‘I’m furious’: Failing care homes are the real coronavirus scandal

The week before prime minister Boris Johnson ordered a nationwide lockdown, Rachel Beckett decided to take matters into her own hands. As chairman of Wellburn Care Homes, she worried the virus could seep into one of her 14 locations across northeast England. Beckett stopped hiring agency workers – fearing they could unknowingly carry and spread the virus as they work between multiple locations – closed all homes to visitors and refused to admit any discharged hospital patients, unless they tested negative for coronavirus.

And then, three weeks into the self-imposed lockdown, the inevitable happened. Two residents tested positive and four more showed symptoms of Covid-19. After Public Health England refused to supply tests for the residents in the home, Beckett went to the shops to buy two trolleys full of toiletries, camp beds and sleeping bags for her staff, who moved on site. “Five weeks ago, I would say, we were very much on our own,” she says.

Even after three more homes were hit by coronavirus outbreaks and testing kits were finally sent out to them, hospitals refused to take in some of the residents who tested positive. “As a sector we support hospitals because we take admissions from the hospitals to relieve their beds, yet they were just not working with us,” says Beckett. She argues that there has generally been little guidance from government and social care regulators on how to protect elderly residents from coronavirus.

With costs for both personal protective equipment (PPE) and staff wages going through the roof and occupancy rates dropping from around 90 per cent to 82 per cent by the end of April, the coronavirus crisis has left Wellburn Care Homes fending for itself – and with a big overdraft. “The NHS had billions and billions written off their debt. We’re a care sector as well, you’d think we’d be getting something,” says Beckett, whose team launched the We Care campaign on April 30 with profits going to the Care Workers Charity.

The UK has allocated £3.2 billion to local councils in the past two months as they respond to coronavirus outbreaks, but to date, the additional funding – in the form of an increase in the fees they pay care homes – has failed to reach the front line. “I’m pretty furious about the £3.2bn and what’s happened to it,” Pete Calveley, CEO of Barchester Healthcare, the UK’s third-largest care provider, told the BBC on May 1. Of the 60 or so councils Barchester deals with, only 23 have made a commitment.

Barchester usually records 420 deaths each month throughout its network of care homes, but this figure increased to 1,200 in April. As the revenue from fees paid by residents and councils drops week by week, the books are no longer balanced and will push some care homes over the edge; particularly those that operate on debt. “Let’s assume half that money goes to the care homes. All it will do is pay the interest on the sector’s debt,” says Nick Hood from Opus Restructuring & Insolvency, which has advised several care home chains about the £3.2bn aid package for social care. The sum makes up a mere one per cent of the government-backed loans worth £330bn to help businesses through the crisis. “It isn’t enough, it never will be enough. What you’ve got is a funding model and a structure in this market that is not sustainable,” he says.

The coronavirus pandemic has thrust the UK’s care homes into the spotlight as the worst hit by chronic understaffing and lack of testing for vulnerable residents. In England alone, a third (29.1 per cent) of the more than 15,000 care homes are currently experiencing a coronavirus outbreak, and have reported 4,343 deaths within a fortnight from April 10. Care homes around the country have become the new front line of the pandemic — and deaths are piling up.

The rising cost of PPE and extra staffing to cover for self-isolating workers, combined with continuously falling occupancy rates, are pushing the sector into deep financial hardship. A third of care providers in the UK are at risk of going out of business in the next three years and could be leaving thousands of elderly people and those with disabilities without much needed care. But Covid-19 does not have to kill thousands of vulnerable people to be the straw that breaks the social care sector’s back. The sector, which includes domiciliary care workers who visit people with learning difficulties, mental health problems and physical disabilities in their own homes, was in trouble long before the coronavirus crisis hit.

When caring for the elderly and vulnerable became big business in the 1980s, hedge funds and private equity firms – dazzled by the promise of a steady stream of income from an ageing population – piled into the sector and built, bought out or leased chains of care homes across the UK. At the other end of the spectrum are family-run homes and a small number of charitable and council services. Councils pay care home operators the bare minimum to house people without the means to pay for themselves, so operators charge people who can fund their own care at least 30 per cent more, an average £672 per week, to compensate for their running costs.

Besides the lack of funding, offshore owners and investors can cash out with short-term profits, which has pushed many care homes to the brink of financial collapse. A report published in November 2019 by the Centre for Health and Public Interest (CHPI), an independent think tank in London, revealed that the 26 largest providers of care home services in the UK – including HC-One, Four Seasons Health Care, Barchester Healthcare and Care UK – pocket around £1.5bn from an annual revenue of £15bn for lease agreements, dividends and debt repayments. These businesses need profit margins of at least 12 per cent to be able to repay their debt, before reinvesting in staffing and the running of their homes, which could be unrealistic in a sector that operates on thin profit margins.

This has left the financial structure of this highly fragmented sector vulnerable to the slightest downturn in income. “I think Covid has made it very apparent now that these are serious flaws in the industry that have never been addressed. It’s kind of the perfect storm,” says Vivek Kotecha, research manager at CHPI. Care home providers set up for profit extraction are most likely to feel a sudden rupture in their finances and could, if they collapse, leave thousands of vulnerable residents with nowhere else to go.

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Occupancy is the lifeblood of care homes. They need at least 80 per cent of beds to be full to remain viable, and even a small drop in occupancy rates can hurt their earnings. Four Seasons Health Care, the second-largest provider in the UK, said its profits had been badly hit by a two per cent decline in occupancy rates caused by a rise in elderly deaths during the 2017 winter flu season. The provider, which cares for more than 10,000 people in 190 homes, has been struggling ever since. In April 2019, it was the last of the “big four” providers to be offered up for sale. With its £735m debt pile, Four Seasons is far from the only provider at risk of going bust without help from lenders.

Nick Hood, a business risk adviser, says one in three care home operators could fail in the next three years. He perused the latest set of published accounts for 7,203 operators registered at Companies House and found that 777 of them were technically insolvent with a total value of £1.6bn in negative equity. And to fund their losses, the 7,203 operators have borrowed £6.4bn between them – a figure that has been rising rapidly since the sector was hit by the coronavirus pandemic. “I hate to think the rate of the losses that some of the big care home companies are making now,” says Hood.

As coronavirus deaths continue to mount in care homes at alarming rates, the lack of PPE and testing has led to a cascade of infections. Because most care homes are operated by separate businesses in competition with one another, they need to purchase PPE directly at highly inflated prices from suppliers. Four Seasons Health Care and Care UK, for example, have spent over £2.3 million and £1.5m respectively to equip their homes since March. In April, the government put the firm Clipper Logistics in charge of setting up a central hub for the supply and distribution of PPE, but the online ordering system is yet to be rolled out.

Some carers complain they have had to buy or make their own. Anna* works for an agency in Northern Ireland, which leaves the responsibility to the care homes that contract her. “Up until a few weeks ago, the PPE was locked away so we couldn’t get to it, which has led to a whole lot of staff in the homes and with agencies to buy their own,” she says. She currently works in two care homes, both run by private company Runwood Homes, which provided her with a used face shield along with the aprons and gloves that are standard in everyday care work.

The costs for staffing are spiralling out of control too, as one in four care workers are self-isolating at one time. In a sector where most workers are paid minimum wages and a quarter are on zero-hours contracts, care homes have had to hire agency workers to fill the staffing gaps. While they would usually pay temporary workers around £30 an hour, some agencies are now demanding up to £90. The higher charge is, however, not always reflected in the workers’ salary. Anna, for instance, is still paid £10.5 an hour. Even before the coronavirus crisis hit, the sector suffered from a 30 per cent staff turnover rate and had over 120,000 job vacancies in the UK.

Care homes house more than 400,000 of the UK’s elderly and most vulnerable people, providing everything from beds and nursing to specialist dementia care. If a care provider goes bust, it becomes the duty of the local authority to step in and try to find care for residents who are at risk from having their homes closed. But this becomes problematic in so-called care deserts, regions of the country where no other care providers exist.

Southern Cross, a care home chain with 31,000 residents, went bust in 2011 after it failed to pay rent bills and settle its debts. Many of the homes the company managed were then sold to the debt-laden Four Seasons Health Care, which in 2019 went into administration. The income from local councils just was too low to make ends meet with the rising costs of providing care and the extra burden of the interest costs on debts. “No one’s around to buy them. If one of those big four collapses, there’s no one that we could think of readily who would come into this market now,” says CHPI’s Kotecha. The sector’s financial collapse could have a devastating impact on the residents and staff under their care.

Besides the uncertainty brought about by the coronavirus crisis, the fragmented structure of the care sector complicates things further. Many care homes are owned by different companies than those running them. In June 2018, Four Seasons Health Care had to shut Ross Wyld Care Home in Walthamstow, London, after failing to negotiate a new lease with the owner who had plans to redevelop the property as flats – and to transfer 47 pensioners and 72 staff members to other care homes. But smaller care providers, or the NHS, don’t have the capacity to take in thousands of vulnerable residents from large care homes, even less so since they have to deal with a significant number of Covid-19 patients.

If the UK’s largest care firms collapse as a result of the coronavirus crisis, the government will have no choice but to step in. “There is only one white knight out there and that’s the government,” says Hood. “I am no socialist, but what is going to have to happen here is that eventually the government is going to have to step in and take the sector back into public ownership.”

*Names have been changed

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