Care Home, Living Wills, Wills

Southern Cross anxiety over Care Home company’s future

From the BBC’s News website. Reproduced with kind permission of the BBC.

1 June 2011 – Thousands of elderly residents face an anxious wait after the UK’s biggest care home company said it would reduce its rent bill amid financial troubles.

The announcement means Southern Cross will pay nearly a third less to its landlords over the next four months.

There are concerns that if this move does not work, its 31,000 residents could be left “high and dry”.

But Health Select Committee chair Stephen Dorrell MP said the government should not consider a bail-out.

“It doesn’t seem to me that it’s the taxpayers’ job to fund the losses that have been suffered by the people who have invested in Southern Cross, that was their risk and it’s their loss,” Mr Dorrell told the BBC.

“What we need to do is to ensure that the care provided to people resident in Southern Cross homes is sustained, and those people’s needs are met.”

Darlington-based Southern Cross recently reported half-year losses of £311m.

The company, which operates 750 homes, warned then that it was in “critical financial condition”.

‘High and dry’

There has been mounting concern over the situation among the elderly residents and their carers and relatives.

Judy Downey, from the Relatives and Residents Association charity, said the developments were worrying.

“It’s a mixture of anguish and concern and panic,” she said.

“The whole business of closure of care homes is something the Relatives and Residents Association has been really concerned about for some time.

I anticipate, over the next week or two, landlords will start to take back their homes” -Paul Saper Financial consultant

“Homes close on a regular basis for one reason or another, and we’re very concerned that they have the same status in law as a corner shop that gives up, and people are left high and dry.”

Roy Lilley, a health policy analyst and former NHS Trust chairman, said Southern Cross was in a difficult position.

“The problem is in a normal business, if you run into trading difficulties, you can circle the wagons, you can close some branches that are not profitable, you can get rid of staff and just generally cut the overheads,” he said.

“But here you can’t do that, you’ve got 30,000 of the country’s most vulnerable people who depend on this company for a service.

“You can’t shove them around, you can’t decant them because clearly some of them are very frail and very vulnerable.”

However, there has been some good news for Southern Cross from the Association of Directors of Adult Social Services, which said local councils would try to help the company bounce back.

The association’s president Peter Hay said: “As councils buying care from Southern Cross, we are willing to work with all parties to support the recovery of the business.

“The care sector has many viable businesses delivering high quality care and we can achieve that for Southern Cross residents if all parties co-operate and continue to put the interests of residents and their families first.”

‘Critical mass’

Southern Cross said on Tuesday that it would defer 30% of its rent for four months while it tried to resolve its financial difficulties.

It also reiterated its belief that a longer-term solution to its troubles would be “forthcoming”.

The firm said it was confident “a critical mass of landlords” would support the move. However, there has been no official agreement.

The rent deferral runs from 1 June to 30 September. Southern Cross said it would issue an update in July.

Company chairman Christopher Fisher said: “We believe that all of the key stakeholders in Southern Cross want this restructuring to succeed.

“We are in dialogue with the Department of Health, our lenders and our landlords and they continue to support the process.

“The objective will be to emerge with a stable and sustainable business model for the continuing care of our residents.”

But financial consultant Paul Saper, who has analysed the private care sector, told the BBC: “They can make a decision themselves not to pay the rent, but their landlords don’t have to turn round and say: ‘We accept that’.

“That’s not going to happen, because these landlords also have responsibility to their shareholders.

“I anticipate, over the next week or two, landlords will start to take back their homes. And why should they not do so?”

From the BBC’s news website.

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