Care home cash crisis will lead to thousands of residents 'flooding' NHS hospitals

Care homes are coming under increasing financial pressure and within five years many will be forced to close and NHS hospitals will have to care for people who have nowhere else to go, according to a stark warning from an independent non-partisan think tank.

The ResPublica has published a report ‘The Care Collapse: The imminent crisis in residential care and its impact on the NHS’ saying that the crisis affecting the care home sector is set to cost the NHS £3bn. The authors claim that within the next five years, care homes could lose as many as 37,000 beds unless the Government takes drastic action.

The authors say the looming crisis has echoes of the 2011 collapse of Britain’s largest care homes operator, Southern Cross Healthcare, which ran 750 care homes. HC-One took over a third of Southern Cross’s homes after the company collapsed under £50m of debt.

Director of ResPublica, Phillip Blond, said: “When Southern Cross failed the private sector stepped in and cared for those left homeless. Now, however, with the sector losing money for every funded resident there is no provider of last resort. We fear the worst case scenario is the most likely, that these residents will flood our local general hospitals costing £3bn per year by 2020.”

Impact of National Living Wage

ResPublica predicts the National Living Wage, which employers will have to pay to all staff aged 25 and over from next April, will also cause significant financial harm to the residential care sector.

The report says by 2020/21 the residential care sector will need an extra £1.1bn to meet demand. A third of this figure - £382m will be for the rise in staff pay because of the National Living Wage.

Staff costs are estimated to be between 60-80 per cent of the total cost of caring for a resident in a care home.

Essential for care workers but could be 'catastrophic' for care sector

Report author Emily Crawford called the National Living Wage a great step forward and said: “It is estimated it could help more than 6 million low paid workers”. She added: “But for the care sector, which is heavily reliant on its labour force, it could be catastrophic.

“By 2020/21 we predict that a third of the funding gap will be because of the rise in the cost of paying staff the National Living Wage."

Mr Blond echoed her sentiments, saying: “The National Living Wage must be brought in. It is essential working people are paid a proper wage. At the same time it will damage the residential care sector which is already under extreme pressure and it could collapse as a result.”

In a detailed analysis the authors point out that currently the number of people over 65 in Britain makes up about 18 per cent of the population. This is set to rise to 25 per cent by 2050.

The report also reveals that 70 per cent of the total health and care spend, in England, is on long term conditions and 90 per cent of local authorities now only provide funding for older people with ‘substantial’ or ‘critical’ needs. The result of this has been that the number of over 65s getting public money for social care has fallen by 27 per cent.

Fundamental shift in funding needed

Report authors say a fundamental shift in the way residential care is commissioned and paid for is needed.

Justin Bowden, national officer for the GMB union, has backed the report’s conclusions, saying: "It is one minute to midnight for the care sector. Just as GMB warnings that Southern Cross would collapse were ignored again and again by Government, history looks set to repeat itself unless George Osborne acts now. This time however we are not just talking about the largest care home provider collapsing, but the entire publicly funded care home and domiciliary care sectors.

“This is not some unexpected, overnight phenomenon catching everyone unawares, this has been a slow motion collapse and somebody's mum or dad or granny - our elderly and vulnerable - will be the biggest victims.”

He added: “Local authorities are unable to act as 'lenders of last resort' and step in, so the NHS will be forced to try and fill the giant hole created by 37,000 less beds in the care sector for our elderly and vulnerable - equal to 28 per cent (or one in four) of all available NHS beds. The effects will be immediate and crippling.”

Chancellor must take 'urgent action'

Dr Chai Patel, executive chairman of HC One the UK’s third largest care provider, also commented on the report, saying: “Our care staff do an incredible job day-in day-out and deserve the Living Wage, but it must be properly funded. This report shows that unless the Chancellor takes urgent action to address this looming crisis, tens of thousands of older people will lose their homes and be forced into the NHS.

“Southern Cross was a failing company, what we are facing now is a failing system. At a time when the Baby Boom generation is beginning to retire, and look ahead to their long term care needs, there are huge fears that the homes to care for them simply won’t exist.”

Martin Green, chief executive of Care England, the voice for the independent care sector, called the report an “important part of the growing mountain of evidence that the care sector is in crisis”.

He added: “This report starkly illustrates the interdependence between health and social care and shows the dire consequences for both citizens and the system, if the Government does not increase care funding.”

'The Care Collapse: The imminent crisis in residential care and its impact on the NHS' is an interim report. The full report will be published in January. It will outline solutions to the crisis facing residential care.