A Crisis In Social Care? Alllied Healthcare Looks To Re-Structure Debts

There was a worrying development late last week when Allied Healthcare told staff and clients that they are seeking a company voluntary arrangement (CVA) – a re-structuring of their debts, basically.

Allied is one of the largest providers in the UK of domiciliary care – carers who work mainly helping older people or those with medical issues to manage in their own homes. Allied has 12,000 staff and contracts with many local authorities around the UK, and also provides other services including medial work in prisons, running medical centres and telephone advice lines.

The pressure on social care providers in the UK has been increasing for some years. Councils have seen their grants from central government slashed, and have passed much of that pressure onto providers with tough constraints on the fees they will pay. Meanwhile, providers have seen minimum wage and other legislation pushing up their cost base. Recently, a legal ruling on how staff should  be paid when they stay overnight at clients’ homes has created a huge potential liability for these firms too, and Allied is looking at a bill for £11 million for back-pay.

The Guardian reported that the Local Government Association (LGA) “insisted that councils have “robust” contingency plans in place to manage the care of individuals if necessary if the company were to fail. The absolute priority for councils affected is to protect the vital care and support that older and disabled people rely on and ensure it is able to continue without interruption,” a spokesman said. “The LGA is working alongside the Care Quality Commission and the government to support Allied, where possible, as it plans to financially restructure the business and continue to provide high-quality home care.”

But as we have seen with Carillion and various retailers, it isn’t always possible to “financially restructure the business”. And if the worst does happen, while no doubt there will be contingency plans, they will presumably cost councils money. The longer term concern is that the whole social care sector is at breaking point because of the pressures mentioned above, and we don’t see any real strategy to address this in local government generally or the public sector procurement world (there is no national category management strategy or strategic supplier programme).

One other point. When this sort of thing happens, as with Carillion, we often see criticism that “government” has not kept a close enough eye on the finances of key suppliers. Well, we thought we would have a look at Allied’s accounts. So a quick search brought up Allied Healthcare Group Limited on the Companies House website / database.

OK, that business is owned by Omnicare Ltd. Let’s have a look at their information. No, that itself is owned by Allied Healthcare Holdings Ltd. Let’s try that one.

Now this is getting daft. That firm is owned by Allied Healthcare Group Holdings Ltd!   So now we have “group” and “holdings” in the name, we must be there now – no! That business is owned by Allied HC Group Ltd!  

That final business was created in November 2015, the accounts tell us, as a vehicle to facilitate the sale of the Allied group to a German private equity firm, Aurelius, the ultimate owners, who bought it from Saga for £19 million - less than 10% of revenues, a tiny valuation really which tells you something about the attractiveness of this business.

And no, we couldn’t get any sense of the true financial position from all of this – maybe a forensic accountant could, but you can see why Cabinet Office and others in public sector procurement sometimes struggle to get on top of the risk factors around key suppliers.

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Voices (3)

  1. Dan:

    I thought ‘commissioning’ was supposed to stop all this by strategically shaping the marketplace rather than just acting as a buyer?

    Instead it looks like its just nasty ol’ procurement under a different name driving down prices.

  2. Mr Grumpy:

    This has been brewing for years and will eventually hit a tipping point. If the Public Sector themselves can’t deliver these services due to the financial investment required and ongoing financial increases year on year, how the heck can they expect the Private Sector to foot the bill for Services in which they have no say on how they are designed, governed and delivered and that will cause them significant financial losses.

    Seriously need to look at the Health and Social Care Act 2012 Bill. Because the constant re-tendering will only drive a loss leader approach.

  3. Dave Coley:

    We seem to be sleep walking into a major disaster for the infirm and needy.

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