This is the biggest insolvency event in the sector since Southern Cross collapsed in 2011.
A Four Seasons Health Care spokesperson said: “We have decided to call in administrators in respect of the holding companies that carry the group’s debt. They are entirely separate from the operational business and administration does not change the way our homes are run and they will continue to operate as normal.
“It does not, in any way, impact the day to day running of Four Seasons Healthcare, brighterkind and Huntercombe Group which have sufficient funding to continue to operate and deliver continuity of care.”
They said there should be no unscheduled impact on Four Seasons’ care homes and hospitals which are now for sale to all interested parties. They expect the sale of their operational business to be completed by the end of the year.
The two direct holding companies of FSHC’s business – Elli Finance (UK) and Elli Investments Limited, were the vehicles placed into administration. The operations and cash section of the business is held by Four Seasons Health Care Group which is not being placed into administration.
The company as a whole is owned by a private equity vehicle called Terra Firma Capital Partners which paid £825m for the business. They currently owe more than £500m in debt which has been the subject of protracted restructuring negotiations over the past two years.
A large portion of this is now held by H/2 Capital Partners, a US-based hedge fund who are seen as the likeliest owners of the business after purchasing hundreds of millions of pounds of bonds.
Approx 80% of FSHC’s operations is funded from the government but it also runs 46 privately funded care homes under the Brighterkind banner and an additional 23 specialist mental healthcare facilities for adults and children trading as Huntercombe.
The Care Quality Commission, the industry regulators, are monitoring the situation closely and have previously issued a notice about providers Allied Healthcare’s financial future.
Four Seasons have reiterated that it’s business as usual for residents but care home closures can still be worrying and chaotic for residents and their families.
Residents who have their bills paid in part or in full by their local council will be found a new place by them but residents who self-fund will have to find their own accommodation.
The news brings the current social care funding model back into the spotlight.
Government Green paper overdue
Simon Bottery, Senior Fellow at The King’s Fund, an independent charity working to improve health and care in England, said: “The problems facing Four Seasons show the extreme pressure that the social care system in England is under. Despite recent moves to shore up social care providers, years of chronic underfunding have left services at crisis point.
“As the Competition and Markets Authority has identified, many care homes that rely on publicly funded residents are now financially unstable.
“It’s not just care homes but the whole social care system which desperately needs reform. Successive administrations have promised to overhaul the system, yet two years after the government committed to publishing a social care Green Paper it is yet to see the light of day.”
The CMA launched an investigation into the care homes market in 2016 to examine whether the sector was working well for elderly people and their families. The findings published in 2017 showed wider concerns and ultimately led to the CMA taking legal action against one provider, securing more than £2m compensation from another and issuing guidance to all providers regarding the practice of charging upfront fees and continuing to charge fees even after residents have deceased.
Acting CMA Chief Executive Andrea Coscelli said: “Demand for care home places is expected to surge over the next two decades. To make sure the additional capacity this requires is available, it needs to be built in good time. At present, short term funding pressures and uncertainty means that the sector is not attracting investment. We will be focusing on finding ways to deal with these and other concerns.”
The reports findings also noted that the sector was not incentivised to undertake the investment necessary to meet future demand. Also that as the number of people aged 85 and over was projected to double by mid-2039, demand for care home services would increase substantially. The level of care required would also increase as residents would have spent longer in their own homes so would be more frail when they did move into a care home.
Financial Markets analyst Nils Pratley suggests that if the government can intervene for public sector providers such as Carillion and Interserve, it has equal responsibility for the social care sector.
He wonders: “There is reason to wonder if this entire sector needs an ownership overhaul. Financial engineers and junk bond opportunists should not be the natural owners and funders of large care homes companies.
“Given that the entire sector is underpinned by local authority funding, the government ought to be able to insist on greater financial strength.”