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Department of Health

Care Act 2014: How should local authorities deliver the care and support reforms? Please give us your views


Managing provider failure and other service interruptions

The Care Act places a duty on the Care Quality Commission (CQC) to assess the financial sustainability of those providers that local authorities would find it difficult to replace should they fail financially.

The CQC will take measures to ensure that a provider who is in financial difficulty is working to return to financial sustainability, warn local authorities of imminent provider failure, and work with the local authorities affected to coordinate a response.

The CQC will consult on its detailed proposals for the design and operation of the new regime in autumn 2014. The draft regulations published for consultation here set out the legal framework for the regime, including criteria for those providers which are to be included.

The draft guidance on managing provider failure and other service interruptions relates to local authorities’ responsibilities for dealing with cases of business failure and other service interruptions, in parallel with the CQC’s regime. It covers:

  • local authorities’ roles and responsibilities in the event of business failure
  • the meaning of ‘business failure’
  • service interruptions other than business failure
  • the link with local authorities’ duties in respect of market shaping
  • contingency planning to prepare for managing business failure and other service interruptions

Read Factsheet 10: market oversight and provider failure

The draft Care and Support (Market Oversight Information) Regulations 2014, cover:

  • the CQC’s power to require information so that it can fully assess the financial sustainability of providers

The draft Care and Support (Business Failure) (England and Wales and Northern Ireland) Regulations 2014, cover:

  • situations that will constitute business failure which, if it leads to the provider’s inability to carry on, will trigger the temporary duty on local authorities or equivalents in Wales and Northern Ireland

The draft Care and Support (Cross-border Placements) (Business Failure Duties) (Scotland) Regulations 2014 , cover:

  • ensure provision for provider failure duties on Scottish local authorities under the Social Care (Scotland) Act 1968 in the case of cross-border placement in Scotland

The draft Care and Support (Market Oversight Criteria) Regulations 2014, cover:

  • the criteria for providers to be included in the CQC’s market oversight regime

The draft regulations specify the entry criteria for the CQC’s regime. In setting the criteria, the Act provides that regard must be had to size, geographical concentration and the extent to which a provider specialises in the delivery of a particular type of care.

The entry criteria for residential care providers capture those large providers that operate nationally, alongside those providers who are smaller but who provide services across much of the country and those who have a significant share of the market in a small number of areas. The justification for choosing these three factors – size, geographical coverage and market concentration – is that were such providers to fail financially, there would be significant challenges in managing that failure both locally and nationally.

It may be that a less complex calculation would be equally effective in identifying providers that are ‘difficult to replace’, and would give providers greater clarity on whether they qualified for the regime.
Respond to question 9 below.

The Act also requires the regulations to define the meaning of ‘business failure’. We have done this by referencing different types of insolvency in the regulations, for example the appointment of an administrator. These insolvency ‘situations’ will act as trigger for local authorities in England and Wales, and equivalent in Northern Ireland to temporarily meet care and support needs where insolvency causes a care provider to become unable to do so.

In defining business failure for this purpose, we have attempted to balance the importance of the local authority taking action to ensure people’s needs are met when their provider ceases to operate, with not inadvertently creating a situation where the local authority precipitates the failure by taking action too soon, or detracting from the core responsibility of the provider itself for arranging care and support services for those people for whom it cares.

In Scotland there are duties on local authorities under the Social Work (Scotland) Act 1968 to meet the needs of people whose needs were being met in their areas under arrangements made by an authority from another UK country, where a care provider operating in Scotland can no longer do so because of business failure.
Respond to questions 10, 11 and 12 below.

Question 9: We invite views on the entry criteria to the market oversight regime, and whether and how they should be made simpler for residential care providers.

Read: guidance on managing provider failure and other service interruptions The Care and Support (Business Failure) (England and Wales and Northern Ireland) Regulations 2014 The Care and Support (Market Oversight Criteria) Regulations 2014 The Care and Support (Market Oversight Information) Regulations 2014 The Care and Support (Cross-border Placements) (Business Failure …

Question 10: We invite views on the approach to defining business failure by reference to insolvency situations.

Read: guidance on managing provider failure and other service interruptions The Care and Support (Business Failure) (England and Wales and Northern Ireland) Regulations 2014 The Care and Support (Market Oversight Criteria) Regulations 2014 The Care and Support (Market Oversight Information) Regulations 2014 The Care and Support (Cross-border Placements) (Business Failure …

Question 11: We also invite views on the insolvency situations listed, for example, are they appropriate and clear. Should other situations be covered?

Read: guidance on managing provider failure and other service interruptions The Care and Support (Business Failure) (England and Wales and Northern Ireland) Regulations 2014 The Care and Support (Market Oversight Criteria) Regulations 2014 The Care and Support (Market Oversight Information) Regulations 2014 The Care and Support (Cross-border Placements) (Business Failure …

Question 12: In particular, are the listed insolvency situations appropriate and relevant to the various legal forms registered care provider can take (including providers registered in respect of establishments or agencies under the relevant legislation in/Wales and Northern Ireland)?

Read: guidance on managing provider failure and other service interruptions The Care and Support (Business Failure) (England and Wales and Northern Ireland) Regulations 2014 The Care and Support (Market Oversight Criteria) Regulations 2014 The Care and Support (Market Oversight Information) Regulations 2014 The Care and Support (Cross-border Placements) (Business Failure …

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