Cash-strapped Southern Cross may hand homes to landlords

Britain's largest care home provider, Southern Cross Healthcare, is planning to return one in five of its care homes to its landlords, potentially causing disruption to thousands of elderly residents.

Overall, Southern Cross plans to return 132 of its 752 properties as part of a financial restructuring package aimed at saving the struggling group from bankruptcy.

However, while many of the properties will be run as care homes by other operators or by the landlords themselves, documents produced by the company concede that a "double-digit" number of the homes may close.

This could mean hundreds of frail residents being forced to move into other care homes over the next year.

News of the closures comes just days after the company revealed plans to cut 3,000 jobs, including more than 300 nurses and 1,275 care staff.

Southern Cross has already been criticised over staffing levels in some of its homes. Yesterday the Care Quality Commission, which regulates the sector, said it would monitor developments on a case-by-case basis.

"CQC's role is to ensure all care homes meet essential standards of quality and safety – our primary concern is always the welfare of people who use services," said a spokesman.

"We will require Southern Cross to demonstrate that all its homes are meeting these essential standards; any failure to so may result in enforcement action."

Southern Cross is Britain's largest care home operator and looks after 31,000 elderly residents. But the company does not own the freehold to the vast majority of its homes. About 250 are owned by city bondholders which bought them from a private equity company five years ago.

Since then, the amount Southern Cross has had to pay in rent has risen by nearly 20 per cent to more than £200 million a year despite a falling rental market. At the same time residency rates have been falling.

The company has been attempting to negotiate rent reductions with landlords – but has met strong resistance. The admission that it may hand back homes could be an attempt to force landlords back to the negotiating table.

Southern Cross recently warned that it was in a "critical financial condition" and reported a £311 million loss in the six months to 31 March. It wants to reduce its annual rent bill from £202.3 million to £137.5 million and recently said it would cut the rent it paid to landlords by 30 per cent as it tries to give itself some breathing space. It told its 80 landlords it was keen to work with them to "enable the orderly transition to an alternative operator of their choice".

It confirmed plans to transfer 47 of the homes to landlords in the next four to six months, with the remaining 85 returned over the next two to five years. A spokesman said: "Southern Cross's paramount concern is minimising disruption for its residents."

A Department of Health spokeswoman said: "Ministers have made clear that the welfare of residents living in Southern Cross homes is paramount... The quality of care and continuity for residents must not be affected by staffing changes within homes. We expect the CQC to closely monitor standards of care and take action as appropriate."