‘Monitor providers’ finances to stop another Southern Cross’

The Scottish government should consider introducing financial health checks on larger social care providers to prevent another Southern Cross-style collapse, Audit Scotland said today.
The government spending watchdog said there was “a strong case” for national level reviews of care provider finances because councils may lack the expertise needed to unpick the accounts of the biggest companies they commission.

The recommendation was made in a report on commissioning social care and would increase the level of financial regulation in social care beyond current plans for Scotland’s Care Inspectorate to require providers to notify it of financial difficulties. Audit Scotland also said that councils should carry out due diligence on external providers before awarding contracts and have contingency plans in place for dealing with the fallout of a provider’s collapse.

Discussions are also taking place in England about whether there should be an increase in financial regulation or monitoring of social care providers, to provide early warnings should organisations get into trouble and ensure service continuity in the event of a collapse.

However, increased financial regulation could damage the care home sector by limiting its ability to make much-needed investments, said Dr Chai Patel, whose HC-One company has taken over one-third of former Southern Cross homes.

“It could potentially create more stress at a time when capital is scarce [for care providers] and [profit] margins are low,” Patel told today’s Laing and Buisson annual long-term care conference. “It would be another sideshow that did not reduce harm for residents and relatives.”

He said the residential care sector needed many billions of pounds of investment over the coming years to deal with demographic change. He said this would involve improvements in commissioning, with councils striking longer-term deals with providers to enable them to invest.

The Audit Scotland report also identified shortfalls in the quality of local authority strategic commissioning. It found that just 11 of Scotland’s 32 councils had a commissioning strategy that covered all services, and that many of those lacked proper analysis of local need or information about the quality and costs of both in-house and external providers.

The report said Scotland’s councils should develop more detailed strategies for social care services as factors such as changing demographics, rising demand and falling budgets are making current models of social care unsustainable.

Robert Black, the Auditor General for Scotland, said that existing deficiencies could undermine plans to give service users more choice and control over their support as set out in the Self-directed Support (Scotland) Bill, published today.

“If these changes are to work well, it is essential that councils and health boards improve the planning and commissioning of care services,” he said.

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