Care sector needs regulation ‘like the banks’

The “critical financial condition” currently faced by Southern Cross – the residential care home provider is to cut its rental payments by a third in a bid to keep its 750 residential homes across the UK open – has been attributed to a flawed business model, which led to selling off the buildings which housed its care homes and then renting them back under long-term leases.

Dr Ros Altmann, Director-General of Saga told Channel 4 News: “Southern Cross’s problem is that they expected the authorities to keep paying more. The business model for Southern Cross has failed – it relied on increased referrals and increased occupancy – neither of which happened.

“At the same time, local authority funding has been directed towards those with critical needs – those who are referred have higher needs than Southern Cross would have budgeted for.”

The business model for Southern Cross has failed. Saga’s Dr Ros Altmann

This situation is the result of cuts across the care sector resulting in local authorities trying to keep people in their own homes for longer. This isn’t necessarily a bad thing; as Dr Altmann says: “People prefer to stay in their own home. It is better for them… it prolongs life as well as their health. Also it is much cheaper.”

Yet saving money in the short term can lead to expensive treatment further down the line: “Incentives don’t work well in terms of encouraging prevention – there is no incentive for councils to prevent hospital treatment,” she said.

Read more from Channel 4 News: who regulates care homes? 

Uncertainty

With 31,000 elderly and disabled people in Southern Cross care homes, the current uncertainty will touch many lives.

Dr Altmann said: “The patients themselves, and the families involved, are anxious about their loved ones. We have already been contacted by concerned relatives who tell us: ‘My mum’s gone into a Southern Cross care home, moving her nearly killed her – if she is moved again, she’ll die.'”

What happens if these homes fail? Dr Altmann believes the situation has been “left to happen”.

She said:”The upcoming rental agreement has been known about for months, but nothing has been done about it.

There is nothing to put in place should Southern Cross fail. Saga’s Dr Ros Altmann

“The problem is there are no proper mechanisms – it’s like the banks. There is nothing to put into place should Southern Cross fail. There is no mechanism for the care sector. I would argue that it’s even more important to regulate the care sector than the banking sector.

“We urgently need a mechanism to rescue failed homes. The Government needs to make clear what its proposals and plans will do if the worse happens here, and what families can expect.”

Saving for a rainy day

Television presenter Joan Bakewell also called for a shake-up of the current system. She told ITN: “We’re expecting businesses that run for profit to set up stable and sustainable business plans. Who could say that of any business enterprise these days?

“Long-term there needs to be a whole shakeup of the system and I believe that is coming when we get the report from the Dilnot Commission [on Funding of Care and Support] next month. I think we will all have to take out some sort of insurance throughout our lives that will pay for our extreme old age.

“I think we’re all going to have to take care of ourselves. We had our nice homes and our pleasurable lives. But we didn’t save for a rainy day. Well the rainy day is coming and we’re going to have to sell the homes and pay for our care, otherwise, where is the money to come from?”