Southern Cross Healthcare Collapse: What about grandma and grandad?

Southern Cross, the UK’s largest private provider of elderly care has been on the verge of bankruptcy since April. What will happen to the 31,000 residents of its homes if it is forced to shut, how was this allowed to happen and what does it mean for a soon to be reformed NHS?

The beleaguered care home group is currently seeking £100 million of investment and a 30% rent reduction in order to avoid collapse. However, even if the negotiations are successful, this restructuring will inevitably result in the closure of at least some of its homes. The problem is, no one seems to know which ones and how many, let alone how much it will cost and who will pay for it.

Eulogy tried to find out by asking local councils, the Department of Health, the Care Quality Commission (CQC) and MPs. What we got were vague promises that ‘partners’ would ‘work together’ to provide an, ‘effective response’. When we asked for details of this ‘effective response’ we got a firm ‘no comment’ from almost all of the people we asked.

Finally, Labour MP Tom Spellar concluded that should the worst happen, some kind of government action would be inevitable.

Under the National Assistance Act of 1948 it is local councils who will ultimately be responsible for the residents of these homes should they be closed. A statement from the office of Care Service Minister Paul Burtsow says, “We will continue to keep in close touch with the situation and will work with local authorities, CQC and others to ensure there is an effective response, which delivers protection to everyone affected.

“The interests and welfare of the people being cared for in residential settings is of paramount concern to Government. We know that the events and speculation of recent days could be distressing and stressful for those involved.”

What plans have been put in place? Which homes are at the greatest risk of closure, and how exactly, will patients be re-housed?

Eulogy put these questions to Paul Burstow’s office and was told firmly and unequivocally that this is the government position and no further comment will be given.

So we also spoke to the Care Quality Commission who prepared this statement, “CQC’s primary concern, as always, is the safety and welfare of people who use services. Our role is to ensure all care homes meet essential standards of quality and safety.
If the situation arises with this or any other provider where a home needs to close, CQC would work closely with local partners to ensure the best outcomes for the service users concerned.” Again when pressed for more information we were ignored.

A spokesperson for Liverpool City Council also seemed confident that the situation could be dealt with at local level, “In a situation like this we would work with neighbouring authorities to make sure that all social care clients are supported into alternative accommodation.”

He also added that media speculation in the matter was ‘unhelpful’. Again, when asked for more details, including where funding would come from to house extra residents Liverpool City Council declined to comment.

Labour MP Tom Spellar, on the other hand, is not convinced that the problem can be solved at a local level, “The situation cannot be resolved by local councils. Government has to get involved. At the moment there are no contingency plans.

“The Borough of Ealing tried to move away from Southern Cross because of the rising prices but had to go back in the end. There were no other options. Local councils are simply not equipped to deal with this. In an extreme situation then you would expect some form of public administration.”

Simply put, there is not enough spare capacity in the social care sector for an additional 31,000 elderly people. Furthermore, the distribution of Southern Cross homes across the UK is uneven. Tyne and Wear, for example, has 50 homes compared to London’s 16. Re-housing that many residents in the event of a collapse would be impossible.

So how did this situation come about? In the 1990s an outsourcing revolution in social care was set in motion with the NHS and Community Care Act. Both Labour and Conservative governments believed that care could be provided for profit, and that the market would deliver cheaper and better care than councils.

Councils would no longer be directly responsible for providing care. The business of running homes and the hiring of nurses and doctors would now be left to private companies. Council authorities would be responsible for working out what was required and spend the money accordingly. The ‘best’ companies such as Southern Cross would win the biggest contracts. In 1992, private companies delivered just 2% of state-funded home care in England. Today, that figure is closer to 90%.

In addition, councils did what all good capitalists are wont to do and formed buying consortia with other councils to ensure cheaper prices. Their combined buying power allowed Southern Cross to secure huge contracts and reach the dominant position it’s in today.

While these companies did contribute some efficiencies, councils had no way of knowing what would subsequently happen to them once these lucrative contracts were issued. Southern Cross’ problems stem from its takeover by the US private equity firm Blackstone, who sold nursing home freeholds in order to fund a failed expansion program. The result is that Southern Cross is in the unusual position of not owning its homes whilst also being locked into expensive agreements which guarantee landlords rent rises of 2.5% every year. The company now owes £250 million pounds to landlords.

Many of the residents of Southern Cross are aged 80 and above and have crippling conditions such as dementia. They are the parents and grandparents who have been left to the mercy of landlords and hedge funds, who will most likely want Southern Cross to ‘exit underperforming sites’ in exchange for a settlement and investment.

The financial aspect of this story is indeed staggering, a company that was valued at £1.1billion before the recession is now only worth £12 million. The human aspect even more so, as 31,000 of society’s most vulnerable, the ones least equipped to compete in the market place, now consider the prospect of losing a home and their carers.

And it is this human aspect which is worth contemplating as yet another government seriously considers another round of market led reforms to the NHS.

Four years ago David Cameron told the British public, ‘You could sum up my priorities in just three letters, N-H-S.’ Understandable given the care his son Ivan depended on in the months leading up to his death.

Which makes the comments of Steve Britnell, a senior Cameron advisor, all the more alarming: “The NHS will be shown no mercy and the best time to take advantage of this will be in the next couple of years."

Last month Britnell was appointed to a kitchen cabinet formed by Cameron to formulate policies for NHS reforms. His comments were part of a speech given last October to a conference organised by the private equity company Apax where he claimed that the UK would provide a “big opportunity” to profit making companies.

He said: "GPs will have to aggregate purchasing power and there will be a big opportunity for those companies that can facilitate this process. In future, the NHS will be a state insurance provider, not a state deliverer."

Cameron today insisted, “There's only one option we've got – and that is to change and modernise the NHS… to make it more efficient and more effective... We save the NHS by changing it.” If Cameron agrees with Britnell, this means the changes that led directly to the collapse of Southern Cross will now be applied to the NHS.