Rise in care homes going out of business

Research by accountancy firm Moore Stephens shows steady increase in number of care home providers entering insolvency

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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.”

‘Mounting concerns’

 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.”

‘Market oversight’

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.”


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6 Responses to Rise in care homes going out of business

  1. Chris Sterry April 26, 2016 at 11:14 am #

    This is just the start as care homes are the first, as it will not be long before this is occurring in supported living and home care service providers, if not already. While it is good that there is the national living wage, even though it is not sufficient, the bench mark should be the Living Wage.

    These providers are having to pay their staff the national living wage when the Government is reducing funding to local authorities, who then are short of funding to allow these providers to increase their fees accordingly. Care is in crisis.

  2. Charles Henley April 26, 2016 at 11:47 am #

    It would seem to me that instability is an inevitable consequence of policy changes based more on political correctness than rational and common sense reasoning. This applies to residential or day care provision for the ordinary elderly, the needs of people with mental health problems, or those with learning disability problems.
    The striving to getaway from big institutions was well founded but the overwhelming drive to retain people ‘within the community’ has not been built on structured and coherent plans or led by sufficiently qualified and experienced leadership but has been swept along by the adoption of one size fits all solutions, the abdication by appropriate authorities to provide direct services, the pressure to reduce costs, and the dubious alternative of privatisation.
    Care in the community is a shambles and will remain so until the values of structure and specialisation are recognised again.

    • Sarah Lund May 10, 2016 at 2:31 pm #

      Thankgod. I was beginning to think I was alone in this same opinion of manufactured communities. Maybe the right people who can help are elsewhere, or might be unemployed and sat at home, having really brilliant ideas. There’s only so much anyone can do, until hopefully soon enough, all of the failures of this social integration, will finally show. They already are, slowly but very surely. When I was little, I was told never to let strangers into my home, so it’s a bit ridiculous how I’m now just expected to let just anyone in. Yet I’m still not daft enough to let anyone I don’t know into my home. Well I can’t call it a home, because for it to feel like a true home, it needs to feel homely. The kind where you feel you belong there. I’ve never felt that here. Still aren’t. I’m not so sure that councils or government should have such idealisms. They’re acting on impulse, rather than practical needs or common sense. I wouldn’t be so naive to think that anything would work out well, just because I want it to. That would be a step too far.

  3. Gerald April 26, 2016 at 1:47 pm #

    This started in 1993 and we have been warning Councils for years and been continually ignored. Since the Councils have been working with the NHS the matter has actually goten even worse. Financialy this policy makes no sence at all and it has no relevance to quality so, I wonder what is the reason the Public Sector has for doing this ?? has anybody got any ideas ??

  4. Anonymous May 10, 2016 at 2:12 pm #

    It makes me glad that I freelance myself to providing companionship to the elderly.. I don’t see why I should have to join a home care provider or be a carer in a care home, in order to provide care in the first place. I can do it anyway. I advertised myself in a local newspaper, and offered to befriend the elderly. It beats being part of any home care provider, because I know how the carers visiting people’s homes get treat, by the bigger people at the top, who work in a staff office. I wouldn’t want some hoity-toity person, giving me more work than I can handle, in one day. And if that wasn’t enough, the home carer’s can never plan their days, because they get more home appointments shoved onto them out of the blue. I’m more free by controlling what days I do this, and how long for. I do it for free. Money shouldn’t come into it, when it’s about caring for others.

  5. Dermot May 10, 2016 at 2:45 pm #

    Oh, look. It’s that over-used word ‘Domicillary’, again. As bad as when they say “Pallative care”. They make it sound like a dentist tool.