Care Sector Alert

“ONE-THIRD of care homes are substandard while the potential for neglect and abuse poses “huge worries”, the head of the sector regulator has admitted.” – a bold statement, appearing in The Sunday Times on 13 October 2013 reporting comments from David Prior, chairman of the Care Quality Commission (CQC).

Lenders and stakeholder with financial exposure to the residential care sector should take note; fortunes can be lost, and with a new, tougher “surveillance” based inspection regime being proposed, sub-standard providers will find it increasingly difficult to paper over the cracks in time for their next CQC inspection.    

So what are the warning signs a lender should look out for when reviewing care sector clients, and what should a lender do to mitigate risk when a problem has been identified?

Aside from adverse variances in key financial metrics (which should be reviewed and analysed regularly) the CQC website publishes details of enforcement notices, embargos or special conditions imposed upon providers. Other desktop resources, such winding up petitions or CCJ alerts can also be useful. However, probably one of the best ways to identify a financially distressed care homes is to conduct a site visit.

Good homes provide a warm, inviting, clean and well maintained environment inhabited by happy service users and staff. If you visit a home that fails on those counts, you are probably dealing with a business where constraints on funding are reflected in a lack of investment, sub-standard care, poor catering, high staff turnover and excessive use of temporary staff. 

A lender’s outcome when faced with a care home in distress will be heavily influenced by the point at which they intervene. The golden rule is, the sooner the better and some key steps to take include:

  • Communication with the borrower and with CQC
  • appointing a care home management company to undertake an operational review;
  • obtaining an up-to-date valuation;
  • instructing Moorfields to undertaken a short form Independent Solvency or Business Review.


If you have concerns regarding your care home clients, our team of specialists would be pleased to hear from you.

If you would like to have a free no obligation chat with one of our advisors please call us on 0207 186 1143.


About Moorfields

Moorfields is one of the UK's leading independent firms of restructuring and insolvency specialists. Our highly skilled teams include restructuring professionals and licensed insolvency practitioners who provide leadership, experience and high quality advice to companies and their stakeholders in financially distressed situations

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