Southern Cross prompts care home sector scrutiny
The government rules out a bail-out of the stricken care home group Southern Cross but pledges to scrutinise the business models of private groups in the sector.
Business Secretary Vince Cable has asked officials at the Department for Business, Innovation and Skills (BIS) to look carefully at the role of private companies in the running of care homes.
The move comes as Britain’s biggest care home, Southern Cross, prepares to axe 3,000 jobs, slashing its workforce by almost 7 per cent and plunging the future of its 750 homes into uncertainty.
The group has insisted that the treatment of its 31,000 residents across the UK will not suffer.
However, Labour MP Nick Smith raised the public’s outrage at the “quick buck strategy” at Southern Cross in parliament, after it emerged that private equity house Blackstone borrowed heavily to buy the company, before selling off its assets to landlords and then leasing the premises back.
The model was successful until the credit crunch struck in late 2007, shortly after Blackstone sold its remaining stake in the business – which had quadrupled in value since it bought the firm in 2004.
Today, Mr Smith called on the government to act. “Will the Secretary of State investigate the conduct of the directors and consider whether regulation should be extended to ensure the financial stability of companies that care for our parents and our relatives?,” Mr Smith asked in the Commons.
The Business Secretary however said that while no resident, whether publicly funded or self-funding, will be left homeless or without care, the government would not be bailing out Southern Cross.
Mr Cable claimed it “had a failed long-standing business model”.
He added: “There is no way we can bail out the company. But what I am doing is that I have asked my officials to look carefully at the business models of companies that do provide public services and to ensure that they are stable and the sector regulators responsible for them are able to act appropriately.”
Mr Cable’s department told Channel 4 News that the Business Secretary had asked his officials for advice, but said there were no plans for an official investigation at this stage.
Care homes are currently regulated by the Care Quality Commission, which regulates care provided by the NHS and private companies alike.
Data gathered by the CQC, and seen exclusively by Channel 4 News, shows problems in half of the Souther Cross homes surveyed. In the six months to April 2011, the CQC reviewed 49 homes and found concerns in 26.
Mr Cable told MPs: “The residents will be given priority and the Government will take responsibility to ensure they are protected.”
He said his department had been in touch with Southern Cross’s banks to ensure that the “process of managing their credit in this critical period is properly managed so that it happens in an orderly way”.