By Richard
Johnstone | 1 June 2011
Town halls have been given guidance on how to take over care homes amid fears for the future of the UK's biggest private provider.
Southern Cross Healthcare, which operates 750 care homes with 31,000 residents, today announced that it would defer part of its rents until October.
The company is under pressure from ‘unsustainable’ rents on the homes on top of local authority cuts. The 30% rent shortfall is designed to help it to restructure.
Chair Christopher Fisher said that the move would help the company ‘emerge with a stable and sustainable business model for the continuing care of our residents’.
A spokesman for the Association of Directors of Adult Social Services has confirmed to Public Finance that it had issued guidance to all local authorities in England on the best way to take over homes if needed. However, he added that ‘we don’t expect it to become necessary’.
The advice, which was produced for Adass by the University of Birmingham's Health Services Management Centre, will be formally launched next week.
Southern Cross has claimed that council spending cuts have squeezed the company’s margins. Fisher said this left the company in a ‘critical’ financial position. Last month it announced in its interim half yearly results that it made a loss of £310.9m.
Today’s announcement that it is unable to meet its rent for the homes, many of which are purpose-built, means that some landlords might look at ‘other options’, the company admitted. This could trigger the need for some residents to be moved, but Southern Cross says this should be ‘part of a larger, managed and orderly process’.
The Local Government Association said that councils that have contracts with Southern Cross are ‘monitoring the situation closely’.
A spokesman said that local authorities have a duty to ensure that the people in the homes continue to be looked after whatever happens, adding that local authorities have experience of dealing with care homes going out of business.
David Rogers, chair of the LGA’s community wellbeing board, said: ‘The LGA is in ongoing discussions with its members, the Care Quality Commission, the Association of Directors of Adult Social Services, Department of Health and Southern Cross to best support its plans to address its financial difficulties and ensure that service and quality are maintained.’
Leading charity Age UK has called on councils to explain the contingency plans to residents and their families.
Charity director Michelle Mitchell said: ‘To prevent similar incidents in the future, Age UK believes that regulation should be strengthened to ensure that inspected care homes can prove they are financially viable.’
Town halls have been given guidance on how to take over care homes amid fears for the future of the UK's biggest private provider.
Southern Cross Healthcare, which operates 750 care homes with 31,000 residents, today announced that it would defer part of its rents until October.
The company is under pressure from ‘unsustainable’ rents on the homes on top of local authority cuts. The 30% rent shortfall is designed to help it to restructure.
Chair Christopher Fisher said that the move would help the company ‘emerge with a stable and sustainable business model for the continuing care of our residents’.
A spokesman for the Association of Directors of Adult Social Services has confirmed to Public Finance that it had issued guidance to all local authorities in England on the best way to take over homes if needed. However, he added that ‘we don’t expect it to become necessary’.
The advice, which was produced for Adass by the University of Birmingham's Health Services Management Centre, will be formally launched next week.
Southern Cross has claimed that council spending cuts have squeezed the company’s margins. Fisher said this left the company in a ‘critical’ financial position. Last month it announced in its interim half yearly results that it made a loss of £310.9m.
Today’s announcement that it is unable to meet its rent for the homes, many of which are purpose-built, means that some landlords might look at ‘other options’, the company admitted. This could trigger the need for some residents to be moved, but Southern Cross says this should be ‘part of a larger, managed and orderly process’.
The Local Government Association said that councils that have contracts with Southern Cross are ‘monitoring the situation closely’.
A spokesman said that local authorities have a duty to ensure that the people in the homes continue to be looked after whatever happens, adding that local authorities have experience of dealing with care homes going out of business.
David Rogers, chair of the LGA’s community wellbeing board, said: ‘The LGA is in ongoing discussions with its members, the Care Quality Commission, the Association of Directors of Adult Social Services, Department of Health and Southern Cross to best support its plans to address its financial difficulties and ensure that service and quality are maintained.’
Leading charity Age UK has called on councils to explain the contingency plans to residents and their families.
Charity director Michelle Mitchell said: ‘To prevent similar incidents in the future, Age UK believes that regulation should be strengthened to ensure that inspected care homes can prove they are financially viable.’
