Call to legislate against providers who “leak” profits

The care home sector should be subject to regulation that prevents care home companies with unsatisfactory financial models from providing care in the UK, a new report has said.

The report, Plugging the leaks in the UK care home industry – strategies for resolving the financial crisis in the residential and nursing home sector, also calls for a new Care Home Transparency Act, which mandates care home providers to disclose where their income goes.

In response to calls for additional funding for the sector, the report’s author, the  Centre for Health and Public Interest, says that there are “significant concerns that the injection of billions of pounds of additional funding into an industry which is beset by structural difficulties is unlikely to deliver either an improved level of care or value for money for the taxpayer.”

A key finding of the report is the “significant levels of leakage across the care home sector”. “Leakage” or “hidden profit extraction” is defined as money that is spent on rent, interest and repayments of debt, and directors’ remuneration, rather than direct patient care. The report calculates that of a total annual income of £15bn, an estimated £1.5bn (10 per cent) leaks out of the care home industry annually in the form of rent, dividend payments, net interest payments out, directors’ fees, and profits before tax.

It comments: “Money not going to front line care. This is equivalent to the £1.5bn of additional funding for social care promised by the government in the September 2019 Spending Review.

The report adds: “In an ideal scenario, most of the money which goes into the sector would go directly to looking after the care home residents. This would mean enough staff with the right training to provide high quality care and good facilities, entertainment, food, and other services for the residents.”

Key criticisms are levelled at care home providers which implement complex company structures, including offshore companies based outside the UK’s tax jurisdiction. “Splitting the care home business into separate operating and property companies raises concerns about the ability of a care home operator to pay compensation for causing harm, and potential tax avoidance.”

The Centre for Health and Public Interest is public-interest think-tank on health and social care policy funded from independent organisations and individuals

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