Trafford Provider Failure Procedure – to follow. Please contact Commissioning Team for more information.
CARE ACT 2014
The local authority is required to temporarily meet the adult’s needs for care and support where they are no longer met as a result of provider failing. It applies to all individuals present in the local authority area whose needs the local authority is not already meeting, that is self-funders and those whose services funded by another local authority.
December 2017: This chapter was amended to include Managing Care Home Closures: A Good Practice Guide for Local Authorities, Clinical Commissioning Groups, NHS England, CQC, Providers and Partners (NHS England, 2015) as above.
- 1. Introduction
- 2. Definitions
- 3. Service Interruptions because of Business Failure
- 4. Business Failure involving a Provider in the Care Quality Commission Oversight Regime
- 5. Business Failure involving a Provider not in the Care Quality Commission Oversight Regime
- 6. Administration and other Insolvency Procedures
- 7. Service Interruptions other than Business Failure
- 8. Market Shaping and Market Intelligence
- 9. Contingency Planning
The possibility of interruptions to care and support services causes uncertainty and anxiety for people receiving services, their carers, family and friends. Interruptions can arise for a number of different reasons, for example when a provider of services faces commercial difficulties that puts the continuation of their business under threat. Both large national and small local providers can experience commercial issues which cause uncertainty for people receiving care and support. The local authority has an important role in situations where a provider is unable to continue to supply services because of business failure.
There are numerous other situations that can cause disruption to care and support services. Some may impact on the whole business – for example a provider decides to close the business down, while others impact on a particular service – for example a meningitis outbreak at a care home. The local authority should use their powers to act in such cases, as set out below.
2.1 Business failure
‘Business failure’ is defined in the Care and Support (Business Failure) Regulations 2015. It is defined by a list of different events such as:
- the appointment of an administrator;
- the appointment of a receiver or an administrative receiver (the full list appears in the Regulations).
Service interruption because of business failure relates to the whole of the regulated activity and not to parts of it.
2.2 Temporary duty
‘Temporary duty’ or ‘duty’ means the duty on the local authority to meet needs in the case of business failure. ‘Temporary’ means the duty continues for as long as the local authority considers it necessary. The temporary duty applies regardless of whether a person is ordinarily resident in the authority’s area (see Ordinary Residence).
It applies from the moment the authority becomes aware of the business failure. The actions to be taken by the local authority will depend on the circumstances, and may include the provision of information. The duty is to meet needs but the local authority has discretion as to how it meet those needs.
3. Service Interruptions because of Business Failure
Business failure of a major provider is a rare and extreme event and does not automatically equate to closure of a service. It may have no impact on residents or the people who use the services. However, if a provider is unable to continue because of business failure, the duties on the local authority are as follows.
3.1 Temporary duty
The local authority is under a temporary duty to meet people’s needs when a provider is unable to continue to carry on the relevant activity in question because of business failure. The duty applies when a service can no longer be provided and the reason for that is that the provider’s business has failed.
If the provider’s business has failed but the service continues to be provided the duty is not triggered. This often may happen in insolvency situations where an Administrator is appointed and continues to run the service.
The duty applies where a failed provider was meeting needs in the local authority’s area. It does not matter whether or not the local authority has contracts with that provider. It does not matter if all the people affected are self-funders.
The duty is in respect of people receiving care by that provider in that authority’s area – it does not matter which local authority (if any) made the arrangements to provide services.
3.2 Meeting needs
The needs that must be met are those that were being met by the provider immediately before the provider became unable to carry on the activity. The local authority must ensure the needs are met but how that is done is for the local authority to decide, and there is significant flexibility in the Care Act 2014 in determining how to do so. It is not necessary to meet those needs through exactly the same combination of services that were previously supplied.
When deciding how needs will be met, the local authority must:
- involve the adult concerned, any carer that the person has, or anyone whom the person asks the authority to involve (see Care and Support Planning);
- where the adult lacks capacity to ask the authority to do that, the local authority must involve anyone who appears to the local authority to be interested in their welfare;
- where a carer’s service is involved, the local authority must involve the carer and anyone the carer asks the authority to involve.
The authority must take all reasonable steps to agree how needs should be met with the adult concerned. It should seek to minimise disruption for people receiving care, in line with the wellbeing principle (see Promoting Wellbeing) and, although authorities have discretion about how to meet needs, the aim should be to provide a service as similar as possible to the previous one.
An authority has the power, where it considers it necessary, to discharge the temporary duty, to request that the provider, or anyone involved in the provider’s business as it thinks appropriate, to supply it with the information it needs. This may involve, for example, up to date records of the people who are receiving services from that provider, to help the local authority to identify those who may require its support.
The authority should act promptly to meet people’s needs. The lack of a needs assessment or carer’s assessment (see Assessment) or a financial assessment (see Charging and Financial Assessment) for a person must not be a barrier to action. Neither is it necessary to complete those assessments before or whilst taking action.
The local authority must meet needs irrespective of whether those needs would meet the eligibility criteria.
All people receiving services in the local authority’s area should be treated the same. In particular, how someone pays for the costs of meeting their needs – for example, in full by the adult themselves – must have no influence on whether the authority fulfils the duty.
However, an authority may charge the adult for the costs of meeting their needs, and it may also charge another local authority which was previously meeting those needs, if it temporarily meets the needs of an adult who is not ordinarily resident in its area (see Ordinary Residence). The charge must cover only the actual cost incurred by the authority in meeting the needs. No charge must be made for the provision of information and advice to the person.
3.4 Restrictions: NHS services
The Care Act imposes certain restrictions on the provision of health services by the local authority and these apply to meeting needs in provider failure cases. A local authority may not meet needs in provider failure cases by, for example, providing NHS Continuing Healthcare (NHS CHC). Where the failed provider’s clientèle consists of persons in receipt of NHS CHC, unless their needs appear to have changed, it would be reasonable for the local authority to conclude that it was not necessary to do anything to meet those needs. This is because the duty to provide NHS CHC falls on the NHS and local authorities cannot provide it. The duties of the NHS in such situations are covered elsewhere and as such are beyond the scope of this guidance. Authorities should refer to the Standing Rules (the National Health Service Commissioning Board and Clinical Commissioning Groups (Responsibilities and Standing Rules) Regulations 2012, as amended); and to the National Framework for NHS Continuing Healthcare and NHS-funded Nursing Care and the NHS-Funded Nursing Care Best Practice Guidance for further guidance.
In fulfilling this function, the local authority must follow the general duties to cooperate (see Integration, Cooperation and Partnerships). Where an adult is not ordinarily resident in an authority’s area, that authority must cooperate with the authority which was arranging for the needs to be met previously (before the business failure). The duty of cooperation applies equally where the needs being met previously were paid for (in full or in part) by another authority through a direct payment to the person concerned.
Authorities that disagree on whether and / or how the law applies in these circumstances may apply to the Secretary of State for a determination of a dispute under the procedure that applies to disputes over ordinary residence or continuity of care (see Ordinary Residence and Continuity of Care).
All of the duties on the local authority described above apply equally if the needs the authority must meet were, at the time the provider became unable to carry on because of business failure, being met under arrangements made by the local authority in Wales, Scotland or Northern Ireland under the legislation that applies in those countries. An English local authority may recover from its counterparts in Wales, Scotland and Northern Ireland the costs incurred in meeting the adult’s needs. If applicable, English authorities can also recover costs from the person themselves (other than the costs of needs being met or funded by the authorities mentioned above).
Disputes between authorities in England, Wales, Scotland or Northern Ireland about whether or how the temporary duty applies in cross border situations are to be resolved under the legislation governing disputes about cross border placements (see Cross Border Placement).
4. Business Failure involving a Provider in the Care Quality Commission Oversight Regime
4.1 Financial health
From April 2015, the financial ‘health’ of certain care and support providers became subject to monitoring by the CQC. The Care and Support (Market Oversight Criteria) Regulations 2015 set out the entry criteria for a provider to fall within the regime. These are intended to be providers which, because of their size, geographic concentration or other factors, would be difficult for one or more the local authority to replace, and therefore where national oversight is required. The CQC will determine which providers satisfy the criteria using data available to it. It will notify the providers which meet the entry criteria.
The CQC must then assess the financial sustainability of the provider’s business. If it assesses there is a significant risk to the financial sustainability of the provider’s business, there are certain actions the CQC may take with that provider (none of which involve the local authority).
Where the CQC is satisfied that a provider in the regime is likely to become unable to continue with their activity because of business failure, it is required to tell the local authority which it thinks will be required to carry out the temporary duty, so that it can prepare for the local consequences of the business failure.
The CQC will inform the local authority once it is satisfied the provider is unlikely to be able to carry on because of business failure.
The CQC’s trigger to contact the local authority is that it believes the whole of the regulated activity in respect of which the provider is registered is likely to fail, not parts of it.
It is not required to make contact with authorities if, for example, a single home owned by the provider in the regime is likely to fail because it is unprofitable and the CQC is not satisfied that this will lead to the whole of the provider’s relevant regulated activity becoming unable to continue.
In these circumstances, it is the provider’s responsibility to wind down and close the service in line with its contractual obligations and it is expected that providers would do so in a planned way that does not interrupt people’s care.
Where the CQC considers it necessary to do so to help a local authority to carry out the temporary duty, it may request the provider to provide it with information and CQC must then give the information, and any further relevant information it holds, to the local authority affected. If the CQC is of the view that a provider is likely to become unable to continue with its activity because of business failure, the CQC should work closely together with the affected local authorities to help them fulfil their temporary duty. In exercising its market oversight functions, CQC must have regard to the need to minimise the burdens it imposes on others.
5. Business Failure involving a Provider not in the Care Quality Commission Oversight Regime
Regulations set out the criteria for the CQC regime. It will be for the CQC to apply those regulations and decide which providers are included. The providers outside the regime will in the main be those with small and medium size businesses.
The temporary duty on the local authority to meet needs in the case of business failure applies regardless of whether the provider is in the market oversight regime.
Despite the CQC having a market oversight responsibility, the local authority has responsibility to ensure continuity of care in respect of business failure of all registered providers.
6. Administration and other Insolvency Procedures
Business failure will usually involve an official being appointed, for example an administrator, to oversee the insolvency proceedings. An administrator represents the interests of the creditors of the provider that has failed and will try to rescue the company as a going concern.
In these circumstances, the service will usually continue to be provided, and the exercise of the local authority’s temporary duties may not be called for.
It is not for the local authority to become involved in the commercial aspects of the insolvency, but it should cooperate with the administrator if requested.
The local authority should, insofar as it does not adversely affect people’s safety and wellbeing, support efforts to maintain service provision by, for example, not prematurely withdrawing people from the service that is affected, or ceasing to commission that service.
7. Service Interruptions other than Business Failure
7.1 Urgent needs
A local authority must meet a person’s eligible needs. This duty applies whether or not business failure is at issue. The Care Act covers the circumstances where care and support needs may be met, that is circumstances where no duties arise, but the local authority may nevertheless meet an adult’s needs.
In particular, it permits a local authority to meet needs which appear to it to be urgent. In this context, ‘urgent’ takes its everyday meaning, subject to interpretation by the courts, and may be related to, for example, time, severity etc. This is likely to be the case in many situations where services are interrupted but business failure is not the cause.
The Care Act provides powers which can be exercised in order to meet urgent needs without having first conducted a needs assessment, financial assessment or eligibility criteria determination.
The local authority may meet urgent needs regardless of whether the adult is ordinary resident in its area. This means it can act quickly if circumstances warrant.
The power to meet urgent needs is not limited to services delivered by particular providers and is therefore available where urgent needs arise as a result of service failure of an unregistered provider (that is a provider of an unregulated social care activity). The power may also be used in the context of quality failings of providers if that is causing people to have urgent needs.
The Care Act gives the local authority a power to act to meet needs, but it does not require that authorities must act. Whether or not to act is a decision for the authority itself but authorities should consider the examples which follow.
In relation to service interruption, circumstances that might lead to the exercise of the power include where the continued provision of care and support to those receiving services is in imminent jeopardy and there is no likelihood of returning to a ‘business as usual’ situation in the immediate future, leading to urgent needs.
Not all situations where a service has been interrupted or closed will merit local authority involvement because not all cases will result in adults having urgent needs. For example, if a care home closes and residents have agreed to the provider’s plans to move the residents to a nearby care home that the provider also owns, the local authority will not necessarily have to become actively involved as urgent needs might not arise. On the other hand, the local authority might wish to be satisfied that the alternative home can adequately meet the urgent needs.
Whether to act under this power is a judgement for the local authority to make in the first instance.
7.3 Provider responsibility
If a provider has not failed, it is primarily the provider’s responsibility to meet the needs of individuals receiving care in accordance with its contractual liabilities. The local authority may wish to be involved to help with this. The power provides an ultimate backstop for use where the provider cannot or will not meet its responsibilities, and where the authority judges that the needs of individuals are urgent (and where the local authority is not already under a duty to meet the adult’s needs).
7.4 Service closure: Short and long term
A service closure may be temporary (for example unforeseen absence of qualified staff) or permanent (for example, the home is to be sold on for use as a hotel. Similarly, an emergency closure or planned closure may be involved. What matters in deciding whether to meet needs is whether the needs of the people affected appear to be urgent. For example, the sale of a provider’s business may be a positive development for residents, service users and commissioners alike and may not lead to urgent needs. These powers are not intended to inhibit the effective operation of a market in improving choice, quality and investment.
Where the local authority does get involved in ensuring needs continue to be met, that involvement might be short-lived or enduring over some months. Acts of God (for example flooding) or complications with suppliers should not in themselves automatically be considered to trigger the use of the power. In all cases, the test is whether the local authority considers there is an urgent need to be met.
When considering action in relation to service interruption or closure, there is a balance to be struck. On the one hand, if the local authority knows there is a serious risk to the continued provision of a service, it may consider not using that service temporarily or reassigning people using that service to an alternative service. On the other hand, it may be possible and justifiable for the local authority to act in a way that maximises the provider’s chances of continuing to provide the service and avoiding a business failure. The local authority should weigh the consequences of its actions before deciding how to respond, in particular, how its actions might impact on the likelihood of the service continuing. Certain actions may increase the risk of precipitating the business failure.
8. Market Shaping and Market Intelligence
The Care Act sets out the local authority’s duty to promote the efficient and effective operation of the local market in care and support services (see Market Shaping and Commissioning of Adult Care and Support).
Central to this function is the need to ensure that the authority has, and makes available, information about the providers of care and support services in its area and the types of services they provide. This gathering of market intelligence is equally relevant to the authority’s response to business failure and other service interruptions.
Where alternative services are to be put in place, an effective response requires a thorough knowledge of the market, which providers provide which services, the quality of each provider’s services and where there is spare capacity in service provision. In anticipating potential service interruptions, there is also a need to know the vulnerabilities in the operation of the market. Service interruptions involving such providers are likely to be more difficult to address. The local authority should have knowledge of market vulnerabilities, market capacity and capabilities such as this in order to respond effectively to service interruptions.
The local authority should understand how providers in their area are coping with the current trading conditions through discussions with the providers themselves. Authorities can achieve this without the collection of detailed financial metrics, accounts and business plans that the CQC might utilise in respect of the major corporate providers in the regime. The business failure of providers outside the CQC regime will be on a smaller scale, usually with lesser impact, and the local authority should take a proportionate approach to anticipating or getting early warning of business failure.
Local authorities may find the Cordis Bright guidance and toolkit: Assessing care market and provider sustainability helpful in developing a proportionate approach. Given that CQC is responsible for monitoring the financial sustainability of providers falling within the market oversight scheme, it is not necessary for authorities also to ask for detailed financial information from these providers.
9. Contingency Planning
Most service interruptions are on a small scale and are easily managed, however service interruptions on a large scale pose far greater problems. If a provider which operates nationwide fails, the local authority is less likely to be able to respond effectively on its own. It should consider how it would respond to different service interruptions and, where the involvement of neighbouring authority / authorities would be essential in order to maintain services, ensure effective liaison and information sharing arrangements are set up in advance.
Close cooperation between authorities may be particularly required where an authority has a substantial number of people placed within its area by other authorities.
9.2 Other providers
As part of contingency planning, the authority should discuss with local providers which services it would be willing and able to provide if the need arose because another local provider had failed. This should help to facilitate a prompt response that would help to maintain continuity of care for the people affected. Through its market shaping activities, the authority should encourage trust between the parties so that effective relationships exist where urgent needs are to be met.
Service interruptions are often the cause of much anxiety and media attention. The local authority should have the capacity to react quickly to any media reporting of service interruptions, whether large scale or small, if uncertainty and anxiety are to be minimised.
9.4 Risk assessment
It should consider how to undertake contingency planning most effectively at a local level, to ensure preparedness for possible service interruptions in the future. Service interruptions are often unforeseen and require rapid response. The local authority should review which service interruptions pose the greatest risk in their locality and consider developing contingency plans in advance, in conjunction with local partners. This may include regional activity with other the local authority in the same area, where risks are better shared between a number of neighbouring authorities.
The local authority already plans and manages challenging situations as a matter of course, for example, school closures from public health outbreaks or the impact of extreme weather. Contingency planning for social care should sit alongside the authority’s other emergency planning activities.
Local authorities may find it useful to consider the Local Government Information Unit guide, Care and continuity: contingency planning for provider failure.