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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.

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.

It is no wonder then that the majority of local authorities have closed their own care homes and now outsource to private providers. Unfortunately with little or no increase in fees over recent years the majority of care homes are struggling to make ends meet. 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.”

For more on this article from community care click here

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