Trouble at Southern Cross

Both The Times and The Guardian reported that Southern Cross Healthcare Group have been launched into some kind of financial crisis following the failure to repay a loan of some £46 million.

Times are getting harder and a lot of firms are failing – but Southern Cross are the largest provider and operator of Residential and Nursing Care  Homes in the UK.

I actually have to say I have had no dealings at all with Southern Cross in the years I’ve been working. So can say neither good nor bad things about them from personal experience.

But just putting a few pieces of very rudimentary information together

The Guardian quotes the company spokesman as saying that the reasons for their financial difficulties are

.. tighter local authority spending for a period of disappointing occupancy rates. High fixed costs and disappointing occupancy rates meant Active Care in particular was performing “significantly below forecasts”. The company also said occupancy levels had been hit by several unexpected deaths of residents in its homes for the elderly.

I was going to say that I’m no cynic, but that’s probably not true – I was reminded of a story I wrote about at the beginning of May where CSCI (Commission for Social Care Inspection) criticised a Southern Cross Care Home for having poor basic dementia training among other things.

You’d think though, that a large company like this would have contingencies for ‘several unexpected deaths of residents’

I know the previous time I wrote about Southern Cross it was in the context of a freeze on placements to a particular home following a poor CSCI report and the death of one of the residents. Disappointing occupancy rates? Quite possibly.

It’s strange that The Financial Times reported back in May that

‘The group has increased the cost of staying in its homes over the past six months, agreeing fee rises of 5 per cent on average with 85 per cent of its local authority customers.’

which is, more or less, in line with inflation and certainly higher than my proposed salary increase this year (!) so, less than six weeks later to blame failings on

‘tighter local authority spending’

seems more than a little churlish.

It seems one of the business practices of Southern Cross was based around building property to lease it back and making its profit partly on property portfolios and management.

The Times quotes the Chief Executive saying

“The care homes sector is cyclical and the cycle has turned down. The margins of two or three years ago will likely be squeezed and fall at least 5 per cent in the next two years.”

I am no accountant but surely cyclical also means, to some extent predicable.. basic kind of saving-for-a-rainy-day type stuff.

Anyway, I am the last person who should really be commenting on Southern Cross’ business model. My idea of wise investment is an instant access savings account.

But I can’t help but wonder what the implications will be for people who are in the residential homes that are failing.

A large proportion of care services,  both residential and domiciliary, has been out-sourced to private companies who have many different interests at heart not least, shareholders.

If they see a death as ‘a disappointing occupancy level’  and lurch towards crisis when there is a cyclical downturn it doesn’t really augur well for planning long term care.

Anyway, at least two of the execs who were in charge of running the company managed to sell their own stock when they were at a high of 550p in December before leaving the company..

The stock fell to 130p yesterday.

And other factors that don’t endear the company, which again, I have had no personal contact include one which was highlighted by Mental Nurse back in April indicating that they were involved in the landmark decision in the High Court which ruled that Care homes can evict residents by being the owners of the Care Home that was trying to do the evicting..

This is also the same Southern Cross that opposed the payment of £7.02 per hour for Senior Care Workers – many of whom were from the Philippines and were refused visas to stay on the basis of the wages that they were receiving – thus being deported.

It doesn’t get much better for Southern Cross (isn’t Google a wonderful thing) as, The Times says again, in another article that

‘In November, The Sunday Times conducted an undercover investigation, with a reporter posing as a carer, and documented a series of alleged abuses and said the home was under-resourced and understaffed.’

At, yes, a Southern Cross Home.

Between deaths, attempted evictions, seemingly poor payment and treatment of staff and undercover reporting that proves, if more evidence were needed, that there is a poor quality delivery of care due to understaffing and under-resourcing.. it is a little clearer why there might have been underoccupancy.

I’m sure in such a large company there are some good quality care homes among there somewhere but reputations do stick when placements are being made – I certainly know there are some companies that I am less likely to make placements with than others, on the basis of how some of the different homes that they own are run – rightly or wrongly you can’t take chances when you are choosing the place that someone is likely to be living for the rest of their life.

But at least some of the executives got out at the top..

I just wonder how this leaves and will leave those who are receiving the services at the moment.

5 thoughts on “Trouble at Southern Cross

  1. I really struggle to get my head around how something as important as care [of anybody who needs it] can be handed over to a private company that’s then allowed to run everything based on bottom line and windfall payments. Also, how the hell can you allow somebody to cash in shares for windfall payments, then p**s off ‘weeks later’ leaving the company totally screwed? Wow, we’ve really become a country that has it’s morals screwed up big time haven’t we?!
    Basically they rushed out to scoop up property with eyes full of £££ signs and got their fingers burnt. The green eyed monster strikes and it’s those who most need stability who will pay the price in the end (as usual).
    Great post BTW!

  2. Yeah, pretty much my angle – and thanks! I was told off not long ago for being against privatisation of care services but it makes me sorry – there are some good services out there but the sad thing about this case is that it didn’t really surprise me..

  3. Hey, that’s how the entire medical system in the US is run. It’s all private, with the exception of the federal/state program for the extreme poor (Medicaid) and the federal program for the over-65 set (Medicare.) That’s why over 30 million Americans go without: they simply can’t afford the premiums for basic health care.

    So I’m sure it comes as no surprise that there are private companies that provide mental health services. And yes, a huge chunk of nursing homes and skilled nursing facilities are run by private, for profit companies. I’ve heard from several people that the actual choices out there are nothing short of abysmal.

    It’s up to the almighty Market Forces on this side of the pond. They will sort it all out in a completely fair manner, you know.

  4. We are heading that way too, step by step.. I have to admit I find something a little unsettling about profit in health and social care but I know that’s an old-fashioned view..

  5. Pingback: Active Care? Another tale of Southern Cross « Fighting Monsters

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