The negativity surrounding the care home operator Southern Cross which recently reported half-yearly losses of £311m makes me wonder if there are lessons to be learned from this for dentistry?
There are very specific circumstances that have led to the crisis at Southern Cross, which owns 751 care homes around Britain. Unlike most operators in this sector it doesn't own its properties, and has been locked into expensive rental agreements - which it is now having to renegotiate. Southern Cross also has a higher proportion of residents that are funded by local authorities (around 80 per cent). Part of Southern Cross's difficulties has arisen from the fact that the care fees it receives aren't sufficient to cover the rent, while other care costs and care fees paid by local authorities don't keep pace with expenses.
Charities claim that cuts to council budgets are making this problem even worse. Age UK estimates that local authorities are underpaying care providers by nearly £500m a year. Age UK – together with Bupa and the Local Government Association – has written to the Prime Minister warning that 'pressure on public finances is pushing an already overburdened system to breaking point'. According to Age UK it has also created the highly unjust situation where a private-paying patient will often pay more per week than a council-funded one for the same level of care – as some nursing home operators are forced to use their private patients to subsidise the shortfall in council funding.
Like those of us in NHS dentistry, Southern Cross has definitely felt the impact of reducing or stagnating financial support from local authorities for the care that they provide to their patients while at the same time facing the glare of the Care Quality Commission who demand that better services be provided. Nearly 30 per cent of Southern Cross's care homes in England have been served with improvement orders by the CQC.
In an ideal world, quality care is what we all want - but the inescapable fact is that such improvements cost money, and is it a price that the Government is willing to pay in these austere times? On the one hand Southern Cross is being squeezed by its reduced income from local authorities while on the other, it is also expected to raise its standards to comply with the CQC's demands, but with less money how can it square this circle? Southern Cross now rents most of its premises and it is this which has resulted in unfavourable news coverage recently as landlords expecting commercial rents from Southern Cross have forced the ailing company to request a temporary moratorium on rent payments in order to give it some much-needed breathing space.
Can parallels be drawn to the UK dental market? Many dental practices are now in shop-front locations battling it out with the rest of the high street. These premises are rarely available to purchase and instead are mainly offered as leasehold premises at commercial rents. It's also noticeable that long established freehold dental practices sold by retiring principals are increasingly being offered to the new and upcoming generation as leasehold premises so that the retiring dentist can continue to generate an income from the rent received. In any case, with the high values of dental practice goodwill, the leasehold option is often all that the younger practitioner can afford.
With PCT NHS contracts now tied to a particular location, savvy landlords are aware they usually have the upper hand with their NHS dental tenants when the rent come comes up for review knowing that the tenants have little option but to pay the increased rent.