultimately makes every part of the sector, public or private, function more efficiently for the benefit of young people in care.

Rob Finney is COO at Tristone Healthcare