Financial pressures on care homes sees increasing numbers being forced to close

Increasing numbers of care homes are being forced to close their doors due to financial pressures, such as rising debts and a lack of funding from local authorities.

Recently concerns have been raised in Northern Ireland where both the Northern and Southern Health and Social Care Trusts have revealed plans to close their care homes. The move follows an announcement by health minister Edwin Poots, who said more than 50 per cent of homes would close under Government plans. The Western Health and Social Care Trust also proposes to shut its homes but an official decision is yet to be made.

The picture is the same throughout much of the rest of the UK and figures published by accountancy firm Wilkins Kennedy show that the number of care home businesses going bust climbed 12 per cent last year from 60 to 67. The firm says local authority cuts and reductions in funding are to blame for the closures.

Partner Stephen Grant said: “Care homes have been really hurt by local authority cut backs. Local authority referrals are a major revenue stream for a sector that is weighed down by very high fixed costs.

“Many care homes used the boom years to borrow heavily to fund growth. While the boom is over and occupancy levels are down in some homes, the debts remain.

“As well as those care home businesses that have already gone into administration, there are a large number of care homes that risk breaking banking covenants.

“Care homes have less leeway than other businesses in drastically cutting costs to match shrinking revenues. High standards of front line care need to be maintained if a home wants to keep its operating licence.

“This puts care homes in a difficult situation as efficiencies are harder to find for them than they are for other businesses.”

Professor Martin Green, chief executive of the English Community Care Association (ECCA), believes the figures show a “real crisis in social care”.

He said: “Recent research has proved that the numbers of care providers going into insolvency has increased significantly. This creates not only a crisis for the people who are currently in those care services, but also takes capacity out of a system, which will be significantly stretched in the future.

“There is another aspect to this which is also worrying, and that is that the majority of services going out of business [are] from small and medium-sized providers. If the Government is truly committed to personalisation, we need not only capacity in the system, but also diversity, and current levels of funding do not allow smaller scale services to be viable.

“There is a real crisis in social care and it is mainly driven by local authority funding cuts and the inability – or unwillingness – of the Government to move significant amounts of health funding into the independent care sector.

“The reality of the 21st Century is that the majority of people have long term conditions and a number of comorbidities. For these people, there is no cure and hospital-based services are neither appropriate nor cost effective.

“The challenge for the future will be enabling people to live well with their long term conditions and that will require a vibrant and diverse social care system, which current policy is destroying.”

Professor Green’s concerns of a “real crisis” are echoed by Michelle Mitchell, charity director general at Age UK, who said: “The care system is underfunded and in crisis. When an older person goes into a care home they want to view that as somewhere they’ll be left in peace to live their life and not having worry and anxiety that they could have to move.

“A sizeable proportion of people in care homes do have dementia and they need continuity, not unsettling change.”

Last year Bupa revealed a funding shortfall of £892 million between the real costs of providing high quality care and the fees paid by local authorities when it published its ‘Bridging the Gap’ report and recently predicted that the situation will only worsen in the future.

Andrew Cannon, managing director of Bupa Care Homes, said: “There doesn’t seem to be any sign that the pressure on local authorities’ budgets will ease and our concern is that the level of fees paid for old people’s specialist care will continue to worsen.

“For some time we’ve feared that smaller providers are making do and struggling to meet regulatory standards, or closing wards and homes as they struggle to survive.

“The risk is that frail older people will not be able to find the support of a care home. As a result they could end up as emergency admissions to hospital, or without the care they need being provided in their own homes. That’s in no one’s best interests.”

Despite the concerns of both Professor Green and Mr Cannon, the Department of Health has said there is no need to be alarmed by the figures.

Care and support minister Norman Lamb said: “These figures need to be put in context – there are over 10,000 organisations providing residential care in England alone, and as with any market in tough economic times, the size and strength of companies will change over time. However, it is imperative that we act to ensure that the care of older and disabled people is maintained if the care home owner is in financial difficulty.”

Mr Lamb recently announced plans to introduce new measures, including financial checks, which will protect residents if their care home is forced to close.

He said: “Everyone who receives care and support wants to know they will be protected if the company in charge of their care goes bust.

“The fear and upset that the Southern Cross collapse caused to care home residents and families was unacceptable. This early warning system will bring reassurance to people in care and will allow action to be taken to ensure care continues if a provider fails.”

The measures, which aim to bring care homes in line with hospitals that already have protection systems in place, will be managed by the Care Quality Commission (CQC).

David Behan, chief executive of the CQC, said: “These are important measures that provide early warning of potential failures in care homes. Set alongside our plans for the appointment of a chief inspector of social care and support, tougher registration requirements on social care providers and the introduction of a new ratings system, these new measures will strengthen our oversight to help ensure risks to peoples’ care are identified and acted upon as early as possible.”