26 July 2018

Strained health and social care system draws in insolvency practitioners

Insolvency practitioners (IPs) are now not only having to run health and social care businesses in receivership or administration while buyers are found, but also having to deal with the CQC, local authority safeguarding teams and clinical commissioning groups.

The problem is acute in services which rely heavily on local authority placements, as local authorities increasingly use funds earmarked for social care in other ways. This puts more pressure on businesses where margins are already extremely tight.
Owners are then tempted to cut corners in order to retain profitability – standards may then fall, lenders become concerned about the value of their security and local authorities start to place residents elsewhere.

Pressure on the sector is clear from the CQC’s latest report, The State of Adult Care Services 2014–2017, which summarised the outcome of some 33,000 inspections at around 24,000 adult social care locations carried out by the CQC from the start of the new inspection framework until February 2017.

Almost four out of five adult social care services in England were rated as good or outstanding overall. But nearly a fifth of services were rated as requiring improvement and no less than two per cent of services, covering 343 locations across the country, were rated as inadequate. Around a quarter of services were found to be either inadequate or to require improvement specifically in relation to whether they were safe and well led.

Add to this the current uncertainty over Brexit and the substantial fall-off in overseas applications to enrol as trainee nurses here over the last six months, as well as the one per cent cap on nurses’ pay increases, and it is not surprising that the pressure is starting to tell.

Insolvency practitioners (IPs) who are appointed as receivers or administrators often now have to deal with local authority or CQC inspections because the simple fact of their appointment may be enough to spark an investigation into the quality of care being offered.

When that investigation uncovers any problems within the service, the office holder then has to put them right at the lender’s expense so that the business has the best chance of being sold, ultimately affecting the amount available to creditors.

Office holders are now, in our experience, commonly faced with such inspections within an increasingly short period after their appointment. This is often coupled with a reluctance by the local authority to continue placing residents until their newly uncovered concerns are alleviated.

The automatic reaction of the local authority may well be to place an embargo on new referrals to the service.

There are three types of embargo, namely:

  1. The overt or non-disclosed embargo – the local authority simply stops placing, but does not say so.
  2. The mandatory embargo – where the local authority, often because of an inability to reach a workable agreement with the office holder, simply imposes an embargo which is often for an indefinite period.
  3. The voluntary embargo – where commissioners seek the agreement of the office holder to an embargo, something which is clearly at first blush not remotely attractive but is, in our view, the correct thing for an office holder to agree to when faced with the alternative of either a non-disclosed or compulsory embargo.

At HCR, we are experienced in negotiating the terms of voluntary embargos with local authority commissioners and their safeguarding teams, in dealing with CQC’s enforcement teams in relation to the type of action which they may take to fulfil their raison d’etre of driving overall improvement in the health and social care sector and in guiding the office holder and lenders through these minefields.

Pitfalls for Administrators and Receivers – CQC Enforcement
The enforcement policy adopted by the CQC can create difficulties for both administrators and receivers appointed to health and social care services whilst a buyer is being found.

The CQC has both civil and criminal enforcement powers; the civil powers focus on reducing risks to people who use regulated services, while the criminal powers hold registered persons to account for serious failures.

It is always guided by an ‘enforcement decision tree’, which has four stages:

  • Initial assessment.
  • Legal and evidential review.
  • Selection of the appropriate enforcement action.
  • Final review.

This decision tree is the basement of the enforcement guidance for inspectors.

Initial assessment

The CQC becomes aware of incidents and events that could warrant civil and/or criminal enforcement action from a number of sources, including notifications by providers, safeguarding alerts, coroners’ reports, complaints etc.

It then considers what response is appropriate; this could entail carrying out a focused or comprehensive inspection, gathering more information some other way, referring the concern or sharing the information of the concerned with another relevant public body or progressing to the next step.

During the first stage, all safeguarding alerts should be reviewed, as should notifications and/or incident reports, and any concerns identified during an inspection should be assessed in more detail before a decision is made.

Where a matter is to be escalated, the CQC will carry out an internal Management Review Meeting (MRM). The MRM continually reviews decisions about what, if any, enforcement action should be taken and is designed to ensure that there is a documented rationale for all decisions.

The legal and evidential review

Where a case progresses to this stage, the inspector will conduct a legal and evidential review to determine whether there is sufficient evidence of a breach of the legal requirements by a registered person.

This review will be carried out by the inspectors and an inspection manager who will seek advice where necessary (e.g. from in-house or external lawyers).

If the MRM considers that the evidence demonstrates an identifiable breach of a legal requirement and that there is sufficient evidence to prove the breach then the case will continue to the next stage.

Selection of appropriate enforcement action

In deciding what enforcement action to take, the CQC must consider the seriousness of the alleged breach and the evidence of multiple and/or persistent breaches over a period of time.

Depending upon the seriousness of the identified breach, following a risk assessment matrix, CQC will respond in accordance with the following table:

Seriousness of
the Breach
Recommended Initial Civil
Enforcement Action
Extreme Urgent cancellation

Urgent suspension

Urgent imposition, variation or
removal of conditions

High Cancellation

Suspension

More significant conditions to be
imposed, varied or removed

Medium The imposition, varying or removal
of conditionsSection 29 Warning Notice
(NHS Trusts and NHS Foundation
Trusts only)
Low Requirement Notice

Final review

The CQC will review enforcement activity as part of developing the coming year’s business plan on an annual basis. Any relevant priorities will be agreed by their board when agreeing the business plan.

The CQC’s Special Measures regime

‘Special measures’ may be a term which causes alarm but the CQC, on launching the regime for adult social care providers, was clear that the status is “designed to ensure there is a timely and coordinated response where we judge the standard of care to be inadequate”.

The purposes of special measures are to:

  • Ensure that providers found to be providing inadequate care significantly improve
  • Provide a framework within which CQC uses its enforcement powers in response to inadequate care and works with, or signposts to, other organisations in the health and social care system to ensure that improvements are made
  • Provide a clear timeframe within which providers must improve the quality of the care they provide, failing which CQC will seek to take further action e.g. to cancel their registration.

There are different processes for special measures in different health and social care sectors. Those for primary medical and independent healthcare are different to those applicable to adult social care services.

Services placed in special measures will be inspected again by the CQC within six months.
If insufficient improvements have been made so that the service is still rated inadequate for any of the five key questions, or overall, then the CQC will use its enforcement powers to begin the process of preventing the provider from operating the service.

This normally leads to the cancellation of the service’s registration, or to varying the terms of the registration, within a further six months if there is no additional improvement. The CQC retains the power to escalate to urgent enforcement action if the situation worsens.

Special measures are intended to “give people who use the service the reassurance that the care that they get should improve”.

Special measures do not replace the CQC’s existing enforcement powers. Indeed it is very likely that the CQC will take enforcement action – such as issuing warning notices and imposing conditions on registration – at the same time as placing a service in special measures, and will sometimes prefer urgent enforcement action to special measures.

Providers are informed that their service is to be place in special measures via the draft inspection report which is always sent to them ahead of publication for “factual accuracy” checks. The draft report will propose an inadequate rating and indicate that the service is to be placed in special measures. When the provider has submitted their comments on factual accuracy, the CQC will review their position and finalise the report.

The CQC will then inform the provider and local commissioners before publishing the inspection report and placing the service in special measures.

The provider has a duty to notify all people who use the service “through all reasonable means” that it has been rated as inadequate and placed in special measures.
Registered individuals have the right to make representations or to appeal against certain types of enforcement action, but they cannot appeal against the decision to place the service in special measures.

A service will only be taken out of special measures if it has demonstrated sufficient improvement to enable the CQC to change its rating from inadequate for any of the five key inspection areas.

Challenging the CQC’s Notices of Proposal

Notices of proposal are issued by the CQC to a registered person when it wishes to:

  • Limit the way an activity is carried on or managed
  • Suspend a registered person’s registration, or
  • Cancel a registered person’s registration.

They are issued under Section 26 of the Health and Social Care Act 2008, under what is generally known as “the slow procedure”, which may lead to the closure of the service involved.

The registered person has 28 days from the date of receipt of the notice to make representations:

  • To impose, vary or remove a condition of registration
  • To suspend a registration or
  • To cancel a registration.

If no representations are made within that period then the proposal will become binding.  There is no right of appeal. The right to make representations is lost.

The CQC has no power to extend the time allowed for making representations, but must consider representations received within those 28 days.

Although its published policy is to endeavour to do so within 20 days of receipt of the representations, that consideration may take longer than that, and often much longer.

Representations cannot be made orally. Section 27(1) of the 2008 Act says that they must be made in writing i.e. by email, by post, by fax or by delivery in person at one of the CQC’s offices.

There is a standard form for making representations which the CQC sends with all notices which it serves by letter. If the CQC serves a notice electronically, it will tell the person to whom the notice is addressed how to download the standard representation forms from its website.

You do not have to use the standard CQC Form of Representation but the CQC encourage you to use that form “to avoid any doubt that you are making representations”.

Once representations are received, the CQC will consult with the person making them, members of its own staff, service user and carer representative organisations “or other expert opinion” where appropriate.

Where the CQC upholds representations, the notice will be withdrawn. Another possibility is that the CQC will, following representations, issue a different notice which they will “aim to serve within 28 days of the receipt of the representations”.

The same rights to make representations against any new notice apply in the same way as for the original notice.
Where the CQC does not uphold the representations and decides that the notice of proposal should stand, it will write to the registered person concerned enclosing a notice of decision, which will specify when it is to take effect and will outline the registered person’s entitlement to apply to the First-Tier Tribunal.

Notices, and representations made in respect of them, are not kept confidential because the CQC takes the view that their “wider responsibility for the safety and welfare of people using the services means that we will share relevant information about enforcement notices as appropriate” with:

  • People who use the services and their representatives
  • Local authorities
  • NHS England
  • The Clinical Commissioning Group (CCG) in whose area the regulated activity is being carried on and,
  • The NHS Trust Development Authority, Monitor (the NHS Foundation Trust Regulator) or the appropriate body.

A registered person has only 28 days from the receipt of a notice of decision to lodge an appeal with the First-Tier Tribunal. If an appeal is lodged, the proposal still does not take effect. Matters then proceed to a final tribunal hearing, which can often be up to a year after the appeal with the tribunal is lodged. Neither the tribunal nor the CQC can extend that 28-day limit.

Throughout the appeals process, the CQC will continue to inspect the service and, if it decides that the proposal is no longer necessary due to satisfactory improvements having been made, then it will be withdrawn and the appeal comes to an end.

If the CQC does not take that view, the tribunal will decide whether the notice of proposal should be dismissed or whether it should be confirmed.

If the tribunal upholds the notice of proposal to cancel registration of a service, the CQC will make transitional arrangements for the service users to be accommodated before it finally closes.

We have many years’ experience of helping registered providers to make representations against notices of proposal or draft improvement plans, We also have the expertise and experience, when, rarely, sufficient improvement has not been made which leads to a CQC notice of decision to uphold the original proposal, to act for providers all the way through the tribunal appeal process.

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About the Author
Sam Payne, Partner, Head of Restructuring & Insolvency Team
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