The Care Collapse: The imminent crisis in residential care and its impact on the NHS

Publication Details

ResPublica, in partnership with Four Seasons Health Care, HC-One, and GMB, has undertaken research assessing the state of the residential care industry, including an analysis of its future financial viability. This will inform a full report, to be published in the new year, setting out our broader vision of the future of care providers: acting as the ‘agents of integration’ in a more joined-up health and social care system.

We do not believe it is an understatement to say that Britain’s residential care sector is in crisis. Providers are being faced with an unsustainable combination of declining real terms funding, rising demand for their services, and increasing financial liabilities. Our research projects a funding gap of over £1 billion for older people’s residential care alone by 2020/21, which could result in the loss of around 37,000 beds. This is greater in scale than the collapse of Southern Cross in 2011, which affected 31,000 older people.

Given the perilous state of the industry, there is no private sector provider with the capacity to take in the residents who would be affected by the loss of other providers’ beds. Consequently we believe the worst outcome is the most likely: that the vast majority of care home residents will end up on general hospital wards. We project that if all these care home lost beds were to flow through to hospitals in this way, the annual cost to the NHS would total £3 billion.

The Five Year Forward View, published in October last year, set out the ambition to achieve greater integration between health and social care services. We believe residential care providers should be seen as fleet-footed organisations capable of marshalling the delivery of integration ‘on the ground’. This report however highlights our concern that the question of the operational viability of the residential care sector threatens the extent to which such integration can be achieved. Addressing the funding crisis in the residential care sector is therefore of paramount importance to ensure good population wellbeing both today and in the future.

In a detailed analysis authors outline a number of other significant factors in this crisis including:

  • An Ageing Population: Over 65s make up about 18% of the population. This is set to rise to 25% by 2050. Nearly 10% of the population is over 75 years old.
  • Acute Conditions: 70% of the total health and care spend, in England, is on long term conditions meaning 30% of the population accounts for 70% of the spend.
  • Spending Cuts: 90% of local authorities now only provide funding for older people with ‘substantial’ or ‘critical’ needs. The result of this has been that the number of over 65s getting public money for social care has fallen by 27%.

Chair of the Health Select Committee, Dr Sarah Wollaston MP, called The Care Collapse “Essential reading for the Treasury”

Barbara Keeley MP, Shadow Minister for Care, cited the report in Oral Questions on Health

Director of ResPublica, Phillip Blond, said: “When Southern Cross failed the private sector stepped in and cared for those left homeless. Now, however, with the sector losing money for every funded resident there is no provider of last resort. We fear the worst case scenario is the most likely, that these residents will flood our local general hospitals costing £3 billion per year by 2020.”

“The National Living Wage must be brought in. It is essential working people are paid a proper wage. At the same time it will damage the residential care sector which is already under extreme pressure and it could collapse as a result.”

Report author Emily Crawford said: “The National Living Wage is a great step forward. It is estimated it could help more than 6 million low paid workers. But for the care sector, which is heavily reliant on its labour force, it could be catastrophic.” “By 2020/21 we predict that a third of the funding gap will be because of the rise in the cost of paying staff the National Living Wage.”

Backing the report, Justin Bowden, National Officer for the GMB union, said: “It is one minute to midnight for the care sector. Just as GMB warnings that Southern Cross would collapse were ignored again and again by government, history looks set to repeat itself unless George Osborne acts now. This time however we are not just talking about the largest care home provider collapsing, but the entire publicly funded care home and domiciliary care sectors.

“This is not some unexpected, overnight phenomenon catching everyone unawares, this has been a slow motion collapse and somebody’s mum or dad or granny – our elderly and vulnerable – will be the biggest victims. “Local authorities are unable to act as ‘lenders of last resort’ and step in, so the NHS will be forced to try and fill the giant hole created by 37,000 less beds in the care sector for our elderly and vulnerable – equal to 28% (or 1 in 4) of all available NHS beds. The effects will be immediate and crippling.”

Dr Chai Patel, Executive Chairman HC One the UK’s third largest care provider, said: “Our care staff do an incredible job dayin day-out and deserve the Living Wage, but it must be properly funded. This report shows that unless the Chancellor takes urgent action to address this looming crisis, tens of thousands of older people will lose their homes and be forced into the NHS. “Southern Cross was a failing company, what we are facing now is a failing system. At a time when the Baby Boom generation is beginning to retire, and look ahead to their long term care needs, there are huge fears that the homes to care for them simply won’t exist.

“We must protect the homes of vulnerable older people, and our NHS, by ensuring they are properly funded for the future.”

  • Emily Crawford

    Emily joined ResPublica in June 2015, and acts as Principal Research Consultant, with a focus on health and public services. She is a specialist in the transformation of public services, including the health, social care and welfare to work sectors....

    Emily Crawford
  • Claire Read

    Claire Read is a professional writer and editor who has specialised in healthcare throughout her 15 year career. She is a regular contributor to Health Service Journal and (formerly E-Health Insider), with her work also appearing in publications including...

    Claire Read