Operational and Financial review of a 12 care home group in the South West

On the instruction of a major bank Healthcare Solutions (HCMS) were instructed to carry out an appraisal of a 12 home group. The brief was to determine whether management had the capability to turn around a business that had been unable to meet it’s financial obligations, and that was under creditor pressure from suppliers and HMR&C. Two homes in the group had recently been closed by the care homes regulator.

The bank had been unable to obtain meaningful financial information from the borrower to support requests for overdraft extensions and interest and capital moratoriums. Despite the financial problems and the complex structure of the group, the principal concern was the potential for the homes to be closed following problems with the Care Quality Commission (CQC) as this would significantly impact upon the value of the bank’s security.

HCMS were instructed to carry out a review of the management to ensure that they had the skills and experience necessary to work their way through the problems that the group faced. Following a preliminary meeting it became apparent that the group also had issues within the finance department and the scope of the review was extended to encompass a review of the financial systems and reporting.

The reviews were carried out in a relatively hostile environment with resistance from the existing management team who, on the whole, felt that all their problems were behind them. It became apparent that there were serious deficiencies in the quality of management information and in the dissemination of this information to home managers.

The report, which included a review of competition, physical condition, management and financial systems and reporting, highlighted a number of areas where it was felt that the management team could improve, most notably in developing strategies to market the homes, manage agency staff costs and produce relevant, timely, and accurate management information. This was presented to the existing management team who argued that they had the capacity to work through the problems without further external intervention.

Following a post-report briefing by HCMS, the operator recruited a new financial controller and, determined to prove their capabilities, focused intently on implementing the HCMS report recommendations and improving their financial performance.