More care homes in critical condition

Elderly care warning as MPs say Southern Cross collapse could be repeated by other companies

More care home companies could collapse following the Southern Cross crisis because ministers and town halls are doing too little to check their financial health, MPs warn today.

Despite the shockwaves from the failure of Southern Cross, there is still no early warning system for other firms getting into trouble, according to the Commons Public Accounts Committee.

It says there are already signs of other major companies piling up large debts, citing the example of Four Seasons Health Care, which runs more than 400 homes caring for 15,000 elderly and vulnerable people across Britain.

Until its demise, Southern Cross was the country's largest care home operator, looking after 31,000 residents in 750 homes. The company, which had undergone rapid expansion funded by selling its leases before the credit crunch of 2008, was driven to the wall in the summer when it was faced with an annual rent bill of £250m.

The committee accused both Whitehall and local councils of doing too little to avoid a repeat of the Southern Cross collapse. It said the Department of Health admitted it lacked the power either to prevent companies becoming overstretched – or even to identify those at risk. At the same time, the MPs warned, the squeeze on town hall budgets was increasing the pressure on care home operators. The committee said that council cuts could also destabilise companies as councils reduced spending on social care places.

Margaret Hodge, the committee's chairwoman, said: "The Department of Health must get to grip with the very real risks to the social care market, if we are to avoid another Southern Cross. "No one really knows what is going on locally or whether one provider is becoming too dominant. Effective oversight of the care market, including market share of large providers, is essential to protect users and taxpayers."

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