Alvarez & Marsal administrates 322-strong care home group

13 May 2019 Consultancy.uk

Four Seasons Health Care, one of Britain's largest care home groups, has appointed professional services firm Alvarez & Marsal to oversee its administration. According to a spokesperson from the company, the news will not impact the care of some 17,000 residents or the jobs of around 20,000 staff. However, staff sentiment towards the firm has for some time suggested it is more invested in profitability than providing care.

The start of May 2019 has seen Four Seasons Health Care, a 322-strong chain of adult social care homes, collapse after two of the holding companies behind the firm appointed administrators from Alvarez & Marsal. The news marks the biggest insolvency in the care homes sector since Southern Cross collapsed in 2011, and comes after months of failed efforts to manage its £525 million debt.

A majority of Four Seasons' operations are funded by the state, with about a fifth of them funded privately. In recent years, Four Seasons was stung by a cut in local authority fees and rising costs, and as a result, Terra Firma Capital Partners, the private equity firm which bought the group in 2012 for £825 million, has seen a £450 million writedown on its investment. Due to the company’s financial situation, it ceded control of the group to US hedge fund H/2 Capital Partners, which holds a large amount of Terra Firma’s debt.

Alvarez & Marsal for administrates 322-strong care home group

As the private interests which hoped to profit from government outsourcing scramble to remove themselves from the equation, then, their holding companies for Four Seasons – Elli Finance (UK) and Elli Investments – have been placed into administration, while the operating companies that run Four Season homes are not. Because of this, Four Seasons said the appointment of administrators would not affect care arrangements or lead to the closure of its homes – which house roughly 17,000 residents, assist 22,000 patients, and employ some 20,000 staff. Alvarez & Marsal will now seek a new owner, while normal service continues.

Dr Claire Royston, Group Medical Director of Four Seasons, commented, "Today's news does not change the way we operate or how our homes are run or prompt any change for residents, families, employees and indeed suppliers… Our priority remains to deliver consistently good care. It marks the latest stage in the group's restructuring process and allows us to move ahead with an orderly, independent sales process."

While this will calm some fears, however, Four Seasons has regularly been panned by its own staff for upholding a poor set of standards and priorities. A simple examination of reviews posted for the group by staff on employment site Glassdoor.uk yields multiple allegations that the homes’ owners were more concerned with profitability than caring for residents. This includes a former Home Manager from Bracknell, who claimed “senior managers lied to regulators”, and that the priority of the company was to “focus on money rather than care, focus on investors and not what was actually happening on the ground.”

Elsewhere, one exasperated team member said, "[Four Seasons] care more about making money to line their pockets than doing what's best for their homes, residents and staff," a feature which cropped up in another 15 reviews on the site. Meanwhile, an anonymous employee in Leeds went even further, stating that the patient-to-staff ratio at their facility was “shocking”, and that while officially it was “30 residents to two care staff and two nurses”, as nurses were regularly issuing medication, in practice is was closer to “two carers to 30 patients.”

Social care crisis

Four Seasons Health Care is the country's second largest care home operator and a major player in the social care sector – and the move had raised fears for tens of thousands of elderly residents, with the National Secretary of the GMB Union, Rehana Azam urging the government to step in and reassure Four Seasons staff and residents. She added the case shows “our care system is in crisis, it is crumbling beneath us because the funding isn't there."

Close to 300,000 people over the age of 65 currently live in adult social care homes, and as the UK’s population is set to age progressively in coming years, this number is likely to steadily grow. Despite the sector forming such an increasingly important facet of social care in Britain, however, adult social care homes are still largely run for profit. As a result, the UK finds itself in the grips of an adult social care crisis, with care homes falling into administration at an alarming rate.

In 2018, 101 care homes went bust across the country. According to a study from auditing and advisory firm BDO, a reduction of spending from the central government on the sector was partially to blame, while companies running care homes bemoaned a rise in the National Minimum Wage last April. Despite the almost uniform complaints of rising wages from the industry’s captains, however, a recent Guardian investigation found that the owners of some of the country’s worst care homes made a total profit of £113 million, while a number of the vulnerable people they were supposed to look after were “being neglected”.

This paints a picture of a vital care sector which is enduring a perfect storm. It suggests that adult social care is ravaged by demographic changes and the corporate greed of private entities, either creaming off a profit from providing the poorest possible service, or exiting the sector abruptly when unable to do so. At the same time, it implies that the incumbent government does not possess the political will to effect meaningful change in the sector.

Age UK’s Charity Director Caroline Abrahams recently lamented, “Sadly… England has been left behind in the race to update the funding of care for older people, compared to some other similar nations… The reality is that an entire generation of older people in England has lost out, given that Germany embarked on care funding reforms in 1995 and Japan in 2000.”