Care Act Factsheet 10. Market Oversight and provider failure

“Ensuring continuity of care should care businesses fail and there be a risk of services stopping.”

This factsheet describes how the Act introduced a regime to oversee the financial stability of the most hard-to-replace care providers, and to ensure people’s care is not interrupted if any of these providers financially fail and services stop. It also describes the responsibilities of a local authority if a local care provider fails.

What happens when a care provider fails?

There is a diverse market for care services in England. Public, private and voluntary sector organisations can all provide these services.

As is the case in any market, providers may leave from time to time, sometimes because they have failed financially. Their care services may well be sold to or taken over by another provider. This process is usually managed in an orderly way that does not cause disruption for the people receiving care. However, there can on occasion be disorderly failures, which happen quickly or with little warning and which can threaten the continuity of services for the people who need them and cause great anxiety.

What was the problem with the old system?

Prior to the Care Act, the laws dated from 1948, when care was provided and managed very differently. There are now many large care providers that serve much of England. A diverse number of public, private and voluntary sector organisations have grown to provide good quality care to the population.

When a large, national or specialist care provider fails, it may impact on numerous local authorities. This might create problems for people receiving care and support from that provider if the situation is not well-managed.

When a provider that provides care to many people fails, a local authority might find it difficult to make any necessary alternative care arrangements.

Previously, there was no formal system in place for checking how well a care provider was managing its own finances. This meant there was no ‘early warning’ that this could become an issue, nor anything in place to help resolve the problems it might cause.

The failure in 2011 of Southern Cross, a major care provider, highlighted these issues. It is unacceptable for people to be left without the care services they need. The interruption of care services, or the worry that this might happen, can affect people’s wellbeing and cause stress to them, their families, friends and carers.

What does the Act do?

a) Managing provider failure locally

The Act gives local authorities clear legal responsibilities where a care provider fails. It makes it clear that local authorities have a temporary duty to ensure that the needs of people continue to be met should their care provider become unable to continue to provide care because of business failure, no matter what type of care they are receiving. Local authorities have responsibilities to all people receiving care, regardless of whether they or the local authority pay for that care, or whether it is funded in any other way.

Should a care provider fail financially and services cease, the local authority must take steps to ensure that all people receiving care do not experience a gap in the services they need. For some people, that may only require the provision of information and advice on alternative services available locally, to help them choose a new provider.

For others, it may require active arrangement of care with a different provider for a period of time, to ensure continuity. The steps will depend on the circumstances of the provider failure and the nature of support the person wants from the authority.

This duty applies temporarily, until the local authority is satisfied that the each person’s needs will be met by a new provider or in a different way. The local authority may make a charge for arranging care and support in these situations.

b) Market oversight

The Act established a new role for the Care Quality Commission (CQC) ,the independent regulator for health and care services in England. The CQC now has a responsibility for assessing the financial sustainability of certain ‘hard-to-replace’ care providers.

These are care providers which, because of their size, concentration or specialism, would be difficult to replace were they to fail and so where the risks posed by failure would be highest for individual local authorities.

To decide which providers CQC should oversee, regulations include criteria which set out which providers should be included in the regime. These criteria determine whether a provider would be ‘hard to replace’; they do not reflect whether or not a provider is likely to fail.

There are different criteria for care home operators and for other providers of care and support. Should it be needed, regulations can also specify particular providers to be included in the regime, irrespective of whether they would meet the entry criteria.

To assess financial sustainability, the Act gives the CQC the power to request information from any provider in the regime. Regulations also allow CQC to request information from other companies in the same group, where this is relevant to assessing the finances of the provider itself.

The Act allows CQC to request that a provider which it judges to be in financial difficulty should develop a sustainability plan and, where needed, arrange an independent business review.

This is intended to help the care provider to remain financially sustainable, so that the care it provides to people is not disrupted.

CQC’s role is to oversee the provider’s plans to remedy the situation and, if failure is judged to be likely, to inform the local authorities affected, to help them to deliver their duties to ensure continuing care to individuals.

The CQC’s aim is not to stop providers failing at all costs or to bail out providers in difficulty or interfere with any commercial discussions surrounding the likely failure.

Further details about how market oversight operates can be found on the Care Quality Commission’s website.”