Care Home businesses increasingly turning to insolvency

Topics covered: Ridouts professional advice

The Insolvency Service has declared that since 2010, 380 care home businesses have declared themselves insolvent.

This news comes in spite of the chancellor failing to offer additional support to care home businesses in the autumn statement.  Insolvencies in 2010 numbered 32 and for the first six months of 2016 the figure was 34.

There are a plethora of reasons why a care home business might find that it makes no financial sense to continue to operate; it is clear that the business model for care home operators is under increased pressure in relation to the fees received by residents that are funded wholly, or in part by councils.

Figures released by insolvency agency Opus has found that around 6,000 care homes are teetering on the edge of insolvency as they are paying more in debt and interest payments than they make in profits.

Whilst the adult social care precept which has been introduced to councils to raise additional funding to pay for social care is welcomed it is a plaster which provides only temporary respite. Even so, the relative power contained within local authorities to place service users and pay the amount they deem appropriate is at the detriment of care home businesses.  In order to slow the number of insolvencies within the care home sector a wholesale rethink about how services are commissioned throughout the sector; perhaps an independent commissioner would be well placed to fairly determine costs for each placement.

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