Care homes face tough financial regulations in wake of Southern Cross collapse
CARE homes will be issued with a tough new set of Government regulations, following the collapse of the UK's biggest operator, Southern Cross.
The measures currently being considered include requiring companies to post capital upfront as a condition of their licence, and giving councils and regulators the power to intervene in the management of homes if they come under the threat of closure.
The proposals, which are contained in a formal government discussion paper, were drafted after the National Audit Office found that existing regulations contain “no formal mechanism for dealing with a provider failure of the size of Southern Cross.”
They are likely to bring the care home sector under a regulatory framework similar to that which exists for NHS foundation trust hospitals. Under that regime, trusts must maintain predetermined earnings before interest, tax, depreciation and amortisation, liquidity and return on asset ratios, or else risk formal intervention by the indutry regulator.
When applied to privately run businesses, that could mean a home would have to undergo a “more rigorous financial check” as a condition of a licence.
Its financial position would be reviewed periodically, or after significant changes. The paper states that in the “event of persistent financial weakness” the regulator could intervene and ultimately remove the licence to operate.
The Government is also considering proposals that would require care home operators to hold insurance bonds underwriting their operating costs.
In a written statement to the House of Commons,Paul Burstow, care minster, said: “At this stage the government has not formed a firm view on what would be the best approach. It wants to take this opportunity to hear different views, before settling its position ahead of next year’s white paper.”
The consultation is due to close on December 2.
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