The viability of care homes

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On 15 December 2017 the Chief Inspector of Adult Social Care at the Care Quality Commission confirmed that services are unlikely to be disrupted as a result of the business failure of Four Seasons Health Care, a standstill agreement in relation to Four Seasons' December interest payments having been reached (Ref 1). The CQC’s fundamental responsibility is for assessing the quality of care provision against National Minimum Standards.

But why is responsibility for the care of 17,000 elderly and vulnerable people linked to repayment terms on private-equity funded high-interest bonds?


The major care-home providers compose about a fifth of the market. According to a University of Manchester study, the financial models for nearly all the larger private equity-owned care home chains carry significant external debt and interest repayments (Ref 2). Meanwhile, spending on social care by austerity-hit local authorities has fallen in real terms, while costs have risen. Pressures on recruitment and retention, potential restrictions on immigration numbers post-Brexit, inflationary and increased operating costs are increasing the costs of social care and care homes provision.  Staffing levels (and hence overall costs) and skill sets vary depending on types of care home, the dependency or disability of residents, and funding or payment mechanisms (Ref 3). These pressures must inevitably force some providers to exit the marketplace.

Key Recommendations

There are a number of critical activities that the local authority must undertake, to fulfil their duty of care (Ref 4).  These include:

  • oversight of the financial viability of care home providers
  • financial oversight arrangements are augmented by working with other local authorities to annually monitor the financial viability of the service providers
  • independent monitoring of the standard of care
  • care home managers ensure staff are sufficiently trained to provide appropriate levels of care
  • care home providers produce timely information and bills to residents
  • owners and operators demonstrate a drive for continued improvements in care standards


The Care Act Statutory Guidance of August 2017 (Ref 5) places a duty on the local authority in arranging and funding of social care in the authority’s area, irrespective of contracts or not with that provider. 

Local authority risk managers should be developing plans that will prevent or mitigate potential for disruptions to social care provision, and hence enable the Council to effectively respond to service loss.

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