Southern Cross crisis prompts call for regulator

The Southern Cross Healthcare case has highlighted the need for an economic regulator to monitor the finances of larger private care providers, experts have said.

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The Southern Cross Healthcare case has highlighted the need for an economic regulator to monitor the finances of larger private care providers, experts have said.

They said the care home provider’s business model of leasing back homes from landlords put at risk services for 31,000 residents.

Southern Cross has said that its rent bills have become unsustainable, given falls in revenue from councils, prompting fears that it will go into administration. These fears were heightened this week after Southern Cross said it would unilaterally cut rents to landlords by 30% from June to September.

Currently, no body oversees the financial structure of providers. The Health and Social Care Bill, as it stands, would give NHS regulator Monitor the power to license providers of NHS-funded care and support the continuity of services, should one become insolvent. However, this would not apply to social care.

Richard Humphries, senior fellow in social care at health think-tank the King’s Fund, said there was a case for a regulator to oversee larger care providers “where the consequences of market failure could be catastrophic”.

He added: “The problem with Southern Cross is the scale and the concentration of homes, particularly in the North East, which no single authority could manage so it underlines the need for a failure regime.”

However, he cautioned that regulation would need to be risk-based and proportionate otherwise it could endanger the many small providers.

Humphries’ call was backed by Counsel and Care deputy chief executive Caroline Bernard and English Community Care Association boss Martin Green.

“Reform of the social care system needs to look at sustainability across the piece, and that includes care homes too,” said Bernard.

Shadow care services minister Emily Thornberry said Labour had mooted the need for an economic regulator for social care when the Health and Social Care Bill was progressing through committee before its delay, but this was ignored by the government.

She demanded that the government make a parliamentary statement on Southern Cross: “They are avoiding parliament at a time like this with 31,000 of the most vulnerable people who are facing an uncertain future. We should be hearing from the [care services] minister [Paul Burstow] that they are the government’s priority and that they will receive continuity of care.”

Yesterday, Burstow insisted the government’s number one concern was the welfare of the provider’s residents and it was “fully engaged with Southern Cross”, but said it was not for ministers to intervene.

“It is for Southern Cross, its landlords and those with a stake in the business to put in place a plan to put the company on a firm footing. That is what they are doing,” he said.

Read full coverage of the Southern Cross case and other key issues in adult social care.

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