A cold wind blows through the health & social care sector

Yesterday it was announced that two of the holding companies of Four Seasons Health Care, the second largest UK care home provider, have gone into Administration with debts in excess of £500,000,000.

The group operates approximately 350 care homes and employs 20,000 staff looking after 17,000 residents and patients.

The group medical director Dr Claire Royston said: “The news does not change the way we operate or how our homes are run or prompt any change for residents, families, employees and indeed suppliers. Our priority remains to deliver consistently good care. It marks the latest stage in the group’s restructuring process and allows us to move ahead with an orderly, independent sales process.”

This is the biggest collapse of a care home business since Southern Cross in 2011. Four Seasons has repeatedly warned about its long term stability in the face of rising costs and cuts to local authority care fees.

Rehana Azam, GMB national secretary, said: “The possible collapse of Four Seasons shows our care system is in crisis, it is crumbling beneath us because the funding isn’t there.”

Following hard and fast upon the sixth delay to the long awaited Government green paper on health and social care and the ongoing uncertainties in relation to Unison’s appeal to the Supreme Court in respect of the sums to be paid to sleep-in workers, this is yet another devastating blow for the sector.

It is bound to have a knock-on effect on other businesses, not least of all Four Seasons’ supply chain and it is symptomatic of the general malaise from which the sector is suffering due to lack of investment over many years.

Whilst it is as yet unknown what the Administrators, Alverex & Marsal, intend to do in relation to the group’s problems it is understood that Terra Firma Capital Partners, the private equity firm which brought the group in 2012 for £825,000,000, has already seen a £450,000,000 write down on its investment and conceded control of the group to the US Hedge Fund H/2 Capital Partners which holds a large amount of the debt.

The majority of the group’s operations are funded by the state with only about a fifth of them funded privately.

The role of the Administrators is to keep things running and try and find a buyer for all of the homes. As such nothing will change immediately.

If a Four Seasons home is eventually marked for closure then the local authority is responsible for making sure everyone is cared for without any interruptions. Private funders, however, will need to find alternative accommodation in the event that their home closes.

Whilst CQC has in the past issued notices expressing its concern over the financial viability of Four Seasons this is just another example of how austerity has impacted on the ability of local authorities to pay the true cost of care to those providing it.

Our Restructuring & Insolvency team has a proven track record in advising businesses and families who find themselves at risk as a result of the knock-on effects of administrations in the care sector. Having undertaken substantial work following the failure of Southern Cross, our team is particularly well placed to advise on any issues which the collapse of Four Seasons may cause you whether a supplier to the business or a resident or family member.

We have also acted for lenders and administrators for many care homes and groups across the country and work closely with our nationally recognised healthcare team on many assignments giving us true sector expertise. Please let one of the team know if you require expert advice.