Care home companies could be forced to open books to prevent another 'Southern Cross' collapse

Care homes could be regulated to prevent a repeat of the Southern Cross crisis.

Care and Support Minister Norman Lamb will today launch a consultation into proposed measures which would protect residents if care providers fail, saying the current regulatory system was not yet "fit for purpose".

Under the proposals, a regulator would monitor the financial health of the largest providers.

The abrupt collapse of Southern Cross, Britain's biggest care homes operator, caused turmoil for more than 30,000 elderly and vulnerable people last year.

The firm was crippled by having to pay a £250 million rent bill as councils sought to cut fees in the wake of the first credit crunch.

Mr Lamb said: "We want to make sure every person receiving care and support will continue to get the care they need if a provider exits the market, regardless of whether they are paid for by the state, or pay for care themselves.

"Southern Cross demonstrated that we need greater oversight of providers' finances and better plans to support people if their independent provider goes out of business.

"We want to make sure care providers have plans in place to get their finances back on track and if this is not possible then a co-ordinated exit from the market happens. This will mean care service users know their needs will continue to be met."

Dr Peter Carter, chief executive and general secretary of the Royal College of Nursing, said: "For some time we have been concerned about the ability of providers to deliver high quality care and run on a sound financial footing.

"When a patient or service user is moved from one care setting to another due to providers failing, it can have catastrophic effects on their mental and physical health.

"The RCN raised these concerns throughout the passage of the Health and Social Care Act and today's news is a welcome step forward.

"It is right that robust plans are put in place to minimise the risk of services failing and that there is scrutiny of their business models. We look forward to seeing these plans in more detail and in particular how they fit in with the Care Quality Commission and Monitor."

Mr Lamb said he had been looking at regulation of the care sector in light of the abuse of vulnerable patients uncovered at private hospital Winterbourne View near Bristol.

He told BBC Radio 4's Today programme: "I think there is a significant lack of corporate accountability for the quality of care that is provided in care homes and in private hospitals and that is something I am determined to address.

"I have been looking at that in terms of the Government's response to the horrors of Winterbourne View and I just have a sense that the whole regulatory model for the care sector is not actually yet fit for purpose and there are reforms that are necessary."

Shadow health minister Liz Kendall said: "The collapse of Southern Cross caused huge concern for residents and their families and the Government is right to say action should be taken to try and prevent a similar crisis from happening again. Labour will consider the Government's proposals in detail to see if they are robust, workable and fit for the future.

"In particular, we are concerned about whether the proposed requirements on care home providers to provide financial information are sufficiently strong, whether the Care Quality Commission or Monitor have the skills, experience or resources to properly scrutinise the financial structures of companies, or the power to take effective action to prevent financial failure if risks emerge.

"However, the underlying challenge facing the Government is to tackle the crisis in social care funding. There have been financial pressures for many years, but the Government's cuts are now driving care services to breaking point."