The rotten state of residential care

Well it seems a Social Care story has finally appeared...

Southern Cross Healthcare who own and operate 31 000 residential homes are in serious financial difficulty. The chairman has quit and the firm is threatened with possible insolvency.

According to the Guardian article Southern Cross came unstuck due to greed:

The company's problems stem from heady expansion when it was owned by the US private equity group Blackstone, which undertook the sale and leaseback of homes to bankroll a number of expensive acquisitions. Many leaseback agreements included upward-only rent reviews of up to 2.6% annually.

As the article also explains whilst this may have seemed like a good idea at the time it doesn't seem so good in the face of local government cutbacks. I know my old authourity a couple of years back went with a 1% increase in the maximum funding levels two years in a row, and for all I know this situation probably continued after I left. What this means is that as far as local authority clients went a company like Southern Cross could only expect the price they received per resident to rise by 1% Makes those 2.6% rent reviews seem like a very bad idea indeed.

But, isn't that the way markets work? Risk and Reward. Southern Cross won't be the first firm to have collapsed after overstretching itself to meet ambitious targets. Maybe we could shrug it off if it wasn't for the following passage of the article:

Paul Saper, chief executive of LCS International, the healthcare consultants, said that the cash-strapped group had not "invested properly in some of its homes, with doors falling off the hinges at some properties". He added that, a year ago, about 40 of the company's homes faced embargos from the regulator and that several had been the target of enforcement orders linked to issues such as hygiene and standards of safety.

This is the crucial difference. The state of the residential care sector affects lives; the lives of residents, of staff and of families. This episode serves as a reminder of just how rotten things are in the sector and just how thoroughly rotten the whole system is.

I don't think many people in social care would rush to defend the status quo. In the one corner we have the capitalists seeking to make a profit, in the other we have local authorities keen to cut costs.

Between these two implulses the standard of care in the sector, particularly for those least able to top-up with their own resources, is being driven down. Residents are put at risk and staff are expected to do a tough and demanding job for a pittance and without the right support and training.

There is an irony here that in the event of Southern Cross folding Local Authorities, most of whom have spent the past few years closing down their own homes to a great deal of local resistance, may well end up taking on responsibility for the homes.