Care Providers Alert May 2013

Proposed Changes to Financial Regulation of Care Homes

In what appears to be a direct response to the collapse of Southern Cross Healthcare, the Government launched a consultation on "Market Oversight in Adult Social Care", containing proposals for changes to the financial regulation of care homes. This consultation was published in December 2012 and closed on 1 March 2013. The consultation follows the publication of the Care and Support White Paper in July 2012, which emphasised the importance of a service user not being left without care and support, should a care provider fail. Introducing further proposed measures to manage provider distress and provide reassurance to service users on the transition of quality care, in the event of provider failure.

The proposals included, strengthening and clarifying the existing responsibilities of local authorities, by creating a statutory duty on local authorities to meet the temporary care and support needs of any person (whether self-funded or in receipt of residential or non-residential care) if they have urgent un-met needs as a result of provider failure. However, it was acknowledged that this may be less effective, where the size and scale or type of service provision may make it difficult for a local authority to ensure people continue to receive the care they need if that organisation fails. The Government therefore proposed a system of checks on the finances of the largest care companies to give an early warning of potential problems, and to challenge financial systems which could be unsustainable or reduce quality. The proposal was for a new regulatory system of targeted market oversight, which would involve a regulator working with the local authorities to provide additional oversight to providers meeting a certain "high risk" threshold. Rather than creating a new regulator, the Government's favoured approach was for one of the existing care regulators, either the Care Quality Commission or Monitor, to take on new functions.

The Consultation aimed to explore where the risk threshold should sit to bring providers into the central oversight regime. It was proposed that those providers that meet the threshold will be required to provide additional reassurance and information to the regulator regarding their ability to deliver quality care services, and would also prepare contingency plans which cover two scenarios: (i) a "recovery plan" to set out the actions to be taken to recover a struggling provider, including provisions to maintain the quality of care; and (ii) a "resolution plan" which would set out the mechanisms in place to allow a smooth transition to new ownership and continuity of quality care, once an organisation is no longer able to continue its operations. The Consultation also sought to gather evidence of costs, in order to consider the viability of the options presented.

The Government's response to Consultation was published on 4 May 2013 and set out the framework for...