Long-term care and intermediate care includes services provided by residential nursing/care homes and care provided within your own home. This is a complicated area where care provided free by the NHS meets means-tested care provided by social services. After 30 years of a policy of privatisation in this sector, service provision is almost exclusively by the private sector, with only a small amount provided by local authorities and the not-for-profit sector.
Funding for this sector has been a major target of austerity policies and as a result providers are facing financial melt-down and a workforce crisis. The level of privatisation in this sector means that local authorities and NHS organisations have very little control over service provision and if companies go bankrupt or decide to leave the market, all they can do is pick up the pieces.
Private sector involvement in the long-term care market began in the 1980s; it was one of the first targets for outsourcing of public services to the private sector.
In 1990 the National Health Service and Community Care Act restructured councils as 'enabling authorities' as opposed to care providers. Councils were required to spend 85% of their funding on purchasing care services from the private sector.
A report from the Centre for Health Policy Institute (CHPI) in late 2016 states that "the vast majority of both home care and residential care in England is now provided by private companies." Around 72% of the adult social care workforce are now employed by the private or voluntary sectors with only 14% still employed by local authorities.
Since the 1980s there has been a trend away from the small companies in the care home sector to larger chains and larger homes; by 2016, according to the CHPI report, the top 10 largest providers accounted for 20% of the UK home market, in terms of numbers of beds.
Chain operators have dominated the market for building large residential and nursing homes with 60 or more en-suite bedrooms. In London, big chain companies already provide the majority of the available beds.
The Centre for Research on Socio-Cultural Change (CRESC) describe this change in the market as a 'Travelodge model'. The homes are built with the purpose of minimising staff needed and maximising profit, as opposed to focusing on the needs of the residents.
A 2018 blog post on London School of Economics and Political science website reported the extent of the growth of private sector involvement in social care over the last 30 years. By 2012 the number of residential or nursing home beds provided by local authorities or the NHS was down to 6%, compared to 64% in 1979. The care home sector has around 410,000 residents, spread across 11,000 homes with 5,500 different providers.
There are approximately 11,000 different regulated providers for home (domiciliary) care services, some operate across the UK but many operate in a single geographical area. The companies operate under contracts with local councils and NHS organisations.
The long-term care sector is an example of what happens when government loses control of the providers of a service. Almost the entire social care sector, residential and home care, is privatised; these companies have to make a profit from service users or face bankruptcy. The privatisation of social care was supposed to lead to better care and more choice for people; what it has led to is a system of declining care standards and widespread financial instability.
Since 2010, government reductions in local government funding has been a primary austerity measure. All local authorities have sought to cope with the resulting funding crisis by reducing the fees paid to care providers in both the residential and the home care sector.
In the residential sector, the private companies have tried to claw back profits in several ways, including charging much higher fees to users who pay privately and reducing the number of staff, sick pay, break times and training. Self-funding residents are paying on average 43% more than state-funded patients for the same care. This disparity in payment means that a two tier system is operating, with residential care homes reluctant to take too many state-funded patients.
Many companies in the residential care sector, in an effort to increase their profits, have resorted to complicated business models backed by private equity and are now reliant on risky financial structures. This leaves them exposed to collapse, with damaging consequences for care home residents. One example of this is the 2011 collapse of Southern Cross, a large national care home provider which had 9% of the market nationally, although within the northeast, Southern Cross accounted for around 30% of all care home places. The company's collapse risked the care of 37,000 people.
The reasons for the Southern Cross failure were many, but all related to the fact that as a private company it needed to make a profit. The company's finances involved a complex mix of creditors, property investors, bondholders, banks, shareholders and landlords and the think-tank CHPI notes that as the company struggled with debt and a reduction in income there was "a reduction in property maintenance, which in turn led to lower occupancy; loans attracting higher interest rates because the company no longer had properties against which to secure loans; a fall in market confidence and the share price; and poor management and quality of care, which led to adverse inspection reports and further decreases in occupancy levels." As it was a private company, the local authorities had no control over the situation, all they could do was try and pick up the pieces after its final collapse.
In the end other private companies took over the contracts, however the main company that picked up the contracts, Four Seasons, was also on the brink of financial downfall by the end of 2017. The uncertainty around the company was only relieved when it struck a deal with US private equity investors and deferred debt payment. Financial stability didn't last long as in March 2019 Four Seasons went into administration. It was reported that this move will not affect the residents lives or the staff as there are no plans to close its 322 care homes.
The instability of the social care market continues. A survey of nearly half of the local authorities in England who commission social care found that 77% experienced provider failure in 2015/16 and 74% believed another failure was going to be likely in the following year.
In November 2016, a report by OPUS found more than one in four care homes across the UK will be facing a financial crisis over the next three years; this means that more than 6,000 care homes could close if they are not rescued by a new owner. The study looked at 6,178 operators that run 96% of the UK’s care homes, looking after 300,000 elderly and vulnerable residents. The report also noted that 751 operators (12%) are ‘zombie’ companies with higher liabilities than the value of their assets. Between them they have a negative equity of £167 million; this figure has risen by 53% since March 2014. The OPUS survey did not cover 750 care homes owned by three private equity companies, including those run by Four Seasons, HC-one and Barchester. These companies are owned by offshore companies and comprehensive financial data was not available. If these companies have been included the sector's financial health would have looked even worse.
The financial stability of the care home companies show no signs of improving. Private equity firms view social care as a lucrative market and have amassed huge amounts of debt buying up care homes. This could easily trigger a financial crisis that would leave local authorities to pick up the pieces, as with Southern Cross in 2011.
In March 2019, accountancy firm BDO reported that more than 100 care home operators collapsed in 2018, taking the total over five years to more than 400. Its report warned that as homes closed many patients would have nowhere else to go but hospitals.
In October 2019. the Guardian reported on documents leaked from the CQC on the financial state of Advinia, a company that had grown to 10th in the English care home market via the acquisition of 22 BUPA homes in April 2018. The CQC is concerned about the company's cash flow and ability to pay its debts. In late August 2019, the CQC warned over 150 local authorities in England and Scotland that Advinia was not cooperating in a financial investigation and the CQC could not give the company a clean bill of financial health. The local authorities now have to decide whether to use the company as a provider or not. According to the leaded documents, Advinia is not cooperating with the CQC and there are also concerns about the “competency and capabilities” of Advinia’s finance department as the company has had four finance directors over five months.
With the sector facing financial problems, the quality of the care that they provide to residents has been found to diminish – the facilities deteriorate, staffing levels are reduced and additional ‘services’ for residents, such as outings and entertainment, are cut back.
Research by Which (click here for Infogram) showed that the care homes owned and ran by private equity firms were among the worst in terms of CQC ratings of inadequate or requiring improvement.
Financial instability is also a major problem in the home care market. In 2017, a report produced by the Local Government Unit think-tank and Mears, one of the leading home care providers, concluded that the home care business was on the brink of collapse; companies were either going bankrupt or pulling out of contracts. Mears reported that it is losing £3 million per year on its home care business and is now pulling out of some local authority contracts and being very wary about bidding for new ones.
In March 2017, an investigation by OPUS, Company Watch and BBC Panorama found that care firms have cancelled contracts with 95 councils, saying they cannot deliver services for the amount they are being paid. The research also found that 69 home care companies had closed in the preceding three months and one in four of the UK's 2,500 home care companies is at risk of insolvency.
In March 2017, Mitie sold its home care division to specialist healthcare investor Apposite Capital for just £2; Mitie bought the division for £111 million in 2012. Mitie blamed cuts to payments by local authorities and the increase in minimum wage.
In October 2018, the CQC took the unprecedented step of writing to 84 local authorities with concerns for the financial stability of Allied Healthcare and its ability to continue to provide home care services past 30 November 2018. The CQC warned that as many as 9,300 elderly and vulnerable people are at risk of losing their home care services. The CQC was concerned that Allied Healthcare would not be able to make a loan payment due at the end of November. The company was saved from going into administration by its sales to Health Care Resourcing Group for an undisclosed sum in December 2018.
Home care companies had sought to maintain profitability by the adoption of the flawed ‘task and time’ model with units of as little as fifteen minutes care per client imposed in order to reduce costs. This approach received considerable criticism, however, and statutory guidance introduced in 2015 stated that this short time was not appropriate. Despite this guidance, in February 2018, a report by the disability charity Leonard Cheshire found that around 20,000 people still received visits of 15 minutes or less.
A workforce crisis
The long-term care market has a workforce crisis, with major and growing problems in recruitment and retention. The biggest cost of providing personal care is paying for the frontline staff that deliver the care, so this area has been targeted for cost restraints in order to retain profit margins in private companies. According to a report from the CHPI, cuts have been made in staff numbers, annual leave restricted, plus the removal of sick pay, paid breaks and moving to unpaid online training.
Brexit is set to make the workforce crisis much worse. In a letter sent to the London Evening Standard in February 2019, Glen Garrod, president of the Association of Directors of Adult Social Services (ADASS) said that given the number of people working in social care that come from the EU – there are now around 100,000 – it is likely that the sector will “struggle to cope” unless there is an “absolute guarantee” from the government that EU nationals can continue to work in the UK, without disruption. ADASS is concerned over the introduction of new immigration rules after brexit, including a £30,000 minimum salary level.
In 2018, the National Audit Office reported that in 2016-17, around half of care workers were paid £7.50 per hour or below (the National Living Wage was £7.20 in 2016-17), equivalent to £14,625 annually. This, along with tough working conditions and a poor image, prevents workers from joining and remaining in the sector. The department estimates that the workforce will need to grow by 2.6% every year until 2035. Yet the turnover rate of care staff has been increasing since 2012-13 and in 2016-17 reached 27.8%, meaning providers must spend funds on recruitment they could otherwise have spent on providing quality care. With the national living wage set to rise to £9/hour by 2020 the stability of the care home market could yet again take a hit.
In 2016, the care home provider Mears has already pulled out of its contracts in the northeast due to low fees being paid by councils leading to the ‘encouragement to providers to breach the national living wage’.
In 2016, the UK's largest not-for-profit care home provider, Housing & Care 21, announced it was pulling out of the market and selling to another provider. Its reasoning for this was that the squeeze on local authorities budgets meant they were paying the lowest rates possible, making staff training, recruitment and retention of staff increasingly difficult.
Four Seasons Health Care Ltd is the second largest provider of care homes in the country. The company is part of the Four Seasons Group, which is run as three separate businesses: Four Seasons Health Care (FSHC), which provides care services to the elderly; brighterkind, which focuses on private residential and nursing care; and The Huntercombe Group (THG), which provides specialised services in mental health, brain injury and neurodisability. The company has around 320 homes and employs around 22,000 people.
The Four Seasons Group was owned by Guy Hands' Guernsey based private equity company, Terra Firma and at the end of 2017, the company had £525 million worth of debt mainly owned by H/2. There were major concerns for the future of Four Seasons as it admitted it could not afford the debt repayments it had due. However, in 2018 the company came to a deal with its creditors. Financial stability did not last long and in April 2019 the company was put into administration. The homes remain open and staff working. Industry experts have said that there is the possibility that the company will be broken up by its largest lender, H/2 Capital Partners, a little-known US property investment group that effectively controls the business and holds the around £730 million worth of debt. An FT report in October 2019 states that Four Seasons has failed to pay millions of pounds in rent to the owners of properties it leases, but also that H/2 partners is likely to buy all the freehold properties held by Four Seasons in a deal set to complete by the end of the year. For the 135 leasehold properties, Four Seasons told the stock market in October 2019 that it is seeking to renegotiate the rent, and withholding the rent is part of the negotiations.
HC-One came to prominence following the collapse of Southern Cross in 2011 and being bought by finance firms Court Cavendish, Formation Capital and Safanad in 2014.
Since 2014, the company acquired the care providers Meridian and McArdle Care. In 2017, the company bought 122 care homes from Bupa taking its total number of care homes up to 350.
However, in May 2018 it was reported that the company was up for sale for £1 billion and there were multiple private investment firms interested in the company. According to Companies House records and the company's annual return to September 2018, the ultimate parent and controlling party is FC Skyfall LP registered in the Cayman Islands. Between HC-One and FC Skyfall LP there is a series of holding companies, including one registered in Jersey.
Between December 2017 and February 2018 Bupa completed the sale of 132 of their UK care homes. Despite this the company remains one of the largest care home providers, with 125 care homes and 6,000 residents. It is also in the process of building four new care homes in England.
Barchester, founded in 1992, is one of the biggest independent care providers in the UK, with over 200 care homes and seven registered hospitals across the country.
The organisation employs over 17,000 staff who care for over 11,000 individuals in care homes which offer a range of services from residential and nursing care to dementia care and more. The ultimate parent company is Grove Ltd registered in Jersey, according to documents filed with Companies House.
Mears UK Ltd, founded in 1988, operates UK-wide in the housing and social care sector. The company has built up a domiciliary care business through the acquisition of companies, most recently in 2015 the domiciliary care division of Care UK. In 2018, the company reports that its care teams deliver approximately 180,000 hours of care and support each week on behalf of 127 local authorities and a number of clinical commissioning groups. The company has over 6,000 care workers that support 30,0000 people.
MC Care was created in 2017 by Apposite Capital following the acquisition of MiHomecare and Complete Care from Mitie Group plc. MiHomecare provides domiciliary care services for the elderly and disabled, whilst Complete Care provides nurse-led complex care solutions. Both companies still operate under their pre-acquisition company names.
Interserve Healthcare, a division of the construction, equipment and facilities management company Interserve, is one of the UK’s leading providers of homecare services. In March 2019 Interserve Healthcare's parent company Interserve went into administration. For more details see our company profile.
One of the largest providers of domiciliary care in the UK, Allied Healthcare provides around 13,000 people receive care across the UK, including Wales and Scotland. Much of this care is under NHS contracts.
The company was owned by German private equity investor Aurelius. In October 2018, the company was reported to be in severe financial difficulties and the Care Quality Commission warned that around 9,300 elderly and vulnerable people could be at risk of losing their care. The CQC wrote to 84 local authorities to warn them of the situation and that there is a “credible risk” that Allied Healthcare may have to stop its services when a loan payment becomes due at the end of the month. In December 2018 the company was saved from bankruptcy by its sale to Health Care Resourcing Group for an undisclosed sum.
What services come under long-term care?
Long-term care, or social care, services provide people with nursing and practical support if needed due to old age, illness, or disability.
The support provided can be at home, within the community or through providing you with a new residence in a care home. Funding for care is complicated as some can be provided free by the NHS, regardless of financial status, via Continuing Healthcare Packages, whilst other care considered to be non-medical is means-tested. Generally, most people have to pay for some of their care and support, but local authorities have a duty to assess everyone's care and support needs.
Who commissions long-term care?
Residential and home care services are commissioned by local authorities and NHS trusts. Some NHS organisations and local authorities have framework agreements listing a large number of providers. Most local authorities buy care piecemeal via an auction system where contractors bid to provide a care package for each elderly or disabled person.
Many NHS trusts have contracts with care homes for what are known as ‘step-down’ beds as a means to improve discharge rates, this is also referred to as intermediate care. The hospital trust discharges patients to a step-down’ bed if they no longer require acute care, but are not well enough to go home.
Who provides long-term care?
The vast majority of residential and home care is provided by private companies with a small number of local government staff, not-for-profit organisations and charities involved.
A 2018 blog post on London School of Economics and Political science website reported the extent of the growth of private sector involvement in social care over the last 30 years. By 2012 the number of residential or nursing home beds provided by local authorities or the NHS was down to 6%, compared to 64% in 1979. The care home sector has around 410,000 residents, spread across 11,000 homes with 5,500 different providers. Even more significantly, home care services have over 11,000 different regulated providers giving help to over 900,000 people. Many home care services are run on the franchise business model, for example Bluebird Care.