Care homes – a dying industry

“Care homes are teetering “on the edge” and a chronic shortage of funding risks “catastrophic failure” within the National Health Service, the businessman expected to be the biggest operator of residential homes has warned.

Chai Patel, chairman of HC-One, which could take over more than 120 homes from Bupa, predicted that six national chains would emerge to dominate the market by benefiting from economies of scale. The acquisition would enable his company to expand to about 350 homes with 22,000 care beds and become the biggest in the sector.

There is immense pressure on care homes amid government funding cuts and an increase in costs since all adults over 25 became eligible for the national living wage. Some small operators are quitting, with 144 care homes closing last year and a loss of about 2,000 beds a year. Many more are “zombie” homes, feared to be close to bankruptcy as struggling councils force down the rates they pay.

A shortage of capacity means that the number of people in residential homes has not increased in line with rising longevity, forcing many frail and elderly people to rely on specialist care in their own homes.

In an interview with The Times, Dr Patel admitted: “There is no question the sector itself is on the edge.” He added: “The impact of chronic under-funding of social care will result in catastrophic failure in the NHS.”

and underneath this article:

“An investment group that is set to be the biggest care homes owner in Britain has vowed that it will not become the next Southern Cross.

HC-One is poised to acquire about 120 homes from Bupa, possibly through a debt and equity deal amid unease about the implications for the group’s debt levels and with memories of Southern Cross’s collapse fresh in the memory.

Southern Cross, which once ran more than 750 care homes and had 37,000 beds and some 41,000 staff, failed in 2011 when all its homes were taken over by their landlords.

The equity for the Bupa purchase, which is close to completion, is understood to be being provided by Stepstone Real Estate and Safanad, an investment firm, and the debt arranged through Deutsche Bank and Apollo Global Management.

The acquisition of more than 9,000 beds from Bupa would take HC-One’s total to almost 22,000 and catapult it above Barchester Healthcare and Four Seasons Health Care. HC-One rose from the ashes of Southern Cross when it acquired about a third of the homes and has expanded through two other acquisitions since 2015. The purchase of Helen McArdle Care, which had 20 homes, was funded through debt.”

Source: Times (pay wall)