Draft guidance was published by the Care Quality Commission (CQC) on 2 February 2015 for all adult social care providers, partners and members of the public to comment on their proposals in relation to its Market Oversight scheme. 

The deadline for comments on the draft Market Oversight guidance for providers is Friday 20 February 2015.

The scheme applies to England only.  Final guidance for providers is expected to be published by early April and coming into effect on 6 April 2015.

What is Market Oversight for?

It is to protect people using care services and their families and carers from the anxiety and distress that may be caused by the business failure of a major care provider and to minimise any disruption to their care.

Why is it required?

The Market Oversight scheme was established as a result of the financial collapse of Southern Cross in 2011, leaving thousands of people at risk of losing their care service.  It is clear that this scheme will come into effect on 6 April 2015 - we shall be watching closely on how effective it will be and the impact it will have on relevant providers

Market Oversight Operating Model

CQC will seek to rely upon a Market Oversight Operating Model developed in co-production with a wide range of stakeholders including people who use services, service providers, commissioners, financial experts and sector representative organisations.

It is an early warning system that aims to protect people using adult social care services from having their care interrupted either by the business failure of a major or specialist care provider. 

Sections 53-57 of the Care Act 2014 establish CQC’s Market Oversight duties and functions. These are:

  • determining whether criteria apply to a provider and informing them where they do;
  • assessing a providers financial stability;
  • informing local authorities where business failure is likely to mean a provider will become unable to continue delivering a service;
  • acting proportionately and minimising burdens we impose on others.

Not all providers are required to enter the scheme. The Care and Support (Market Oversight Criteria) Regulations 2014 set out the criteria for entry to the scheme. 

This will depend upon:

  • bed capacity in a residential care setting;
  • size of organisation;
  • spread of organisation
  • nature of specialism;
  • number of care hours delivered (for domiciliary care providers).

The criteria relates only to how difficult a provider would be to replace were they to fail.  It bears no relation to any judgement of actual or potential risk of failure of a specific provider.

Six Stage Model

The Market Oversight Model is broken down into a 6-stage approach to the assessment of financial sustainability,  Stage 1 being entry to the scheme and Stage 6 indicating the highest level of risk.  Throughout the model, providers can move backwards and forwards across the stages to reflect decreasing as well as increasing costs. CQC recognise that each provider is different and some may spend longer at one stage than others, it is not a ‘one size fits all’ approach but simply a tool to determine that a potential business failure is likely to cause a regulated activity to cease or change.

Stage 1 – Entry to the Scheme

Eligibility to enter the scheme is by either:

  • satisfying the criteria set out in the regulations or
  • being brought into the scheme by the Secretary of State for Health.

CQC will publish the names of the corporate groups and registered providers that are subject to Market Oversight as well as the locations from which those providers deliver regulated adult social care.

Providers who enter the scheme must remain in it for a minimum 12 months unless removed through a decision by the Secretary of State for Health.

Stage 2 and Stage 3 – Regular monitoring and further analysis

CQC will carry out routine monitoring of providers finances and quality and to investigate further, where this indicates an area of concern.

Providers are required to submit a document called a Financial Oversight Submission Template.  This is largely based on consolidated group financial information (as per the “group undertaking” definition of s.116(5) of the Companies Act 2006) as it will be at this level defined where most ‘business failure’ risks will be assessed.

CQC will collate this information alongside information obtained from inspections and registration data to calculate a standard set of risk indicators.  These indicators will be reviewed to assess financial stability and identify business failure risks that need to be followed up with further analysis or provider meetings.

Stage 4 – Provider Engagement on risk

Provider meetings will take place to identify and discuss concerns identified in stages 2 and 3.  Further information will be gathered about the future business strategy and plans for development of the business in a sustainable way.

Stage 5 – Regulatory Action and Engagement

At this stage risks will have increased significantly over previous stages and there will be real concerns and the providers financial sustainability.

Stage 6 – Formal Notifications to Local Authorities

Section 56(1) of the Care Act 2014 requires that where CQC are satisfied that a registered provider that is subject to the Market Oversight scheme is likely to become unable to carry on a regulated activity because of ‘business failure’ (as defined in the Care and Support (Business Failure) Regulations, which are currently only in draft form), CQC must inform the local authorities as they have a legal duty to step in and make arrangements for anyone affected so that their needs carry on being met.

There are three conditions which have to be satisfied in order to trigger this duty to notify local authorities:

  1. business failure, as defined in the Care and Support (Business Failure) Regulations;
  2. a registered provider is unable to carry on a regulated activity.
  3. It is likely that both of these may happen and Condition 2 happens because of Condition 1.

Commenting on CQC’s draft guidance for providers, Chief Inspector of Adult Social Care, Andrea Sutcliffe, said:

“Change in social care providers is happening all the time and can usually be well managed locally. But this may not be possible for some providers who have a lot of services across the country or provide specialist services that would be very difficult to replace.

"Introduced in the 2014 Care Act, our new scheme will combine the quality monitoring we already do at CQC with a new role of monitoring the financial sustainability of these difficult to replace providers. Our aim is to spot if a provider may be at risk of failing so that action can be taken to protect people’s continuity of care.

"That is the focus of this work, to make sure that people in vulnerable circumstances do not suffer disruption to their care and the distress this would cause them, their families and carers. The draft provider guidance sets out how we plan to deliver an effective operating model from April in more detail, including what will be expected of providers who meet the criteria.”

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