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Care homes under financial distress

15 August 2017

One in six care homes at risk due to increasing demand on sector

New research has revealed that one in six care home companies exhibited signs of being at risk of failure in the year leading to February 2017.

This has been put down to increasing pressures on the care sector including rising costs, cuts to funding and a growing population.

The study and its findings

7,497 companies completed the survey put forward by the accountancy firm Moore Stephens.
It revealed that 16% of care home companies were financially-stressed and exhibiting signs that they were at risk of failure. This is almost a 5% increase on the previous year.
Several areas were cited as contributing factors for this increase:

  • Rising equipment and general costs
  • Cuts to funding
  • An ageing population
  • An increase in the National Living Wage (rose to £7.50 a year)
  • Difficulty in retaining and recruiting skilled staff, and dependence on expensive agency personnel

The findings have prompted experts and opposition politicians to accuse the Conservatives of "repeatedly ignoring warnings" of an impending "crisis" in the sector. Health Secretary, Jeremy Hunt, has been told by many to "wake up" and provide more adequate funding.

Other stresses on the care sector

Last month, it emerged that one in four pensioners entitled to free care (approximately 48,400 elderly people) were being wrongly charged fees of up to £100 a week. This is believed to be an attempt to subsidise gaps in care home funding from councils.Consumer watchdog, Healthwatch England, recently warned that the tremendous pressure care homes find themselves under means they are often unable to provide basic care. In some cases, this has led to elderly people being dressed in each other's clothes and living among dead plants and rotting windowsills.

What does this mean for the future?

At present, four in ten care homes are not fit for purpose and 38% of care homes have failed Care Quality Commission inspections in the last year. This translates to 70,000 vulnerable patients and residents at risk.

Drastic changes to care home companies will need to take place if they are to deliver adequate care and avoid financial distress.

Lee Causer, a restructuring partner at Moore Stephens, warned that too many businesses in the care home sector were heading "back to the brink".

He described the current situation as "volatile" and stated that many factors have made it "increasingly difficult for care home companies to offer a high standard of care - while remaining solvent".

Causer also raised concerns that private companies who are not making a profit will hand back contracts to local authorities. This will place more strain on government funding, and unless more money is made available, quality of care will drop further.

A Department of Health spokesperson said:

“Everyone deserves to receive high-quality care in older age – that is why we have introduced tougher inspections of care services to drive up standards, provided an additional £2bn for social care, and have committed to consult on the future of social care to ensure sustainability in the long term.”

While this seems promising, many care home companies are expected to restructure in the coming months. Hopefully, this will help turn the sector around and create viable care solutions for the ageing public.

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