How should we manage care homes?

Winterbourne View care home (Tim Ireland/PA wire)

The nation has been shocked by the appalling stories of bullying and abuse at the Winterbourne View care home near Bristol.  That sort of staff behaviour might have been expected in a Soviet mental asylum in the 1930s, but surely not in England in the 21st Century.

But we need a response that is practical and effective, not one driven merely by sentiment.  Perhaps predictably, a commentator showed up on the BBC saying that care for the elderly should be based purely on compassion, and that business had no place in it.  Of course he did not define “compassion”.  Surely he didn’t mean that we should rely on nothing but private charity and voluntary work?

But his comment is naïve.  Care for the elderly requires premises, and staff, and catering, and laundry, and a host of other services.  These services are provided by people who, however compassionate, also (and very reasonably) expect to be paid.  So we need money, and we need a business plan.

The choice is not between hard-headed, profit-driven businesses on the one hand, and generous compassionate volunteers on the other.  It is between a budget and a business plan managed by the private sector, or one managed by the public sector.  And there is no prima facie reason to suppose that the public sector is better able to deliver than the private.

Of course the stories from Winterbourne View were quite dreadful.  Yet if we read the recent press coverage of care in the NHS, we see callous neglect that fails to meet requirements of old people for dignity, for health, for basic food and care and hygiene, or for human contact and consideration.  Some families have claimed that neglect in NHS facilities has led directly to premature deaths.  Admittedly we have not seen quite the direct bullying and abuse of the Winterbourne reports, but we have seen enough to know that the NHS has no monopoly on compassion, and that the public sector provides no guarantee of acceptable treatment.

We constantly hear from the left that “health matters so much that the profit motive has no place in medicine”.  And I am inclined to ask “Why not?”.  You could say, rightly, that food is critical to human life, but no one argues that the profit motive has no place in supermarkets.

The left seeks to condemn profit as all about greed and institutionalised theft.  So let’s recall what profit is really about.  First of all, it is a measure that enables us to see whether resources in an enterprise are being managed effectively, which is surely as important in healthcare as anywhere else.  Secondly, it provides the motive to invest in new and better facilities, and indeed frequently provides the funds to invest as well.  In principle, then, profits are a good thing.

That said, I turn to the story of Southern Cross, the care home operator with 700+ homes which, according to the Daily Mail, has been left high and dry by the private equity firm Blackstone.  I should stress that Blackstone has angrily rebutted the Daily Mail version, and I have no comment as to who has the story correct.  But the Mail’s version is that Blackstone took control of Southern Cross, and made it set up sale-and-lease-back plans for all its properties.  When the economic down-turn hit, Southern Cross was left unable to meet the rents, and without the property portfolio.  Meantime Blackstone (they say) made off with the sale proceeds.

If this is true — I stress if — then something has gone seriously wrong.  Frequently private equity firms do a great job.  They may take a failing company and turn it around.  They may restructure businesses so that they become and remain viable.  Certainly they talk a good story on jobs and investment.  But it surely would not be acceptable for a private equity firm to asset-strip a company (especially a company providing a vital public service) in this way, and leave it to collapse.

I remember when I was in business in the seventies and eighties, we had bright young accountants with the brilliant idea of sale-and-lease-back.  It certainly freed up funds in the short-term.  But companies found that in a few short years, they had spent the capital sum paying rent to the new land-lord, and then forever after were paying an escalating rent for the property they used to own.  “We’re in the widget business, not the property business” was the mantra.  But that still didn’t mean that selling the property was a good idea.

It hurts me to say it, but if the Daily Mail story is right, then we need to look at ways of curbing such activity — hopefully without resort to excessive and heavy-handed regulation.

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2 Responses to How should we manage care homes?

  1. I dont know about profits as a measure of what is going on, or compassionate volunteering. I think you are missing the point here somewhat. What we dont want is nasty little bullies running our care facilities, whether public or private sector and you would be better off addressing that point and also address the following point, why is it that this society has sunk so low that we are getting this? These are the real questions that need answering.

    • You raise some important points — they’re just not the issues I happened to be addressing. And I’m not sure I have pat answers to your questions — what’s your solution?

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