Private Equity in Social Care

Today, in their ‘Society’ supplement, the Guardian include a special report on ‘private equity in social care’ and particularly in residential care services in the wake of the collapse of Southern Cross.

The articles make interesting reading and have to be considered as parts of a whole.

The introductory article explains the premise and what I would express as the ‘problem’

Before it was floated in 2006, Southern Cross was owned by US private equity group Blackstone, and over the last decade enjoyed a period of heady growth. But its failure to meet a huge rent bill from freeholds that were offloaded to raise cash during the boom years (known as sale and leaseback), together with declining fees from local authorities – which paid for most of the 750 care homes’ 31,000 residents – pushed it under.

In total, more than 200,000 vulnerable people are being cared for in residential accommodation or in their own homes by scores of companies that have been bought out and run by a dozen or so leading private equity companies. This means that a significant proportion of all care homes in the UK are now owned by private equity firms, which are earning hundreds of millions of pounds a year from local councils and the NHS.

Southern Cross made its money on the rising prices of land and property.The market is not about human beings so much as being about the buildings in which those people live and while the fees are rising, there doesn’t seem any evidence from  my own experience (and I go to a lot of care homes) that there has been a rise in quality of care.

Another article in the series in the Guardian seems to challenge that statement.

A journalist takes a look at a Care UK establishment and speaks to a resident who profusely praises the care that he is receiving and honestly I don’t doubt that.  Mitchell (name changed) says

“I have come from being unwell to being really well through the services and the staff here. It’s my belief that once you get the medications right and when you follow the good advice of the staff you are virtually well,” says Mitchell.

Asked what he likes most about his living arrangements, he says: “Mainly the freedom that you get here. I didn’t have much of it in hospital. It helps me to be independent.”

Which sounds fantastic but I remain cynical and here’s why. The establishment in which Mitchell lives is a specialist unit which houses 20 residents between 32 and 72 years old.

I would have liked the Guardian to do the equivalent interview in an older adults dementia care home where there are 50+ residents and, to put it bluntly, the ‘turnover’ is higher, staff are less skilled and paid more poorly and the attempts to provide individualised care, even to the extent of people being about to go out for a walk now and ago, is sparse to non-existant to say the least.

The Guardian do a good job in trying to paint a hopeful picture of the sector, explaining how well Mitchell gets on but it’s worth remembering that Mitchell is being funded at a much higher level than the average older adult in residential care.

The home’s manager is quoted as saying

..  private equitycan bring much-needed investment to the healthcare sector. “We all started out in the public sector,” he says. “When we make the jump to the private sector we have the freedom and the innovation to do the things we want to do which can be a bit stifled within state services. We can respond to the customers’ needs more quickly.”

Investment? Maybe but that investment demands quantifiable returns and the returns are much higher in specialist services like the one that manager runs. I have seen poorer quality with my own eyes and seen staff transferred to appalling conditions to boost the profits of these private companies rather than being free to ‘innovate’.

Interesting that the other articles covered in the Guardian which promote the expertise of these companies include one about City and County Healthcare who sound fantastic– do they provide care for older adults with dementia?


Choice Care Group, an umbrella organisation providing personalised care for more than 300 adults with learning disabilities, mental illness and autism in 43 residential care homes. Supported living services are also provided.

There are other articles which focus on the Priory Group – highlighting work with adolescents with mental health needs and Four Seasons which took over many Southern Cross homes but insist that they ‘do things differently’.

I’d have liked to see a little more critical analysis of what has been going wrong over the last ten years in terms of the lives of older people who rely on these services running well – maybe in conjunction with an examination of CQC closure and suspension notices – but perhaps that’s a project I’ll pick up myself.

I don’t believe the quality of care has increased across the board, you see. For some groups where there are higher funding agreements, more demands can be made, but as long as our society think that is it acceptable to institutionalise older adults – particularly those with dementia – in a way that would no longer occur with the equivalent services with younger adults – we have a very long way to go.

I’m probably not as opposed to private equity in residential care as I seem but I have seen first hand what is termed to be ‘investment’ and it has been a shadow of the proportion of money pumped into stockholder dividends compared to the amount it has cost the public purse. The more lucrative contracts have been hived off and institutionalisation is rampart while regulation has drifted off into the sunset.

As an opinion piece, The Guardian include an article written by Ian Mulheirn of the Social Market Foundation. He argues against the perceived ‘public good/private bad’ dichotomy and explains that

the failure of Southern Cross wasn’t a failure of private capital per se. There are plenty of private providers who don’t run such a risky model. One of the largest operators, Bupa, for example, owns its care homes. Any care home operator that leases its premises, whether public, private or third sector, would struggle in the current conditions.

He also argues that the investment in care services has improved as a result of the involvement of these private equity firms. Without doubt, my personal experience would agree with his statement about increased investments in property but increased quality of care? I think there is a general move towards different models of care which may have happened (I would argue) regardless. We are developing models of ‘personalisation’ and increasingly those in residential care are being included but rather than just citing business models such as those of BUPA, I think we have to have an understanding of the quality and type of care that is being delivered ‘on the ground’ and without inspectors inspecting, particularly as the CQC has said that business models do not form a part of their inspection regimes, we cannot know about the quality and type of delivery of care to individual residents that is happening.

I think it’s a shame that the Guardian did not balance up the views of Mulheirn with someone, well, like me, someone who has seen poor care delivery again and again and again by many different providers who have grown rich on the back of the provision of poor and cheaper services and that the dichotomy is so clearly drawn.

Whether private or public, less sturdy regulation, poorer terms and conditions and increasing institutionalisation will not deliver the care services older adults and in fact, anyone who needs the services that they provide deserve.

Quality has to be the indictor and driver rather than pure profit – that can be delivered by private or public but I found the coverage disappointingly one-sided by the Guardian – as I expected more. It is a shame that the voice of social care is left with policy bods and managers and away from social workers who should be at the heart of this debate.

5 thoughts on “Private Equity in Social Care

  1. Interesting that no comments were allowed on the Care Uk article. Was this a condition of giving the interview, I wonder?. I agree totally that, as is so often the case, journalists entering this world have little idea of the nuances and clearly do not realise the difference between a home for younger people attracting high fees where, of course, there are the resources to give highly personalised care and support, and the grossly underfunded care homes for older people at the end of the market that relies on local authority funding.

    The man interviewed, had he spent a long time in hospital would have course found anywhere that gave him privacy and decent food Shangri La in comparison.

    I would love to knwow the fee levels paid by Local authorities for a place at this home. I’d be prepared to bet that they are around twice the level of the equivalent older person’s basic residential home. I do not doubt it provides a good service but then the staff are not engaged in a ceaseless round of incontinence pad changing, 2 hourly turns, and trying to persuade Mrs Jones to let them give her a bath before her daughter comes and throws a fit because Mum hasnt been kept clean.

    Disappointing journalism from the Guardian. Havent they got anyone with real experience of the social care sector?

    Nevertheless my impression differ slightly re the improvement in standards generally over the last decade. CQC and it’s antecedents deserve some credit for hauling up standards on things like decent food, cleanliness, activities and personal freedom. Winterbourne was a tragedy for it’s victims but it seems to have provoked a return to more old fashioned boots on the ground inspection by CQC instead of sitting in the office gathering data and relying on self assessment.

  2. You know, the lack of commenting facility on that Care UK article is exactly what prompted me to write this post..
    I accept what you say about me being too harsh regarding general improvements over the last ten years but I had in mind, some very specific local examples which don’t necessarily reflect the national picture, I think that’s very fair criticism of what I wrote.

  3. My Company (Impact Change Solutions) has been working with Directors of Social Care to examine the viablity of social care sector following the collpapse of Southern Cross. The level of debt that private equity has brought to the sector is phenomenal, with some companies leveraged above 90% of asset values that are falling. At the same time billions has been placed in the hands of a small number of individuals as a result of sales, flotations and sale/leaseback deals, money that will never be returned to the social care system. Regulation in the energy and communications markets ensure that these type of situations do not occur, and the government is at the moment calling for the FA to monitor the level of debt in football clubs! Even John Molton is of the opinion that there is a case for economic regulation in the care market – it needs to become a government priority, or the whole barrel of bad apples will be revealed very soon.

  4. Private units I deal with can be horrible, while staff on the bottom can be great as you move up it is obvious that it is more about profit than care.

    There can also be a rebound, which is the same side of the coin in that it becomes all about cutting coats regardless of impact on care.

    It’s all about the Benjamins…..

  5. It seems incredible that there is no economic regulation in this sector really and the CQC have firmly stated it ‘isn’t their problem’. And I agree FCO, I’ve seen some fantastic care given but mostly at the lower levels from the poorly paid staff on whose goodwill the management often rely to work beyond their remit..

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s