The number of care home providers going bust in England and Wales rose last year, according to research.
An analysis by accountancy firm Moore Stephens found 47 care home operators became insolvent in 2014-15, up from 40 the previous year and 35 in 2012-13.
Reductions in local authority fees and increasing property costs had piled pressure on providers, the research found. The introduction of the national living wage from April this year will add further strain on provider finances, it added.
Mike Finch, a partner at Moore Stephens, said many more care homes were being pushed to breaking point.
He said: “With funding from local authorities contributing a substantial amount to the revenue of care homes, there is understandable concern of the impact any further spending cuts would have on the sector. This is especially important as the cost of care in the UK remains high.
“Many care homes have also lost control over their increasing property costs by selling ownership of the property they occupy to an investor and then renting it back from the same investor with pre-agreed rent increases they can no longer afford.”
The findings will add to ongoing concerns over the fragility of the care home market.
In November 2015, the UK’s largest provider, Four Seasons Health Care, closed seven care homes in Northern Ireland after it deemed them financially unviable. The provider, along with four others, later wrote to chancellor George Osborne urging him to increase social care funding for the implementation of the national living wage policy.
The letter warned a provider collapse could happen in the next 12 to 24 months.
Martin Green, chief executive of provider representative body, Care England, said years of underfunding and rising costs were pushing care homes into liquidation.
He said: “We have had the national living wage, pension auto-enrolment, and significant increases in CQC fees, all of which have been levied onto the sector without commensurate increases in fees. These increases are making care services in both residential and domiciliary care unsustainable and I am particularly worried about the impact on small providers, who may well be forced into liquidation because the funding is inadequate.”
He added: “We are also seen an increasing number of councils telling care providers that fee increases will be 0%, despite having levied to the 2% council tax precept to local citizens. I don’t think people realise that local authority funding for residential care can be as low as £2.60 an hour, which is totally unsustainable.”
The Care Quality Commission has a duty to assess the financial sustainability of the largest care providers in England, which councils would find difficult to replace should they fail. The regulator is required to alert councils where business failure is likely to see a provider unable to provide services.
A CQC spokesperson told Community Care the watchdog had not identified any recent concerns through this work, adding: “While we recognise the financial pressures facing the sector, providers have a responsibility to prioritise the delivery of safe, high quality and compassionate care for the people they are paid to look after.
“As the regulator, we have an important job to make sure great care becomes the norm and we will continue to celebrate the good care we see, encourage improvement where necessary, and hold providers to account if they choose to cut corners on quality.”