Nursing Home Costs
So you have decided to open a care home. At this stage you may already have an idea whether you will be running a specialist nursing home or a more general residential home for the elderly. You may even have put in your formal planning registration application to your local authority. It is now time to construct a detailed budget to work out all the costs of setting up and running a nursing home.
Most buildings can be converted into a nursing home but the amount of money required and time available to achieve it may vary depending upon the state and age of the property itself. The upgrade cost of modernising older buildings can make some nursing home opportunities prohibitive. For example there are many health and safety and building regulations to be considered relating to access and fire safety which may include widening doors and corridors, installing chairlifts and shallowing stairs. So one of the first jobs when constructing a nursing home budget will therefore be to meet with your property developer or architect to discuss the cost of implementing any initial changes to your proposed nursing home building.
You will need to meet with your accountant to discuss your company structure including registering for VAT if appropriate. This is particularly important if you plan a new build development nursing home whereby you seek to reclaim VAT on building materials and labour following completion of project. Another expensive start-up cost will be the cost of finance. Most owners will need some type of business loan or commercial mortgage in order to finance the purchase and start-up costs associated with running a nursing home. Finances can usually be obtained through conventional sources (albeit highly specialised lenders who are now few and far between in the middle of the credit crunch). Lenders will inevitably charge you some type of administration fee and demand a hefty deposit to secure finance you require.
Assuming you have correctly budgeted for your initial start-up costs, the running costs will now need to be accurately forecast. This will ensure cash flow problems can be better avoided in the future and your basic assumption that running a care home as a profitable business holds true…
By far the largest cost involved running a care home will be staff salaries. The actual amounts depend upon the level of expertise and experience of staff recruited and the geographic location in the UK. For instance if you are planning to open a nursing home to cater for disabled people you will need highly specialist trained staff which will dictate a premium. It is therefore sensible to speak with local recruitment consultants who specialise in health care to understand what the local job market is doing regarding salaries for the type of staff who you are seeking.
You will also need a comprehensive care home insurance policy to protect your investment. This would normally include a wide range of insurance covers arranged on a package basis including employers liability insurance to cover the risk associated with your employees and to comply with the law. You will be required to display a certificate of insurance in a convenient place that all of your employees can see. In addition you will need public liability insurance to protect your self against claims occurring on the premises ( if you are planning to lease the building rather than purchase it out right, the landlord will take care of the building insurance for you and the associated property owners liability will form part of that policy. As the number of regulations for running a care home increases and the law makes it easier for people to make negligence claims, so the need for a comprehensive care home insurance with the correct form of liability insurance covers becomes vital. There are very few nursing home insurance providers in the UK (when compared to the number of conventional home insurance policy providers). So don’t leave shopping around for a cheap or comprehensive insurance quote to the last minute and always seek the professional advice from a qualified insurance specialist before making any type of insurance decision.
Another major ongoing high cost will be the cost of heating. For taking care of the elderly your property will need to be comfortably heated to meet the needs of frail and elderly residents or patients during the coldest winter months. As the cost of energy continues to rise globally, your gas bill will continue to climb and it’s important you forecast this rise well in advance. Check with local suppliers to see if you have any choice as to who can supply your building. They may be able to give you specific quotes based on your assumed level of consumption, (based on the number of residents in the building) throughout the year. Consider when your existing central heating system needs to be upgraded. Modernised central heating can make huge savings on ongoing gas bills. As well as making your nursing home building more comfortable for your residence, you may also want to consider investing in the latest double glazing windows and doors to minimise your ongoing heating bill. Likewise your annual electricity bill will also be quite high due to the large number of residents in the building and their different lighting needs. You may want a budget for installing devices to turn off unwanted lights and energy saving devices and light bulbs.
Likewise the cost food and provisions for your residence will be high. They will expect high-quality food as meal times are an essential part of the perceived level of care by the elderly. While most of us understand typical residential food bills for a family, trying to budget for an entire nursing home, (with a large number of people with very dietary needs) is a lot more tricky. You will need to contact local cash and carry’s and food wholesalers to establish what the minimum food order required is to secure wholesale discounts. You may also need professional advice of a qualified chef to establish which ingredients will be required based on an assumed and varying menu. If you know anyone in the hotel or catering trade, asking them would also help sanity check your budgeting activity.
Your local authority should be able to tell you what the business rates will be on your proposed nursing home. Rates will form a large proportion of your ongoing overheads. Be sure to check with your solicitor regarding any rates relief which may be appropriate to the type of business you are planning to run.
Your last major cost will be the cost of laundry and cleaning. Hygiene standards are often essential and so heavy duty washing machines and tumble dryers will probably need to be provided on site. Alternatively you may need to budget to pay for service contracts with local laundry providers offsite. These should be quite easy to budget for based on an assumed quantity of cleaning. Other important costs that need to be included inside your budget will be the upkeep of the building and it’s fittings. Your annual budget for this will vary wildly depending upon the age of your building and the level of investment initially provided to modernise it. Items to consider include leaking roofs, blocked drains, garden maintenance, window cleaning and redecoration. Similarly you will need to include the costs of maintaining or replacing fixtures and fittings including carpets, catering equipment, vacuum cleaners, emergency call systems and security systems.
We hope this short summary of the budgetary issues helps you think about the importance of the budgeting process. Assetsure provide insurance for care homes and are happy to discuss your detailed requirements.
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