UK Care Homes: Delayed reforms create heightened risk of insolvencies

The UK care home sector is undergoing a challenging modernisation to meet rising demand for an ageing population, increase specialist care facilities and improve service delivery amid declining public funding and strict regulatory scrutiny.

As the sector edges closer to a crisis point, experts argue immediate action is required to stabilise it and address long-term structural challenges, as outlined in the previous article. With the UK population projected to reach 70 million by mid-2026, and the number of people aged 85 and over projected to jump from 1.6 million to 2.6 million over the next 15 years, according to the Office for National Statistics (ONS), the strain on care facilities is only set to increase. 

The consensus view is that the government must urgently establish a sustainable funding plan to prevent the financial collapse of care homes and avoidable hospital stays for elderly patients. Successive governments have resisted comprehensive financial solutions – such as increased taxes or a social care insurance scheme for those over 40 – due to the fear of a public backlash.

In the second of our three-part series we aim to explore the government’s role in addressing the broadening crisis in adult social care, which critics warn is on the brink of collapse. 

Adult social care commission risks delaying reforms

On 3 January, the government announced an independent commission, led by Baroness Louise Casey, aimed at transforming adult social care. The two-phase commission intends to inform government policy towards delivering a National Care Service. However, its first recommendations are not expected until 2026, with final proposals delayed until 2028. Critics argue this timeline is inadequate with the commission further delaying, rather than delivering reforms.

The problems plaguing the adult care system, along with potential solutions, are well known, even to ministers. However, as Professor Martin Green, Chief Executive of Care England, warns, the newly-established commission “risks becoming yet another report that gathers dust while the sector crumbles.” He stressed the urgency, saying: “Waiting until 2028 is not an option.” 

At the heart of the problem, this delay poses a risk of further preventable insolvencies in the meantime. For example, many local authorities lack the financial resources to cover sustainable care fees and are consequently forced to make care homes increasingly reliant on self-funders to stay afloat. Delayed reforms risk stretching this dependency to breaking point, pushing more care providers to consider returning contracts to local authorities or the NHS. In a highly fragmented sector, dominated by swathes of small independent operators dependent on local authority funding, the risks of delaying reform implementation into the next parliament are all too clear.

The Institute for Government (IfG) described the decision to appoint Casey, although highly qualified, as a “cop-out”. “Fixing social care will be expensive and the decision about who should pay will, in the short-term, be unpopular.” The IfG suggests Casey should approach the reform of the adult care system with a revised two-phase plan: 

Phase 1: Vision, Cost, and Funding Options

• Articulate a comprehensive vision of a reformed care system, addressing current system flaws and future needs. Stakeholders insist on higher wages, better career development opportunities, and more robust recruitment to plug skilled labour shortages. Incentives to support modernisation and technological innovation in care delivery are also considered vital to meet rising regulatory and user expectations.
• Provide a detailed financial cost to implement the vision, considering both public and private sector implications. 
• Explore various funding options, including raising taxes, reallocating current budgets, or innovating with new funding models (e.g. social impact bonds or public–private partnerships). Stakeholders have called for sustainable funding models that address the reliance on cross-subsidisation and ensure long-term financial viability for operators. Each option should be evaluated for feasibility and impact.

Phase 2: Engagement and Finalisation

• Undertake public consultations via online platforms to gather public opinion, gain broad support, and understand public priorities regarding adult care. Integrate service users, care providers, and advocacy groups to ensure priorities are practical and meet real needs.
• Through these engagements, form a coalition of support that balances competing priorities across different adult care interest groups.
• Finalise recommendations on how to fund the new care system, balancing fiscal responsibility with the need for quality care, aiming to reduce political friction by having a widely supported proposal.

The urgency to modernise small independent care operators (homes and domicilliary) is now. BTG Advisory is well placed to support independent healthcare providers navigate these dynamics and modernise their business. Our team can help optimise performance and streamline processes while maintaining a patient-centric care delivery focus. We offer a diagnostic assessment that identifies viable cost reductions to address inefficiencies, achieve cash savings, and optimise the use of working capital to improve overall operational performance and cash flow generation. We also help navigate regulatory compliance and the evolving legal environment and establish sector-specific risk management frameworks to mitigate operational and financial risks, including implementing robust cybersecurity measures.