Tag Archives: High

NHS deficit last year twice as high as expected, say sources

Hospitals in England ended last year with twice as big a deficit as expected, according to sources, in another illustration of the NHS’s fragile finances.

NHS Improvement (NHSI), the health service’s financial regulator, will reveal the overspend when it releases full details on Thursday of how the NHS performed in 2017-18. Sources close to the publication of the annual health check confirmed NHS trusts ended 2017-18 “about £1bn” in the red.

The likely overspend, double the £496m expected, will fuel claims that the government is underfunding the NHS, given the sharp increase in the number of people needing care.

It would show the health service has been unable to regain the spending discipline the Treasury demanded after years of steadily worsening finances. But critics will blame the deficit on the NHS experiencing the seventh successive year of a budget squeeze and hospitals having to staff thousands of extra beds as a result of the worst winter crisis in its history.

The deficit would be significantly higher than the £791m overspend in 2016-17, but less than the record £2.45bn the NHS ran up in 2015-16.

Jeremy Hunt, the health and social care secretary, is pressing Theresa May to honour her pledge of a long-term finding deal by giving the service a budget increase of between 3% and 4% a year at least until the end of the parliament in 2022.

Simon Stevens, the NHS England chief executive, wants a 10-year commitment to 4% annual rises. However, Philip Hammond, the chancellor, is privately warning that anything above 2.5% is unaffordable.

A report last week from the Institute for Fiscal Studies, the NHS Confederation and the Health Foundation warned people would have to pay more tax in order to give the NHS enough money in the years ahead to ensure it can provide care to an ageing population.

NHS finance experts claimed service’s deficit is much worse than the £1bn NHSI will admit to this week, because trusts also received £1.8bn from the sustainability and transformation fund, and £337m to help them cope with extra demand over winter.

Sally Gainsbury, a senior policy analyst at the Nuffield Trust, a thinktank, said: “NHS providers started the financial year 2017/18 with a £4bn black hole between their underlying costs and income that was deepened further over the year.

“So while hospitals and other NHS services did make efficiency savings over the year, the vast bulk of those savings were needed just to stop the black hole getting any deeper. Essentially, services are having to run to just stand still, or even move slightly backwards.

“The real underlying deficit is likely to remain very similar to where it was at the start of the year – at around £4bn, which is inevitable as long as we continue to systematically pay hospitals and other services less than the cost of actually delivering care.”

In March, the public accounts select committee said NHS finances “remain in a perilous state”.

“The NHS is still very much in survival mode, with budgets unable to keep pace with demand. The NHS has a long way to go before it is financially sustainable,” the committee said.

In February, NHSI disclosed that 107 of 136 hospital trusts providing acute care in England were in the red.

Niall Dickson, the chief executive of the NHS Confederation, said: “[Trusts] are at the end of their tether. It’s simply not realistic or reasonable to expect the NHS to go on delivering a comprehensive universal service with inexorably rising demand and demonstrably inadequate funding.”

He urged ministers to abandon a short-term approach by which the NHS “lurches from budget to budget, with one futile bailout after another”.

Prince had ‘exceedingly high’ level of fentanyl in body when he died

A toxicology report from Prince’s autopsy, obtained by the Associated Press, shows he had what multiple experts called an “exceedingly high” concentration of fentanyl in his body when he died.

Prince was 57 when he was found alone and unresponsive in an elevator at his Paisley Park estate on 21 April, 2016. Public data released six weeks after his death showed he died of an accidental overdose of fentanyl, a synthetic opioid 50 times more powerful than heroin.

A confidential toxicology report provides some insight into just how much fentanyl was in his system. Experts who are not connected to the Prince investigation said the numbers leave no doubt that fentanyl killed him.

“The amount in his blood is exceedingly high, even for somebody who is a chronic pain patient on fentanyl patches,” said Dr Lewis Nelson, chairman of emergency medicine at Rutgers New Jersey medical school. He called the fentanyl concentrations “a pretty clear smoking gun”.

The report says the concentration of fentanyl in Prince’s blood was 67.8 micrograms per litre. Fatalities have been documented in people with blood levels ranging from three to 58 micrograms per litre, the report says.

It adds that the level of fentanyl in Prince’s liver was 450 micrograms per kilogram, and notes liver concentrations greater than 69 micrograms per kilogram “seem to represent overdose or fatal toxicity cases”.

There was also what experts called a potentially lethal amount of fentanyl in Prince’s stomach. Dr Charles McKay, president of the American College of Medical Toxicology, said the findings suggest Prince took the drug orally, while fentanyl in the blood and liver suggest it had some time to circulate before he died.

Experts say there is no “lethal level” at which fentanyl can kill. A person who takes prescription opioids for a long time builds up a tolerance, and a dose that could kill one person might help another.

Search warrants released about a year after Prince’s death showed authorities found numerous pills in various containers around his home. A lab report shows many of the pills tested positive for fentanyl. Information released publicly indicates the source of those drugs has not been determined.

Last week, the lead prosecutor in the county where Prince died said he was reviewing law enforcement reports and would make a decision ‘in the near future’ on whether to charge anyone.

Prince had ‘exceedingly high’ level of fentanyl in body when he died

A toxicology report from Prince’s autopsy, obtained by the Associated Press, shows he had what multiple experts called an “exceedingly high” concentration of fentanyl in his body when he died.

Prince was 57 when he was found alone and unresponsive in an elevator at his Paisley Park estate on 21 April, 2016. Public data released six weeks after his death showed he died of an accidental overdose of fentanyl, a synthetic opioid 50 times more powerful than heroin.

A confidential toxicology report provides some insight into just how much fentanyl was in his system. Experts who are not connected to the Prince investigation said the numbers leave no doubt that fentanyl killed him.

“The amount in his blood is exceedingly high, even for somebody who is a chronic pain patient on fentanyl patches,” said Dr Lewis Nelson, chairman of emergency medicine at Rutgers New Jersey medical school. He called the fentanyl concentrations “a pretty clear smoking gun”.

The report says the concentration of fentanyl in Prince’s blood was 67.8 micrograms per litre. Fatalities have been documented in people with blood levels ranging from three to 58 micrograms per litre, the report says.

It adds that the level of fentanyl in Prince’s liver was 450 micrograms per kilogram, and notes liver concentrations greater than 69 micrograms per kilogram “seem to represent overdose or fatal toxicity cases”.

There was also what experts called a potentially lethal amount of fentanyl in Prince’s stomach. Dr Charles McKay, president of the American College of Medical Toxicology, said the findings suggest Prince took the drug orally, while fentanyl in the blood and liver suggest it had some time to circulate before he died.

Experts say there is no “lethal level” at which fentanyl can kill. A person who takes prescription opioids for a long time builds up a tolerance, and a dose that could kill one person might help another.

Search warrants released about a year after Prince’s death showed authorities found numerous pills in various containers around his home. A lab report shows many of the pills tested positive for fentanyl. Information released publicly indicates the source of those drugs has not been determined.

Last week, the lead prosecutor in the county where Prince died said he was reviewing law enforcement reports and would make a decision ‘in the near future’ on whether to charge anyone.

Prince had ‘exceedingly high’ level of fentanyl in body when he died

A toxicology report from Prince’s autopsy, obtained by the Associated Press, shows he had what multiple experts called an “exceedingly high” concentration of fentanyl in his body when he died.

Prince was 57 when he was found alone and unresponsive in an elevator at his Paisley Park estate on 21 April, 2016. Public data released six weeks after his death showed he died of an accidental overdose of fentanyl, a synthetic opioid 50 times more powerful than heroin.

A confidential toxicology report provides some insight into just how much fentanyl was in his system. Experts who are not connected to the Prince investigation said the numbers leave no doubt that fentanyl killed him.

“The amount in his blood is exceedingly high, even for somebody who is a chronic pain patient on fentanyl patches,” said Dr Lewis Nelson, chairman of emergency medicine at Rutgers New Jersey medical school. He called the fentanyl concentrations “a pretty clear smoking gun”.

The report says the concentration of fentanyl in Prince’s blood was 67.8 micrograms per litre. Fatalities have been documented in people with blood levels ranging from three to 58 micrograms per litre, the report says.

It adds that the level of fentanyl in Prince’s liver was 450 micrograms per kilogram, and notes liver concentrations greater than 69 micrograms per kilogram “seem to represent overdose or fatal toxicity cases”.

There was also what experts called a potentially lethal amount of fentanyl in Prince’s stomach. Dr Charles McKay, president of the American College of Medical Toxicology, said the findings suggest Prince took the drug orally, while fentanyl in the blood and liver suggest it had some time to circulate before he died.

Experts say there is no “lethal level” at which fentanyl can kill. A person who takes prescription opioids for a long time builds up a tolerance, and a dose that could kill one person might help another.

Search warrants released about a year after Prince’s death showed authorities found numerous pills in various containers around his home. A lab report shows many of the pills tested positive for fentanyl. Information released publicly indicates the source of those drugs has not been determined.

Last week, the lead prosecutor in the county where Prince died said he was reviewing law enforcement reports and would make a decision ‘in the near future’ on whether to charge anyone.

Prince had ‘exceedingly high’ level of fentanyl in body when he died

A toxicology report from Prince’s autopsy, obtained by the Associated Press, shows he had what multiple experts called an “exceedingly high” concentration of fentanyl in his body when he died.

Prince was 57 when he was found alone and unresponsive in an elevator at his Paisley Park estate on 21 April, 2016. Public data released six weeks after his death showed he died of an accidental overdose of fentanyl, a synthetic opioid 50 times more powerful than heroin.

A confidential toxicology report provides some insight into just how much fentanyl was in his system. Experts who are not connected to the Prince investigation said the numbers leave no doubt that fentanyl killed him.

“The amount in his blood is exceedingly high, even for somebody who is a chronic pain patient on fentanyl patches,” said Dr Lewis Nelson, chairman of emergency medicine at Rutgers New Jersey medical school. He called the fentanyl concentrations “a pretty clear smoking gun”.

The report says the concentration of fentanyl in Prince’s blood was 67.8 micrograms per litre. Fatalities have been documented in people with blood levels ranging from three to 58 micrograms per litre, the report says.

It adds that the level of fentanyl in Prince’s liver was 450 micrograms per kilogram, and notes liver concentrations greater than 69 micrograms per kilogram “seem to represent overdose or fatal toxicity cases”.

There was also what experts called a potentially lethal amount of fentanyl in Prince’s stomach. Dr Charles McKay, president of the American College of Medical Toxicology, said the findings suggest Prince took the drug orally, while fentanyl in the blood and liver suggest it had some time to circulate before he died.

Experts say there is no “lethal level” at which fentanyl can kill. A person who takes prescription opioids for a long time builds up a tolerance, and a dose that could kill one person might help another.

Search warrants released about a year after Prince’s death showed authorities found numerous pills in various containers around his home. A lab report shows many of the pills tested positive for fentanyl. Information released publicly indicates the source of those drugs has not been determined.

Last week, the lead prosecutor in the county where Prince died said he was reviewing law enforcement reports and would make a decision ‘in the near future’ on whether to charge anyone.

Prince had ‘exceedingly high’ level of fentanyl in body when he died

A toxicology report from Prince’s autopsy, obtained by the Associated Press, shows he had what multiple experts called an “exceedingly high” concentration of fentanyl in his body when he died.

Prince was 57 when he was found alone and unresponsive in an elevator at his Paisley Park estate on 21 April, 2016. Public data released six weeks after his death showed he died of an accidental overdose of fentanyl, a synthetic opioid 50 times more powerful than heroin.

A confidential toxicology report provides some insight into just how much fentanyl was in his system. Experts who are not connected to the Prince investigation said the numbers leave no doubt that fentanyl killed him.

“The amount in his blood is exceedingly high, even for somebody who is a chronic pain patient on fentanyl patches,” said Dr Lewis Nelson, chairman of emergency medicine at Rutgers New Jersey medical school. He called the fentanyl concentrations “a pretty clear smoking gun”.

The report says the concentration of fentanyl in Prince’s blood was 67.8 micrograms per litre. Fatalities have been documented in people with blood levels ranging from three to 58 micrograms per litre, the report says.

It adds that the level of fentanyl in Prince’s liver was 450 micrograms per kilogram, and notes liver concentrations greater than 69 micrograms per kilogram “seem to represent overdose or fatal toxicity cases”.

There was also what experts called a potentially lethal amount of fentanyl in Prince’s stomach. Dr Charles McKay, president of the American College of Medical Toxicology, said the findings suggest Prince took the drug orally, while fentanyl in the blood and liver suggest it had some time to circulate before he died.

Experts say there is no “lethal level” at which fentanyl can kill. A person who takes prescription opioids for a long time builds up a tolerance, and a dose that could kill one person might help another.

Search warrants released about a year after Prince’s death showed authorities found numerous pills in various containers around his home. A lab report shows many of the pills tested positive for fentanyl. Information released publicly indicates the source of those drugs has not been determined.

Last week, the lead prosecutor in the county where Prince died said he was reviewing law enforcement reports and would make a decision ‘in the near future’ on whether to charge anyone.

Profit-hungry firms are gambling on social care. Are the stakes too high?

The idea of care homes for older people being traded like financial instruments might be unpalatable, but it is a reality in today’s adult social care sector. In what has been called the “financialisation” of care, private equity investors have pounced on a £16bn industry, attracted by a steady stream of income in the shape of fees from a growing population of older people.

Some 410,000 older people live in care homes in the UK, according to official figures, receiving everything from specialist dementia care to less complex nursing and bed and board. Those numbers are set to rise with lengthening life expectancy.

While these changing demographics are attractive to profit-hungry private equity firms, fears are mounting that some have racked up such huge debts to buy into the sector, they could trigger a financial crisis.

Investment in care homes has gone badly awry in the not-too-distant past. When care home provider Southern Cross imploded in 2011, residents of its 750 homes were plunged into a period of uncertainty. Much of the outrage focused on the firm’s former owner, private equity group Blackstone, which walked away with estimated profits of 500m, leaving cash-strapped local authorities to pick up the pieces.

Today, 95% of the 11,300 care homes for older people are provided by the independent sector (both for-profit and charities). A total of 360 are owned by struggling private equity-backed Four Seasons Health Care. In January, the Clova House care home in Ripon, Yorkshire, closed after Four Seasons said it was no longer financially sustainable. The shock news caused confusion and fear among residents, some already suffering the disorientating effects of dementia. Yet such closures are far from rare. A recent study by healthcare analysts LangBuisson found that 929 care homes, housing more than 30,000 older people, have closed in a decade, some for financial reasons, others due to serious failings in care.

Recent closures include 12 homes owned by Scottish provider Bield, Bupa’s Hillview home in Eston, North Yorkshire and Valley View in Blaydon in the north-east, where residents were given a week to pack their things and leave. According to accountancy firm Moore Stephens, one in six UK care homes is at risk of failure.


It’s inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin

A recent report by the Competition and Markets Authority warned that some providers “may be carrying unsustainable levels of debt, and therefore may be at risk of financial distress”. In the event of a financial failure, “there could be a risk of disruption to residents while local authorities step in to ensure continuity of care provision.” Within the last few months, cracks have started to show at some of the country’s biggest providers, some laden with high levels of debt thanks to a succession of not-so-careful owners.

While there is no reason to believe any are in danger of imminent failure, there are certainly signs of strain. Loss-making Four Seasons is owned by Terra Firma, the investment vehicle of Guernsey-based financier Guy Hands, who had hoped to extract £890m from the company via costly loans. Rising staff costs, stagnant fee income and crippling interest payments have since destroyed its profits and raised fears about the firm’s survival.

With the business in difficulty, Terra Firma is now under pressure from US investment firm H/2 Capital Partners, which bought Four Seasons’ debt. Ongoing rescue talks aimed at securing a financial future for the company have been acrimonious and protracted, although the care homes appear safe for now.

HC-One, which was created from the ashes of Southern Cross and has more than 300 homes, is another major player with the shadow of high finance hanging over it. Its debts are thought to have shot up to more than £600m last year after HC-One refinanced its debts and bought 122 care homes from Bupa in a £300m deal. The company says its debt is “modest” and that it is “very healthy financially”.

The ownership and debt structure of care home chains would not give cause for concern were other structural issues not becoming more serious. Len Merton, chief executive of healthcare firm Advinia, which owns 38 residential and nursing care homes, says the industry is under strain due to a toxic combination of rising costs and stagnant income due to government austerity. “There’s a desperate shortage of nurses, a situation that has worsened since Brexit was announced because nurses aren’t coming over from Europe,” he says. This has left employers turning to temporary agency staff, who cost more.

Meanwhile, the “national living wage” – and the way it is being applied in care homes – has inflated payroll outgoings. “Costs have gone up and the fee contribution from local authorities has been behind where it needs to be for the past seven or eight years,” says Merton.

The government announced an extra £2bn in funding for social care last year, but the Local Government Association says only a quarter of that is reaching care home companies because the government asked councils to spend most of the money on reducing delays in discharging patients from hospitals.

“Our estimate of the funding gap between what councils pay and what providers say they need right now is £1.3bn,” says Linda Thomas, vice-chair of the LGA’s community wellbeing board. Many councils are due to levy a 3% council tax “precept” from April to raise extra cash for the care of older people, but the £548m raised will be wiped out by increased staff costs.

The financial squeeze is most keenly felt in homes that have a high proportion of council-funded residents. On average, in 2016 “self-funders” paid £846 a week, while the council paid just £621 a week for those without the means to pay for themselves.

Nick Hood, a social care expert whose firm, Opus, has restructured the finances of many care homes, says debt-financed businesses have a particular problem. These firms, he says, typically need profit margins of up to 14% to be able to afford their massive debt interest payments. “It’s completely inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin,” says Hood. “The bottom line is that the sector makes no money and will make less and less as the minimum wage goes up. I’m deeply concerned that these heavily over-indebted care providers are underinvesting in homes, with serious implications for residents.”

Research by consumer group Which?, ranking providers of homes for the over-65s by the percentage deemed inadequate or in need of improvement, shows that private equity-backed firms are rated among the worst. HC-One was placed 32nd of 54, with 29% of the 98 homes included in the study deemed not good enough. Four Seasons was 43rd with 35%. Orchard Healthcare, owned by private equity group Alchemy Partners, came in 49th, with nearly 45% of its 44 homes providing care that was not satisfactory.

The Care Quality Commission, which regulates the sector, keeps a close eye on the financial sustainability of care home companies that are so big that they would be difficult to replace. Hood fears that councils, who would have to pick up the pieces if a major provider failed, could not take the strain. “When Southern Cross happened, a lot of local authorities were still running homes and had the capacity and the expertise to bail these things out. That’s not true any more. The capacity has disappeared and expertise has been absorbed into the major private operators. I’m really not sure what the government thinks would happen if any of those businesses went bust.”

Merton, while reluctant to criticise peers in the industry, also has concerns about large debt-fuelled care home companies.

“When you look at the top three or four providers with in excess of 200 homes, it depends on their financial model. If they’re in large debt to buy those homes, they could be at risk.” But if the sector is so unprofitable, why do private equity firms still find it so attractive? Hood says they are “dazzled by demographics … they look at the market and say there will be another 25% who’ll need care in the next 15 years. They think that sooner or later the government will have to make funding available and those prices will go up. But the numbers don’t work right now because the government won’t put the money in.”

Barbara Keeley, shadow minister for mental health and social care, says: “The financial fragility of larger providers has been made worse by eight years of Tory cuts, raising serious doubts about how equipped councils are to step in in the event of provider failure. Labour would invest £8bn during this parliament with £1bn this year to ease the funding crisis. The social care system urgently needs a longer-term, sustainable funding solution to secure the future of services but questions must also be asked about the care system’s reliance upon care home chains with continually high levels of debt. The piecemeal funding offered by the Tories is not enough to ease the crisis their cuts have caused.”

In response, a Department of Health and Social Care spokesman says: “We know the social care system is under pressure due to our growing ageing population — that’s why we’ve provided an extra £2bn and recently announced a further £150mfor next year. We will shortly outline the government’s plans to reform social care to ensure it is sustainable for the future.”

Profit-hungry firms are gambling on social care. Are the stakes too high?

The idea of care homes for older people being traded like financial instruments might be unpalatable, but it is a reality in today’s adult social care sector. In what has been called the “financialisation” of care, private equity investors have pounced on a £16bn industry, attracted by a steady stream of income in the shape of fees from a growing population of older people.

Some 410,000 older people live in care homes in the UK, according to official figures, receiving everything from specialist dementia care to less complex nursing and bed and board. Those numbers are set to rise with lengthening life expectancy.

While these changing demographics are attractive to profit-hungry private equity firms, fears are mounting that some have racked up such huge debts to buy into the sector, they could trigger a financial crisis.

Investment in care homes has gone badly awry in the not-too-distant past. When care home provider Southern Cross imploded in 2011, residents of its 750 homes were plunged into a period of uncertainty. Much of the outrage focused on the firm’s former owner, private equity group Blackstone, which walked away with estimated profits of 500m, leaving cash-strapped local authorities to pick up the pieces.

Today, 95% of the 11,300 care homes for older people are provided by the independent sector (both for-profit and charities). A total of 360 are owned by struggling private equity-backed Four Seasons Health Care. In January, the Clova House care home in Ripon, Yorkshire, closed after Four Seasons said it was no longer financially sustainable. The shock news caused confusion and fear among residents, some already suffering the disorientating effects of dementia. Yet such closures are far from rare. A recent study by healthcare analysts LangBuisson found that 929 care homes, housing more than 30,000 older people, have closed in a decade, some for financial reasons, others due to serious failings in care.

Recent closures include 12 homes owned by Scottish provider Bield, Bupa’s Hillview home in Eston, North Yorkshire and Valley View in Blaydon in the north-east, where residents were given a week to pack their things and leave. According to accountancy firm Moore Stephens, one in six UK care homes is at risk of failure.


It’s inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin

A recent report by the Competition and Markets Authority warned that some providers “may be carrying unsustainable levels of debt, and therefore may be at risk of financial distress”. In the event of a financial failure, “there could be a risk of disruption to residents while local authorities step in to ensure continuity of care provision.” Within the last few months, cracks have started to show at some of the country’s biggest providers, some laden with high levels of debt thanks to a succession of not-so-careful owners.

While there is no reason to believe any are in danger of imminent failure, there are certainly signs of strain. Loss-making Four Seasons is owned by Terra Firma, the investment vehicle of Guernsey-based financier Guy Hands, who had hoped to extract £890m from the company via costly loans. Rising staff costs, stagnant fee income and crippling interest payments have since destroyed its profits and raised fears about the firm’s survival.

With the business in difficulty, Terra Firma is now under pressure from US investment firm H/2 Capital Partners, which bought Four Seasons’ debt. Ongoing rescue talks aimed at securing a financial future for the company have been acrimonious and protracted, although the care homes appear safe for now.

HC-One, which was created from the ashes of Southern Cross and has more than 300 homes, is another major player with the shadow of high finance hanging over it. Its debts are thought to have shot up to more than £600m last year after HC-One refinanced its debts and bought 122 care homes from Bupa in a £300m deal. The company says its debt is “modest” and that it is “very healthy financially”.

The ownership and debt structure of care home chains would not give cause for concern were other structural issues not becoming more serious. Len Merton, chief executive of healthcare firm Advinia, which owns 38 residential and nursing care homes, says the industry is under strain due to a toxic combination of rising costs and stagnant income due to government austerity. “There’s a desperate shortage of nurses, a situation that has worsened since Brexit was announced because nurses aren’t coming over from Europe,” he says. This has left employers turning to temporary agency staff, who cost more.

Meanwhile, the “national living wage” – and the way it is being applied in care homes – has inflated payroll outgoings. “Costs have gone up and the fee contribution from local authorities has been behind where it needs to be for the past seven or eight years,” says Merton.

The government announced an extra £2bn in funding for social care last year, but the Local Government Association says only a quarter of that is reaching care home companies because the government asked councils to spend most of the money on reducing delays in discharging patients from hospitals.

“Our estimate of the funding gap between what councils pay and what providers say they need right now is £1.3bn,” says Linda Thomas, vice-chair of the LGA’s community wellbeing board. Many councils are due to levy a 3% council tax “precept” from April to raise extra cash for the care of older people, but the £548m raised will be wiped out by increased staff costs.

The financial squeeze is most keenly felt in homes that have a high proportion of council-funded residents. On average, in 2016 “self-funders” paid £846 a week, while the council paid just £621 a week for those without the means to pay for themselves.

Nick Hood, a social care expert whose firm, Opus, has restructured the finances of many care homes, says debt-financed businesses have a particular problem. These firms, he says, typically need profit margins of up to 14% to be able to afford their massive debt interest payments. “It’s completely inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin,” says Hood. “The bottom line is that the sector makes no money and will make less and less as the minimum wage goes up. I’m deeply concerned that these heavily over-indebted care providers are underinvesting in homes, with serious implications for residents.”

Research by consumer group Which?, ranking providers of homes for the over-65s by the percentage deemed inadequate or in need of improvement, shows that private equity-backed firms are rated among the worst. HC-One was placed 32nd of 54, with 29% of the 98 homes included in the study deemed not good enough. Four Seasons was 43rd with 35%. Orchard Healthcare, owned by private equity group Alchemy Partners, came in 49th, with nearly 45% of its 44 homes providing care that was not satisfactory.

The Care Quality Commission, which regulates the sector, keeps a close eye on the financial sustainability of care home companies that are so big that they would be difficult to replace. Hood fears that councils, who would have to pick up the pieces if a major provider failed, could not take the strain. “When Southern Cross happened, a lot of local authorities were still running homes and had the capacity and the expertise to bail these things out. That’s not true any more. The capacity has disappeared and expertise has been absorbed into the major private operators. I’m really not sure what the government thinks would happen if any of those businesses went bust.”

Merton, while reluctant to criticise peers in the industry, also has concerns about large debt-fuelled care home companies.

“When you look at the top three or four providers with in excess of 200 homes, it depends on their financial model. If they’re in large debt to buy those homes, they could be at risk.” But if the sector is so unprofitable, why do private equity firms still find it so attractive? Hood says they are “dazzled by demographics … they look at the market and say there will be another 25% who’ll need care in the next 15 years. They think that sooner or later the government will have to make funding available and those prices will go up. But the numbers don’t work right now because the government won’t put the money in.”

Barbara Keeley, shadow minister for mental health and social care, says: “The financial fragility of larger providers has been made worse by eight years of Tory cuts, raising serious doubts about how equipped councils are to step in in the event of provider failure. Labour would invest £8bn during this parliament with £1bn this year to ease the funding crisis. The social care system urgently needs a longer-term, sustainable funding solution to secure the future of services but questions must also be asked about the care system’s reliance upon care home chains with continually high levels of debt. The piecemeal funding offered by the Tories is not enough to ease the crisis their cuts have caused.”

In response, a Department of Health and Social Care spokesman says: “We know the social care system is under pressure due to our growing ageing population — that’s why we’ve provided an extra £2bn and recently announced a further £150mfor next year. We will shortly outline the government’s plans to reform social care to ensure it is sustainable for the future.”

Profit-hungry firms are gambling on social care. Are the stakes too high?

The idea of care homes for older people being traded like financial instruments might be unpalatable, but it is a reality in today’s adult social care sector. In what has been called the “financialisation” of care, private equity investors have pounced on a £16bn industry, attracted by a steady stream of income in the shape of fees from a growing population of older people.

Some 410,000 older people live in care homes in the UK, according to official figures, receiving everything from specialist dementia care to less complex nursing and bed and board. Those numbers are set to rise with lengthening life expectancy.

While these changing demographics are attractive to profit-hungry private equity firms, fears are mounting that some have racked up such huge debts to buy into the sector, they could trigger a financial crisis.

Investment in care homes has gone badly awry in the not-too-distant past. When care home provider Southern Cross imploded in 2011, residents of its 750 homes were plunged into a period of uncertainty. Much of the outrage focused on the firm’s former owner, private equity group Blackstone, which walked away with estimated profits of 500m, leaving cash-strapped local authorities to pick up the pieces.

Today, 95% of the 11,300 care homes for older people are provided by the independent sector (both for-profit and charities). A total of 360 are owned by struggling private equity-backed Four Seasons Health Care. In January, the Clova House care home in Ripon, Yorkshire, closed after Four Seasons said it was no longer financially sustainable. The shock news caused confusion and fear among residents, some already suffering the disorientating effects of dementia. Yet such closures are far from rare. A recent study by healthcare analysts LangBuisson found that 929 care homes, housing more than 30,000 older people, have closed in a decade, some for financial reasons, others due to serious failings in care.

Recent closures include 12 homes owned by Scottish provider Bield, Bupa’s Hillview home in Eston, North Yorkshire and Valley View in Blaydon in the north-east, where residents were given a week to pack their things and leave. According to accountancy firm Moore Stephens, one in six UK care homes is at risk of failure.


It’s inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin

A recent report by the Competition and Markets Authority warned that some providers “may be carrying unsustainable levels of debt, and therefore may be at risk of financial distress”. In the event of a financial failure, “there could be a risk of disruption to residents while local authorities step in to ensure continuity of care provision.” Within the last few months, cracks have started to show at some of the country’s biggest providers, some laden with high levels of debt thanks to a succession of not-so-careful owners.

While there is no reason to believe any are in danger of imminent failure, there are certainly signs of strain. Loss-making Four Seasons is owned by Terra Firma, the investment vehicle of Guernsey-based financier Guy Hands, who had hoped to extract £890m from the company via costly loans. Rising staff costs, stagnant fee income and crippling interest payments have since destroyed its profits and raised fears about the firm’s survival.

With the business in difficulty, Terra Firma is now under pressure from US investment firm H/2 Capital Partners, which bought Four Seasons’ debt. Ongoing rescue talks aimed at securing a financial future for the company have been acrimonious and protracted, although the care homes appear safe for now.

HC-One, which was created from the ashes of Southern Cross and has more than 300 homes, is another major player with the shadow of high finance hanging over it. Its debts are thought to have shot up to more than £600m last year after HC-One refinanced its debts and bought 122 care homes from Bupa in a £300m deal. The company says its debt is “modest” and that it is “very healthy financially”.

The ownership and debt structure of care home chains would not give cause for concern were other structural issues not becoming more serious. Len Merton, chief executive of healthcare firm Advinia, which owns 38 residential and nursing care homes, says the industry is under strain due to a toxic combination of rising costs and stagnant income due to government austerity. “There’s a desperate shortage of nurses, a situation that has worsened since Brexit was announced because nurses aren’t coming over from Europe,” he says. This has left employers turning to temporary agency staff, who cost more.

Meanwhile, the “national living wage” – and the way it is being applied in care homes – has inflated payroll outgoings. “Costs have gone up and the fee contribution from local authorities has been behind where it needs to be for the past seven or eight years,” says Merton.

The government announced an extra £2bn in funding for social care last year, but the Local Government Association says only a quarter of that is reaching care home companies because the government asked councils to spend most of the money on reducing delays in discharging patients from hospitals.

“Our estimate of the funding gap between what councils pay and what providers say they need right now is £1.3bn,” says Linda Thomas, vice-chair of the LGA’s community wellbeing board. Many councils are due to levy a 3% council tax “precept” from April to raise extra cash for the care of older people, but the £548m raised will be wiped out by increased staff costs.

The financial squeeze is most keenly felt in homes that have a high proportion of council-funded residents. On average, in 2016 “self-funders” paid £846 a week, while the council paid just £621 a week for those without the means to pay for themselves.

Nick Hood, a social care expert whose firm, Opus, has restructured the finances of many care homes, says debt-financed businesses have a particular problem. These firms, he says, typically need profit margins of up to 14% to be able to afford their massive debt interest payments. “It’s completely inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin,” says Hood. “The bottom line is that the sector makes no money and will make less and less as the minimum wage goes up. I’m deeply concerned that these heavily over-indebted care providers are underinvesting in homes, with serious implications for residents.”

Research by consumer group Which?, ranking providers of homes for the over-65s by the percentage deemed inadequate or in need of improvement, shows that private equity-backed firms are rated among the worst. HC-One was placed 32nd of 54, with 29% of the 98 homes included in the study deemed not good enough. Four Seasons was 43rd with 35%. Orchard Healthcare, owned by private equity group Alchemy Partners, came in 49th, with nearly 45% of its 44 homes providing care that was not satisfactory.

The Care Quality Commission, which regulates the sector, keeps a close eye on the financial sustainability of care home companies that are so big that they would be difficult to replace. Hood fears that councils, who would have to pick up the pieces if a major provider failed, could not take the strain. “When Southern Cross happened, a lot of local authorities were still running homes and had the capacity and the expertise to bail these things out. That’s not true any more. The capacity has disappeared and expertise has been absorbed into the major private operators. I’m really not sure what the government thinks would happen if any of those businesses went bust.”

Merton, while reluctant to criticise peers in the industry, also has concerns about large debt-fuelled care home companies.

“When you look at the top three or four providers with in excess of 200 homes, it depends on their financial model. If they’re in large debt to buy those homes, they could be at risk.” But if the sector is so unprofitable, why do private equity firms still find it so attractive? Hood says they are “dazzled by demographics … they look at the market and say there will be another 25% who’ll need care in the next 15 years. They think that sooner or later the government will have to make funding available and those prices will go up. But the numbers don’t work right now because the government won’t put the money in.”

Barbara Keeley, shadow minister for mental health and social care, says: “The financial fragility of larger providers has been made worse by eight years of Tory cuts, raising serious doubts about how equipped councils are to step in in the event of provider failure. Labour would invest £8bn during this parliament with £1bn this year to ease the funding crisis. The social care system urgently needs a longer-term, sustainable funding solution to secure the future of services but questions must also be asked about the care system’s reliance upon care home chains with continually high levels of debt. The piecemeal funding offered by the Tories is not enough to ease the crisis their cuts have caused.”

In response, a Department of Health and Social Care spokesman says: “We know the social care system is under pressure due to our growing ageing population — that’s why we’ve provided an extra £2bn and recently announced a further £150mfor next year. We will shortly outline the government’s plans to reform social care to ensure it is sustainable for the future.”

Profit-hungry firms are gambling on social care. Are the stakes too high?

The idea of care homes for older people being traded like financial instruments might be unpalatable, but it is a reality in today’s adult social care sector. In what has been called the “financialisation” of care, private equity investors have pounced on a £16bn industry, attracted by a steady stream of income in the shape of fees from a growing population of older people.

Some 410,000 older people live in care homes in the UK, according to official figures, receiving everything from specialist dementia care to less complex nursing and bed and board. Those numbers are set to rise with lengthening life expectancy.

While these changing demographics are attractive to profit-hungry private equity firms, fears are mounting that some have racked up such huge debts to buy into the sector, they could trigger a financial crisis.

Investment in care homes has gone badly awry in the not-too-distant past. When care home provider Southern Cross imploded in 2011, residents of its 750 homes were plunged into a period of uncertainty. Much of the outrage focused on the firm’s former owner, private equity group Blackstone, which walked away with estimated profits of 500m, leaving cash-strapped local authorities to pick up the pieces.

Today, 95% of the 11,300 care homes for older people are provided by the independent sector (both for-profit and charities). A total of 360 are owned by struggling private equity-backed Four Seasons Health Care. In January, the Clova House care home in Ripon, Yorkshire, closed after Four Seasons said it was no longer financially sustainable. The shock news caused confusion and fear among residents, some already suffering the disorientating effects of dementia. Yet such closures are far from rare. A recent study by healthcare analysts LangBuisson found that 929 care homes, housing more than 30,000 older people, have closed in a decade, some for financial reasons, others due to serious failings in care.

Recent closures include 12 homes owned by Scottish provider Bield, Bupa’s Hillview home in Eston, North Yorkshire and Valley View in Blaydon in the north-east, where residents were given a week to pack their things and leave. According to accountancy firm Moore Stephens, one in six UK care homes is at risk of failure.


It’s inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin

A recent report by the Competition and Markets Authority warned that some providers “may be carrying unsustainable levels of debt, and therefore may be at risk of financial distress”. In the event of a financial failure, “there could be a risk of disruption to residents while local authorities step in to ensure continuity of care provision.” Within the last few months, cracks have started to show at some of the country’s biggest providers, some laden with high levels of debt thanks to a succession of not-so-careful owners.

While there is no reason to believe any are in danger of imminent failure, there are certainly signs of strain. Loss-making Four Seasons is owned by Terra Firma, the investment vehicle of Guernsey-based financier Guy Hands, who had hoped to extract £890m from the company via costly loans. Rising staff costs, stagnant fee income and crippling interest payments have since destroyed its profits and raised fears about the firm’s survival.

With the business in difficulty, Terra Firma is now under pressure from US investment firm H/2 Capital Partners, which bought Four Seasons’ debt. Ongoing rescue talks aimed at securing a financial future for the company have been acrimonious and protracted, although the care homes appear safe for now.

HC-One, which was created from the ashes of Southern Cross and has more than 300 homes, is another major player with the shadow of high finance hanging over it. Its debts are thought to have shot up to more than £600m last year after HC-One refinanced its debts and bought 122 care homes from Bupa in a £300m deal. The company says its debt is “modest” and that it is “very healthy financially”.

The ownership and debt structure of care home chains would not give cause for concern were other structural issues not becoming more serious. Len Merton, chief executive of healthcare firm Advinia, which owns 38 residential and nursing care homes, says the industry is under strain due to a toxic combination of rising costs and stagnant income due to government austerity. “There’s a desperate shortage of nurses, a situation that has worsened since Brexit was announced because nurses aren’t coming over from Europe,” he says. This has left employers turning to temporary agency staff, who cost more.

Meanwhile, the “national living wage” – and the way it is being applied in care homes – has inflated payroll outgoings. “Costs have gone up and the fee contribution from local authorities has been behind where it needs to be for the past seven or eight years,” says Merton.

The government announced an extra £2bn in funding for social care last year, but the Local Government Association says only a quarter of that is reaching care home companies because the government asked councils to spend most of the money on reducing delays in discharging patients from hospitals.

“Our estimate of the funding gap between what councils pay and what providers say they need right now is £1.3bn,” says Linda Thomas, vice-chair of the LGA’s community wellbeing board. Many councils are due to levy a 3% council tax “precept” from April to raise extra cash for the care of older people, but the £548m raised will be wiped out by increased staff costs.

The financial squeeze is most keenly felt in homes that have a high proportion of council-funded residents. On average, in 2016 “self-funders” paid £846 a week, while the council paid just £621 a week for those without the means to pay for themselves.

Nick Hood, a social care expert whose firm, Opus, has restructured the finances of many care homes, says debt-financed businesses have a particular problem. These firms, he says, typically need profit margins of up to 14% to be able to afford their massive debt interest payments. “It’s completely inappropriate to have a financialised business model for a sector that isn’t just low margin, it’s no margin,” says Hood. “The bottom line is that the sector makes no money and will make less and less as the minimum wage goes up. I’m deeply concerned that these heavily over-indebted care providers are underinvesting in homes, with serious implications for residents.”

Research by consumer group Which?, ranking providers of homes for the over-65s by the percentage deemed inadequate or in need of improvement, shows that private equity-backed firms are rated among the worst. HC-One was placed 32nd of 54, with 29% of the 98 homes included in the study deemed not good enough. Four Seasons was 43rd with 35%. Orchard Healthcare, owned by private equity group Alchemy Partners, came in 49th, with nearly 45% of its 44 homes providing care that was not satisfactory.

The Care Quality Commission, which regulates the sector, keeps a close eye on the financial sustainability of care home companies that are so big that they would be difficult to replace. Hood fears that councils, who would have to pick up the pieces if a major provider failed, could not take the strain. “When Southern Cross happened, a lot of local authorities were still running homes and had the capacity and the expertise to bail these things out. That’s not true any more. The capacity has disappeared and expertise has been absorbed into the major private operators. I’m really not sure what the government thinks would happen if any of those businesses went bust.”

Merton, while reluctant to criticise peers in the industry, also has concerns about large debt-fuelled care home companies.

“When you look at the top three or four providers with in excess of 200 homes, it depends on their financial model. If they’re in large debt to buy those homes, they could be at risk.” But if the sector is so unprofitable, why do private equity firms still find it so attractive? Hood says they are “dazzled by demographics … they look at the market and say there will be another 25% who’ll need care in the next 15 years. They think that sooner or later the government will have to make funding available and those prices will go up. But the numbers don’t work right now because the government won’t put the money in.”

Barbara Keeley, shadow minister for mental health and social care, says: “The financial fragility of larger providers has been made worse by eight years of Tory cuts, raising serious doubts about how equipped councils are to step in in the event of provider failure. Labour would invest £8bn during this parliament with £1bn this year to ease the funding crisis. The social care system urgently needs a longer-term, sustainable funding solution to secure the future of services but questions must also be asked about the care system’s reliance upon care home chains with continually high levels of debt. The piecemeal funding offered by the Tories is not enough to ease the crisis their cuts have caused.”

In response, a Department of Health and Social Care spokesman says: “We know the social care system is under pressure due to our growing ageing population — that’s why we’ve provided an extra £2bn and recently announced a further £150mfor next year. We will shortly outline the government’s plans to reform social care to ensure it is sustainable for the future.”