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09.Jun.2011

The financial difficulties faced by care home provider Southern Cross have hit the front pages. Virginia Cooper and Carlton Sadler look at the implications for local authorities and PCTs.

Local authorities, and PCTs commissioning Continuing Health Care, will need to keep a close eye on developments at Southern Cross. As the Group provides care for in the region of 37,000 residents (approximately 31,000 in the elderly care category) across over 750 care homes, the uncertainty over its continuing trading is likely to impact upon the vast majority (if not all) of local authorities and PCTs. Exposure will be greater in some regions than others but, particularly with out of area placements, there are unlikely to be any commissioning authorities who are completely untouched by the events. For some, the crisis potentially jeopardises the placements of hundreds of vulnerable adults for whom they are responsible.

At present, there is great uncertainty as to how the Group’s financial crisis will be resolved. Much will depend upon the Group’s investors, who have been called to a meeting on 12 July 2011, and the landlords who have been requested to accept a 30% rent reduction over the next four months. However, even this reduction, if accepted, may be insufficient to see the Group survive another quarter. The same could be true of the reported 3000 job cuts which it is proposing by October.

There are reports in the press of the possibility of a Government bail out, but if this is not forthcoming the main insolvency options for the Group are as follows:

Administration

This is a procedure where a company may be rescued or reorganised or its assets realised under the protection of a statutory moratorium preventing action being taken against it. This may result in the business continuing but in a restructured format (such as with the loss of a number of ‘loss-making’ homes) and under new ownership.

Administrative Receivership

This is not an insolvency proceeding in the strict sense but rather a remedy for a secured creditor to allow for the realisation of a company asset subject to security, such as property.

Company Voluntary Arrangement

This is where a company and its creditors come to an agreement, usually involving a suspension of payment or a reduced payment, which is implemented and supervised by an insolvency practitioner and binds all creditors.

Liquidation

This is an alternative to the rescue mechanisms where a company is wound up. This involves the appointment of a liquidator who collects in and distributes the company’s assets and dissolves the company.

Whatever steps are taken, there will be a number of commissioning and contractual issues which will arise.

Commissioning issues

Latest reports suggest the Group may ‘shed’ in the region of 180 of its homes. It appears that any such reduction would be achieved by either the closure of some homes (30 is the reported number), or, in the majority of cases, transfer to alternative providers. In some cases, the landlords such as Four Seasons and Bondcare are care providers who may be willing to take over the running of the homes. In many other cases, new providers may need to be found or residents may need to be transferred to other Southern Cross homes. Whilst this is a national problem, the practical ramifications and solutions will vary depending upon local issues.

Local authorities and PCTs need to have contingency plans in place. Commissioners should:

• scope the potential scale of risk by clarifying the numbers of placements they have with Southern Cross homes whether locally or out of area
• develop contingency plans to respond to the potential closure of Southern Cross homes in their areas
• liaise with host authorities for any out of area placements regarding their contingency plans for the ongoing provision of care to residents in any ‘at risk’ homes
• review the availability of suitable alternative placements in the local economy
• consider their response to any proposals to transfer residents to other Southern Cross homes or new providers, this may include putting in place arrangements to consult with the residents and/or their families in relation to Human Rights issues *
• consider how they will want staffing issues to be dealt with by the new providers – are they to be required to take on the placements together with the staff employed on a TUPE basis? What are the costs implications of that? Are there industrial relations implications if an alternative approach is adopted?
• satisfy themselves that they are happy with any suggested new providers. This will include ensuring they have appropriate registration with the Care Quality Commission (CQC) in place
• managing press and public relations around these issues.

In the event that there is insufficient capacity in terms of alternative placements, commissioners may be able to take on responsibility for running the homes themselves. In such instances, local authorities would need to consider:

• renegotiating the lease or an assignment of the existing lease
• employment issues – in particular the application of TUPE and the important consultative obligations associated with that as well as the cost implications both in terms of possible redundancies and pensions issues
• possible joint working arrangements with the local health commissioners
• the need for appropriate registration with CQC.

Contractual issues

Commissioners will need to review existing contracts to understand their contractual obligations in the light of any insolvency arrangements.  Factors commissioning authorities might consider, for instance, in the event of an administration include:

• their potential entitlement to terminate existing agreements
• their options where the administrators refuse to perform Southern Cross’ obligations under any contracts or the contracts of others that impact on Southern Cross’ service
• any express provisions in contracts with Southern Cross which may entitle them to withhold payment following administrationwhether it is necessary to make any payments in advance and if so the basis on which such payments should be made.

* In relation to local authority funded residents, Southern Cross has its own duties under the Human Rights Act

Virginia Cooper is a partner and Carlton Sadler is an associate at Bevan Brittan. Virginia can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it., while Carlton can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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06.Jun.2011

The Care Quality Commission (CQC) has a shortfall of 133 inspectors, around 15 per cent of its target number, according to a report in the Financial Times.

The news raises doubts about the capacity of the CQC to adequately introduce the random inspections of care homes it promised last week following allegations of abuse by staff at a privately-run care home in Bristol by the BBC.

The CQC apologised in the aftermath of the BBC documentary after it became clear that concerns over staff conduct at the Winterbourne View home had been reported to the regulator on two occasions prior to the broadcast on the Panorama programme last month.

The regulator will also take responsibility for the inspection of 9,000 dentist's surgeries and 8,000 GP practices from April next year, but the CQC is not expecting to increase staffing levels.

According to the Financial Times, the shortfall was caused by the recruitment freeze imposed on quangos by the new government last year, although this was lifted four months ago for the CQC which is now in the process of recruiting more inspectors.

An investigation by the FT, published last week, found that the CQC had reduced inspections by 70 per cent in the six months to March this year compared with the previous six months, despite almost 15% of privately-run and 9% of local authority homes being considered 'poor' or 'average' by the regulator.

Meanwhile, the government has reiterated its intention to introduce mandatory safeguarding boards for all local authorities, as reported on Local Government Lawyer last month.

Speaking to the BBC at the weekend, care minister Paul Burstow said: "It comes as a surprise to people that the statutory basis for the safeguarding of vulnerable adults in this country is much weaker than that which exists for children.

"I'm committed to follow through on some recommendations we have received recently from the Law Commission to implement statutory safeguarding rules that will require the police the NHS, social services to work together."

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02.Jun.2011

Reforms to adult social care suggested earlier this month by the Law Commission will be included in a white paper by the end of the year, the government has said.

The Department of Health said the government recognised the need for reform after a coalition of organisations concerned with social care wrote to the three main party leaders to urge action.

Their letter, reported in the Daily Telegraph, said: “The reform of funding for older people's long-term care and for younger people with disabilities remains one of the most difficult and challenging policy issues confronting England.

“For over a decade, governments of all colours have struggled to agree an answer.

“But delay is no longer an option. As a number of recent reports have highlighted, the increased pressure on public finances is pushing an already over-burdened system to breaking point.

“And without further integration between health and social care services this picture could worsen. It is frail, older people who will suffer unless the issue is resolved.”

Signatory organisations included Bupa Care Services, the Local Government Association, Age UK and the Joseph Rowntree Foundation.

A DH spokesperson said: “The coalition government recognises the urgent need to reform the social care system - an aging population and rising expectations make the current system completely unsustainable.

“That is why the government acted quickly to establish the Commission on Funding of Care and Support, to make recommendations by July on how best to fund social care in future.

“We will bring together their findings with those of the Law Commission in a White Paper by the end of the year, to put in place a lasting and fair settlement for social care.”

The commission’s proposals included a new statute that would set out a single, clear duty to assess a person, with a low qualifying threshold for an assessment, but with a provision that a council could have discharged its duty if a person refused to accept an assessment, unless safeguarding issues arose.

The new statute would specify that an assessment must focus on the person’s care and support needs and the outcomes they wish to achieve.”

Age UK's charity director Michelle Mitchell said: “The current care system is in crisis. None of us want to live in a society where older people have to struggle on alone, isolated, scared and vulnerable for the last years of their lives.”

A copy of the Law Commission's proposals is available at the following link: http://www.justice.gov.uk/lawcommission/docs/lc326_Adult_Social_Care_Report_Summary.pdf

See also:

Making adult care law fit for the future
The Law Commission has published its final report on reforming adult social care law. Tim Spencer-Lane, one of the lawyers working on the project, outlines some of the key proposals.

Details

01.Jun.2011

The Care Quality Commission (CQC) is to launch random inspections of hospitals that cater for adults with learning disabilities, following a BBC Panorama programme last night that exposed serious abuses.

Panorama showed “appalling standards of care” the commission said, at Winterbourne View, a private hospital for people with learning disabilities near Bristol, owned by care firm Castlebeck.

The commission said it would launch a programme of risk-based and random unannounced inspections of a sample of the 150 hospitals providing care for people with learning disabilities.

Care services minister Paul Burstow said: “People deserve to receive safe and effective care. That's what we expect from every care provider.

“I have confirmed with CQC that they should undertake a series of unannounced inspections of services for people with learning disabilities.

“These unannounced inspections into care for people with learning disabilities will help inform future policy and focus attention on the 7/24 care obligation all providers have.”

The commission has admitted that it failed to act quickly enough on disclosures by whistleblowers last autumn. “We recognise that there were indications of problems at this hospital which should have led to us taking action sooner,” it said in a statement. “We apologise to those who have been let down by our failure to act more swiftly to address the appalling treatment that people at this hospital were subjected to.”

It has launched a review of its own actions relating to Winterbourne View, and another review of all Castlebeck’s facilities.

The CQC said was contacted by a former member of staff on 6 December, having already been advised of whistleblowing concerns by South Gloucestershire Council at the end of November.  It said South Gloucestershire set up a safeguarding meeting “to look at these issues which, though concerning, were not as detailed or specific as the information revealed by Panorama”.

The commission assumed the concerns were being examined but found the safeguarding meeting did not take place until February.

“We recognise that had we contacted the whistleblower ourselves directly after we received the email we would have been alerted to the seriousness of the situation and moved swiftly to inspect the hospital,” it said.
Lee Reed, Castlebeck’s chief executive officer, said: “I was shocked, disgusted and ashamed by what I saw on Panorama tonight.

“Having spent my entire career in health and social care, I intend to leave no stone unturned to ensure that this type of horrific event is never allowed to happen again.

“I have been chief executive since January, and my priority is the patients under our care. My job now is to ensure that this company moves forward from this appalling episode to having among the best, if not the very best, standards in the provision of care for some of the most vulnerable people in society”.

Meanwhile Avon and Somerset Police have said that four people have been arrested and released on police bail in connection with the allegations.

Details

20.May.2011

Birmingham City Council failed to ask the right questions in relation to disability equality duties and conducted a flawed consultation when it decided that it would no longer pay for any adult care needs that were not ‘critical’, a High Court judge has ruled.

Responding to the ruling, the local authority warned that there was “no new money” and it would have to review other parts of its ‘New Offer on Adult Care' as a result.

Birmingham’s reaction followed the publication of Mr Justice Walker’s ruling in full yesterday. The High Court judge had issued an interim judgment in April upholding the challenge by the families of four disabled adults, who claimed that Birmingham had failed to have ‘due regard’ to the disability equality duty pursuant to s. 49A of the Disability Discrimination Act 1995.

The council had planned to bring in the proposed changes from 1 April 2011. It will now have to make a fresh decision.

In W, R (on the application of) v Birmingham City Council [2011] EWHC 1147 (Admin), Mr Justice Walker ruled that the original decision was unlawful. He found that:

• He accepted that the council had to take a decision about the extent to which it would analyse in detail the likely impact on individuals of the options which it had identified. But that had to be seen in the context of the work Birmingham had done as part of its transformation programme. On any view, the dramatic concerns identified in a report of the council's assistant director for equalities and human resources in November 2010 on the possible impact of this and other cuts in services were a "highly significant feature of that context".  The claimants’ analysis of all that was done by the council in the period from November 2010 (when the plans were first unveiled) “undeniably” showed that the council did not in any real sense refine and focus what in November 2010 was necessarily a ‘high level and generalised’ description of the likely impact of moving to ‘critical only’. “It is difficult to see how, in the circumstances of the present case, ‘due regard’ could be paid to the matters identified in s. 49A without some attempt at assessment of the practical impact on those whose needs in a particular respect fell into the ‘substantial’ band but not into the ‘critical’ band.”
• The decision to consult ‘on broad options’ required consideration of a subsidiary question whether to go beyond generalities in assessing the likely impact of the proposed course upon individuals with ‘substantial’ needs. “At the very least it seems to me that in order to pay ‘due regard’ the council when deciding to consult ‘on broad options’ needed to consider whether its answer to the subsidiary question was consistent with its duty under s. 49A. The council submitted to the judge that this would have been impossible, but Mr Justice Walker pointed out that this was not a feature of the analysis put to members.
• He accepted that throughout the process Birmingham was giving consideration on how to address the needs of the disabled. “In that sense its decisions taken in relation to adult social care were decisions which were relevant to its performance of the s. 49A duty. That is not the same thing, however, as doing what s. 49A seeks to ensure: namely to consider the impact of a proposed decision and ask whether a decision with that potential impact would be consistent with the need to pay due regard to the principles of disability equality.”
• “Conspicuously absent” from the material before the Cabinet was any express statement that Cabinet must consider whether s. 49A required it to take the course of recommending to the full council that further spending resources be allocated to the Directorate, in particular because of the potential severity of the impact of the proposed move to ‘critical only’.
• The evidence as a whole made clear that there was a failure by the Council on 1 March 2011 and Cabinet on 14 March 2011 – meetings at which the budget was set and the eligibility policy was changed – to focus on the questions which were required to be asked. The relevant propositions in this respect were: ‘due regard’ requires analysis of the relevant material with the specific statutory considerations in mind; general awareness of the duty does not amount to the necessary due regard, being a ‘substantial rigorous and open-minded approach’; in a case where the decisions may affect large numbers of vulnerable people, many of whom fall within one or more of the protected groups, the due regard necessary is very high; in particular, decision-makers need rigorous and accurate advice and analysis from officers, not ‘Panglossian’ statements of what officers think members want to hear. “The failure to ask the right questions must, to my mind, lead to the conclusion that the decisions of 1 March and 14 March 2011 so far as concerns the New Offer for Adult Social Care were unlawful and cannot stand”.
• Even if members were able to form some sort of opinion as to the broad impact of the move to ‘critical only’, there was not in the material prepared for the meetings any assessment of the extent to which such mitigating factors as were mentioned would or would not reduce the potential severity of the proposed move to ‘critical only’. There were passages in the material about complaints but the reply did not meet those complaints. These defects were not remedied in another report either. In the Equality Impact Needs Assessments, neither the analysis nor the suggested action plans attempted to examine what the actual impact of the move to ‘critical only’ would be or how it would be affected by mitigating measures. “Had members appreciated the need to consider the right questions, they would not have had the wherewithal to answer it.”
• Though not a determinative feature, the council acknowledged that financial constraints played a part in the proposal to move to ‘critical only’. “That fact of itself involves no breach of s. 49A: authorities must seek value for money and must balance the interests of local taxpayers with those of services recipients.” However, the stance of the council in the proceedings involved an assertion that the position already reached in Birmingham meant that there was no more room for manoeuvre – it might have been that other authorities could cope for a while longer by making the sort of savings the council had already made, but the council could not. “It may be that this belief underlay council officers’ approach to the decisions to be taken on 1 and 14 March,” the judge said. “The material prepared for consideration on those dates did not consider the possibility that this belief might not be right.”
• There was a failure in the material prepared for consideration on 1 and 14 March to address the questions which arose when considering whether the impact on the disabled of the move to ‘critical only’ was so serious that an alternative which was not so draconian should be identified and funded to the extent necessary by savings elsewhere. The judge said this was not meant as a personal criticism of the council’s officers, who were working under pressure of time and resources. The council’s strategic director for adults and communities had said that for the officers, disability discrimination was not, discretely, a major feature, because virtually the whole of their work was directed towards combating its effects and seeking to advance those who suffer from it. “The combination of these factors, I believe, may well have led them to lose sight of what s. 49A required in the context of something as potentially devastating as a move to ‘critical only’,” the judge said
• His conclusion as to the failure to comply with s. 49A inevitably carried with it a conclusion that the consultation was inadequate. “Just as the decision-making process failed to address the right questions, the same is true of the consultation process.” There were other “troubling” features of the consultation process, including that it failed to make clear that a substantial part of the £33.2m saving was nothing to do with the move to ‘critical only’ and that the wording of the consultation left considerable scope for confusion. “As regards the latter, it seems to me that there are very substantial grounds for concern that consultees did not have the opportunity to assert that the true sum involved in retaining ‘substantial’ as the criterion for eligibility was a sum which could be properly found by making savings elsewhere.” Even if the council had asked itself the right questions the judge would have concluded that the consultation process had not complied with what the law requires.

Commenting on the full ruling, Peter Hay, strategic director of adults and communities at Birmingham, said the judgment had given the council greater clarity with regard to the Disability Discrimination Act.

He added that the local authority would now re-run the consultation and make decisions about adult social care “consistent with the need to analyse the potential impact on disabled people and our compliance with the equality principles set out in law”.

Hay confirmed that, in the meantime, people would continue to receive services to meet needs that have been assessed as substantial and critical. A report will be brought back to cabinet members to enable them to decide how the council will meet adult social care needs in the future.

But he warned that the original dilemma between reducing services in different areas remained. “There is no new money as a result of the judgment and hard choices about meeting growing needs with fewer resources will have to be made by local authorities.”

Birmingham’s strategic director continued: “As this judgment clearly acknowledges, councils can only control spending by setting eligibility criteria. We will now have to review our criteria and sadly other aspects of our new offer will have to be withdrawn so that we consider all resources that are available to the council. We are particularly saddened that our agreement to spend £10m in supporting people with substantial needs in community and voluntary services will cease whilst we review our options.”

Hay added that there were broader issues for all councils which would need to be considered as a result of the judgment. “On the DDA and impact assessment, we recognise the need both for further action and to build broader understanding of the impact of the choices we will make across the council, and particularly with people who use services and their carers,” he said.

Polly Sweeney, a solicitor at Irwin Mitchell, which acted for one of the claimants, hailed the ruling as a “hugely important victory not just for the four individuals involved in this case, but also for the thousands of other people affected across Birmingham”.

She added: “These people and their families rely heavily on this care and it would have represented a huge backward step if the funding was removed.

“This case has national significance too. Birmingham City Council is the UK’s largest local authority and it’s very likely that this outcome will set a precedent for other cases in other parts of the UK where councils may be targeting vulnerable groups through cost-cutting drives.”

Philip Hoult

Details

27.Apr.2011

Some public services are best suited to being delivered by organisations that are rooted and based within the communities served and so should be excluded from EU procurement rules, a group that represents local support and development organisations in England has claimed.

In its response – coordinated with Citizens Advice – to the EU consultation on modernising public procurement, NAVCA also argued that it should be made easier for statutory bodies to include social value clauses within procurement processes.

The group said these changes to the legislation would be of great help to local charities and voluntary organisations.

Its response identified a number of problems not for profit SMEs have with public bodies’ procurement processes, including:

• Processes that are disproportionate to the value of the contract and are expensive and time-consuming for not for profit SMEs
• Processes that require a significant investment of resource to complete with a low chance of return
• Processes that are based on an inflexible and highly risk-averse approach to procurement
• A lack of joined up working and differences in approaches, culture, objectives and priorities between the various officers involved in the whole commissioning process, from those who take part in the earlier stages of a commissioning process to the technical procurement officers
• Competing and conflicting policy objectives. “Whilst there has been an attempt to use procurement to achieve policy objectives in public services, in reality this has proved difficult to achieve.”

The submission said that despite previous attempts to address these issues, fundamental problems remain. These include that “public bodies do not have a good enough understanding of the market of not for profit SMEs, find the current regulatory framework overly complex, and do not use the flexibilities that are currently available to them due to high degrees of risk aversion”.

It warned that this meant many not for profit SMEs had lost or were at risk of losing the funding which enables them to continue operating.

“This produces a reduced market and therefore a less competitive situation, rather than a more competitive one,” NAVCA said. “The wider impacts are the losses of invaluable assets to local communities, including the economic, social and environmental contribution of not for profit SMEs.”

Neil Cleeveley, NAVCA's Director of Policy and Communications, said: "EU procurement rules have a massive impact on charities and voluntary organisations, which are increasingly involved in the delivery of public services. We need to have a say on this consultation as it is a vital issue for so many voluntary and community sector groups.

"Too many public bodies follow the full blown procurement procedures when they don't need to. The review and consultation shows that the EU is aware of the problems many local charities and small businesses have with commissioning."