The scandal

they all chose

to ignore

Kenneth Roy

This is a morality story for our time – the story of how personal fortunes were made out of a company that is now virtually worthless and begging the prime minister for its survival; the story of how the care of the neediest people in society was entrusted to this outfit; the story of how the Scottish Review appealed to the NHS in Scotland and the Scottish government to pull back from a further commitment to the company; and the story of how our repeated warnings were ignored.
     Southern Cross Healthcare, the largest operator of care homes in Britain with 31,000 old people on its books, has announced that it will run out of cash next month. The mainstream media have very belatedly latched on to this scandalous state of affairs, while David Cameron, faced with the company's demand for a massive RBS-style bail-out, continues to peddle the ideology that the private sector runs vital services more efficently.
     Perhaps the prime minister would care to reflect on the efficiency of a company whose share price has fallen from £6 to 6p and which has been the subject of too many complaints to the regulators about the standard of its properties, and the quality of its care, before he commits the taxpayer to a colossal investment in this failing enterprise. Perhaps he will conclude that Southern Cross Healthcare should simply collapse into administration, leaving the much-maligned public sector to pick up the pieces and safeguard the welfare of 31,000 helpless old people. And perhaps the NHS in Scotland, and the Scottish government, should acknowledge – if only to themselves – the scale of their own culpability.

 

     
     In its 15-year history, Southern Cross Healthcare has made several men extremely rich. Its founder, John Moreton, was a darling of the business media, earning glittering notices for the speed with which he amassed a portfolio of 140 homes in the UK's burgeoning care market before selling the business for £80 million in 2002. He then declared his intention to establish a software company with his friend Iain Duncan Smith, the Tory politician, now cabinet minister, best known in Scotland for his censorious views on the lifestyle of the Glasgow poor. Mr Moreton has faded from public view somewhat.
     After his departure, Southern Cross Healthcare continued to expand at an astonishing rate. By 2006 it was running 570 homes and floating on the stock exchange. Its chief executive at the time, Philip Scott, told the business press: 'The outlook for Southern Cross is favourable and we look forward to driving value for our existing and new shareholders from the many opportunities that we see in the care home market'. Such buoyant assurances went unchallenged.
      Mr Scott, however, did not stick around long enough to see these many opportunities brought to fruition. When the share price stood at 550p, he made a windfall of £11 million by offloading his shares. The finance director, Graham Sizer, made £8 million by doing likewise. A few weeks later, both men left the company.
     Within a year, the outlook was not nearly so favourable. In July 2008, the famously acquisitive company was forced into emergency talks with its bankers after failing to meet a £46 million loan repayment schedule. The share price plunged to 130p. Throughout the years of growth, the business press had ignored two inconvenient facts – that Southern Cross Healthcare was borrowing heavily to fund its acquisitions and that it owned the freeholds of surprisingly few of its properties; in short that its policy of rapid over-expansion had made it vulnerable. These facts were also ignored by the company's public sector sponsors, who continued to supply it with customers.
     There were other grounds for concern. Between March 2004 and August 2008, the period of the company's most explosive growth, the Care Commission received, in Scotland alone, 684 complaints about Southern Cross homes, of which 373 were completely or paritally upheld. South of the border, it was prosecuted on several occasions. In one case it was fined £80,000 after a patient suffering from dementia fell to her death from the first-floor window of a home in Oxford. The patient's daughter said: 'They get an awful lot of money [£28,000 per year per patient], so not to fix a window lock with a screw was unforgivable'. A healthcare consultant familiar with Southern Cross establishments added that 'the group has not invested properly in some of its homes...there are doors falling off their hinges'.

 

     
     Despite the disturbing record of complaints, enforcement orders and prosecutions, Southern Cross Healthcare was still a company with which government, local and national, did business – lots and lots of it. By January 2010, when it crossed our radar for the first time, NHS Greater Glasgow and Clyde was eagerly preparing to sign the missives for the sale of valuable public land in the west of Glasgow for a care home to be run by Southern Cross Healthcare.
     In a series of articles, SR pointed out the folly of the scheme, which would give the care of the frail elderly to Southern Cross, a company in deep trouble, at the expense of a hospice nearby, St Margaret of Scotland, which was already providing this care to the highest standards of clinical and nursing excellence. One of the first discoveries in our long investigation was that Southern Cross had hired the services of a Glasgow-based firm of crisis management consultants (Media House); next, that Southern Cross or its crisis management consultants had prevailed upon a health minister in the Scottish government to open one of its homes.
     The continuing association with Southern Cross, in the face of all the facts, baffled and concerned us. We wrote to the then head of the NHS in Scotland alerting him to all we had unearthed. We contacted the cabinet secretary for health, Nicola Sturgeon. We wrote to all non-executive members of NHS Greater Glasgow and Clyde. We attempted to interest the BBC in the story. Nothing – absolutely nothing – was done, said or written except in this magazine. The land was sold and, within a few months, the scheme lay in ruins. It was all so predictable; and preventable.
     What next? The complacent Scottish media claim that all of Southern Cross's homes will be saved somehow and that there is nothing for the residents – the human commodities in this business – to worry about. Meanwhile, however, the 35 residents of Sefton Park care home in Lanarkshire – which is no longer 'fit for purpose' and which Southern Cross cannot afford to refurbish – have been given until August to find somewhere else to live: the home is closing. So much for the assurances of the Scottish media.
     Others, of course, are more fortunately placed. The last report of John Moreton, founder of Southern Cross Healthcare, was that he had bought a 1,000-acre arable farm in Hampshire.

Kenneth Roy is editor of the Scottish Review