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Background

We were initially asked to conduct an Independent Business Review and provide ongoing advisory work for a group of six care homes, with 143 registered beds, located in the South of England. Due to the lack of co-operation from the director with regards to conditions imposed by the bank, including obstructing the sales process, and the fact that the group was cash flow and balance sheet insolvent, the bank appointed RBR Advisory – part of Begbies Traynor Group – as administrators over the group of care homes.

Challenges

During the Administration, several complex issues had to be dealt with including:

  1. A substantial amount of time and expenditure was incurred by the Administrations, at cost to the appointor/secured lender, in dealing with necessary remedial works as a result of the lack of proper historical preventative maintenance to the home. Moreover, in one instance, securing retrospective planning permission/consent and fire safety compliance for a number bedrooms constructed pre-Administration.

  2. Two of the CQC registrations were held by separate companies from that of the trading entities, requiring an expedited transfer of the registrations to one of the registered operating entities with CQC assistance.

  3. Greater degree of responsibility and complexity involved in dealing with one home with a Brain Injury Unit.

  4. Dealing with a voluntary bed embargo as a result of historical safeguarding issues. The embargo was subsequently lifted during the course of the Administration after CQC re-inspection and becoming satisfactorily fully compliant.

  5. Dealing with management issues, where the competence of some of the care home managers was somewhat lacking.
"Our team also recommended the appointment of Careport to assist with the non-performing homes and to liaise with CQC to rectify and resolve issues identified during inspections."

Advice Provided and Outcome

  • A review of salary and overhead expenditure to assess the level of savings that could be implemented. Agency staff costs were high in one of the homes due to the remote location and long standing sick leave.
  • Review of monthly management accounts, with a particular focus on profitability, aged debtors and creditors, HMRC liabilities and intercompany positions with non-group companies.
  • Identification of the non-viable care homes due to reduced occupancy levels following bed blocks due to issues identified by CQC.
  • Negotiating a payment plan with HMRC regarding significant PAYE/NI arrears.

Our team also recommended the appointment of Careport to assist with the non-performing homes and to liaise with CQC to rectify and resolve issues identified during inspections. The level of care was always highlighted as a concern throughout our appointment, as was the capability of the Director to manage a group of this size.

This has resulted in the successful sale of all the care homes on a going concern basis, with no disruption to service users.

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