Outsourcing Crisis | Care Homes Sector collapse

Some time ago I wrote about problems in the Care Home sector. Politicians have been arguing for years about who should meet the costs of residential care for older people, with no consensus.

While this debate has been taking place a crisis on the supply side of the sector has been building up, with Care Homes going bankrupt. I wrote about this a few months back:


What is driving the crisis in the sector isn’t staffing costs, although these are the largest part of the cost base. It’s the financing costs – Care Homes have lots of debt on their books built up by buying property and making it meet Care Quality Commission Standards .

Advinia, one of the 10 largest residential care companies are the latest to hit the buffers. The CQC are trying to force them to open their books so they can work out how big the problem is


In the case of Advinia they increased their borrowing to purchase some additional homes from BUPA in addition to the debt they had from the costs of homes and keeping them to standard. Their debt per home looks to be similar to Pizza Express’s debt per restaurant. The difference is that PE can close under performing branches much more readily than Advinia.

This is the 2nd major group to run into financing problems this year, after Four Seasons hit the buffers in April.

The obvious answer is for the Government to step in and re-finance the chain using cheap Government borrowing. This could form the basis of a state residential care company that could intervene in the market, and take on more struggling chains to keep capacity open

But instead all that will happen is a fight over who pays what, and how the inherited wealth of middle class people can be protected while the sector shrinks. A sudden shock – the loss of lots of workers due to Brexit for example – would cause a rapid contraction of capacity in parts of the South of England.

Sadly I don’t think anyone in the Health and Care systems is sighted on this at a national/policy level, and it is left to individual health and social care organisations, who aren’t set up to deal with companies that operate nationwise

We are heading toward the Care Crunch.

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