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Hundreds of millions of pounds of care home fees paid by residents and local authorities are never reaching frontline services, claims a report.
The Centre for Health and Public Interest has revealed £1.5bn a year “leaks out” through rental payments, interest on loans, and profits.
The figure is 10% of the total annual income of the UK care home industry.
The think tank says some of this money could be used for frontline care if the industry were restructured.
The centre’s study – which is part funded by Unison – analysed the accounts of 830 adult care home companies across the UK.
The average cost for a residential care home place in the UK is £32,084 not including nursing care.
The study found that among the 26 largest care home providers, £261m of the money they receive to provide care goes towards repaying debt.
Of this, £117m goes to related companies.
“Hundreds of millions of pounds a year leak out of the care home industry in the form of rental payments to offshore landlords, in the form of profit, in the form of management fees and in the form of rental payments again to offshore companies,” CHPI director David Rowlands told Newsnight.
“Lots of debt has been loaded onto large care home companies by the companies that brought them and that means in some cases that 16% of all the money that is given over to care for a resident each week disappears out of the system to pay off those high cost loans.”
More than 90% of all care home services are now provided by the private sector.
Nick Hood, a senior analyst at Opus restructuring, said: “The average interest rate paid by the major care home operators in 2017 was 11.8%, which means that they were paying over £235m a year in interest and that’s money that could be going to frontline care, but isn’t.”
He said some estimates suggest this financing model pushes up the cost for a care home resident “by anything between £100 and £200 a week”.
According to the Health Foundation think tank, £4.4bn per year will be needed by 2023 just to stabilise the market.
‘You expect longevity’
One of Britain’s largest care home groups, Four Seasons Health Care, went into administration earlier this year after struggling to repay debts.
One of their homes – Ross Wyld in north-east London – closed the year before after they were unable to renegotiate the renewal of their lease.
Alan Lazurus’s mother, Hettie, was one of the residents forced to relocate.
“She was 93, she was obviously getting on but she wasn’t actually senile or had dementia at that stage,” he said.
“You put someone into a nursing home – you certainly expect there would be a longevity for her.”
Four Seasons declined to comment on the closure of Ross Wyld.
The CHPI is calling for A Care Home Transparency Act, so that those paying for care in a care home know exactly where their money goes.
You can watch Newsnight on BBC Two at 22:30 on weekdays. Catch up on iPlayer, subscribe to the programme on YouTube and follow it on Twitter.
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