New powers that could enable the UK government to bail out struggling social care companies are expected to be part of a health service shake-up that comes as hundreds of homes struggle with the financial burdens of Covid-19.
The secretary of state for health and social care is already allowed to make emergency payments directly to non-profit providers that run into financial trouble, but draft legislation on reforming the NHS proposes extending this to private sector owners of companies that run residential care facilities or provide nursing services for the elderly and disabled in their own homes.
Any financial assistance would be decided on a case-by-case basis and could go to individual providers or the entire sector, providing “grants, loans, loan guarantees or the purchase of share capital on any terms the secretary of state considers appropriate”, the draft white paper seen by the Financial Times says.
Much of the care provided to elderly people and vulnerable adults is paid for by the state but outsourced to private companies. They manage about 380,000 beds in care homes, accounting for nearly 90 per cent of the total supply, with a further 59,000 provided by not-for profit providers or local authorities, according to LaingBuisson, the data specialists. It estimates the value of the market at £17.3bn.
In 2007 Southern Cross, then the largest care home operator, collapsed, causing uncertainty for its frail and elderly residents while Four Seasons, another care home chain, is now in the hands of creditors.
The risks of another corporate collapse have increased as Covid-19 has torn through care homes, lowering occupancy rates and increasing staffing costs for providers, which are also required to buy protective equipment such as masks and gloves.
Nick Hood, consultant at Opus Restructuring, which advises social care businesses, said there was a real risk of widespread failures among providers in the wake of the pandemic and called for the plans to be implemented “without delay so that [the government] is in a position to respond with the appropriate urgency as and when the need arises”.
But others warned that the draft legislation risked sending a message that the government would bail out companies that had got into difficulty.
David Rowland, director of the Centre for Health and the Public Interest, a campaign group, said the sector required further reform or the new measures would provide “no incentive for the large for-profit providers to rein in their extractive and highly leveraged business practices”.
Many large care providers, including HC-One, the UK’s largest care home chain, and the Priory, Britain’s biggest mental healthcare provider, are owned by international investors with complex debt-laden structures across multiple jurisdictions.
Although the regulator, the Care Quality Commission, can provide an early warning of corporate collapse, it currently has no powers to intervene, with responsibility for rehousing vulnerable residents or finding alternative care falling on local authorities.
Sally Warren, director of policy at the King’s Fund, a think-tank, said the proposed new power reflected concern that during the Covid-19 crisis the government had struggled to deliver extra funding to social care providers as quickly or as directly as it would have liked.
Warren, a former director for social care at the health department, highlighted the infection control fund that was intended to allow staff to be paid higher sick pay when needing to isolate, and support more recruitment. The government had had to channel the money via local authorities, a process it had found “really quite slow and variable, depending on the local authority, which providers found frustrating”, she added.
She said she understood from discussions in Whitehall that the main purpose of the change was not to bail out foundering companies, but to enable the secretary of state to act in a crisis or an urgent need. “I don’t think they would be able to rule out it being used for that,” she added.
The Department of Health and Social Care declined to comment