Southern Cross is meeting with landlords and the Department of Health this week The chairman of Southern Cross care homes has reassured residents they will continue to receive care and defended the business model that many argue has pushed the company towards collapse.
Christopher Fisher told the BBC care “will be sustained” across its homes, by Southern Cross or another operator.
He added that the company would be in a worse position if it had borrowed money to buy homes, rather than renting them.
Southern Cross is having a meeting with its landlords on Wednesday.
The company cannot afford to pay its rent and is negotiating with its landlords to find a solution.
The Department of Health will also be present at the meeting.
“Utmost priority is being given to continuity of care in the homes and people should not fear any widespread programme of closures,” Mr Fisher said.
“If occupancy falls significantly in the coming weeks, the losses generated by the business may increase to an extent that any pretence that it is a going concern will become impossible”
“Care will be sustained. In respect of some of our homes, some of our landlords, who are themselves operators, may wish to take back the effective operation of some of those homes.”
However, he said there were a “number of homes whose medium-term future does have some concerns”.
A “relatively small” number could possibly close over the next five years, he said, but any decision to close lay with the landlords.
Mr Fisher said the main reason why the company was in trouble was because “occupancy levels and the charges we can levy on local authorities have both come under pressure”.
Authorities are cutting back on the fees they are willing to pay care homes since the government announced its spending cuts.
“We operate on relatively low margins. A typical care home has 50 beds – with 46 occupied we are in a good place, but with 43 occupied we are in a difficult place,” Mr Fisher said.
Most commentators say the rents Southern Cross pays for its homes are the reason the company is struggling. This is the direct result of the company’s decision to sell its homes and then lease them back a number of years ago.
However, Mr Fisher argued that continuing to borrow from banks would have caused greater problems.
“We could have borrowed money, but lease structures create greater stability than bank borrowing, that might typically have a five-year term,” he said.
Borrowing from banks would have been a “much more difficult refinancing challenge”, he added.
Mr Fisher also apologised for the distress his company’s financial difficulties were causing for residents.
“I’m very sorry that the difficulties we are experiencing at corporate level are creating a degree of uncertainty and concern for our residents and their relatives, and for our staff and their relatives,” he said.
Southern Cross currently runs 752 care homes with 31,000 residents and has been struggling with high rents of about £200m a year.
It has already deferred 30% of its rent to its 80 landlords for four months.
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