April 2020: Coronavirus / COVID-19 Guidance


The Act sets out the duty of local authorities when providers fail. The local authority is required to temporarily meet the adult’s needs for care and support where they are no longer met as a result of provider failing. It applies to all individuals present in the local authority area whose needs the local authority is not already meeting, that is self-funders and those whose services funded by another local authority.


Market Shaping and Commissioning of Adult Care and Support


Managing Provider Failure and Other Service Interruptions, Care and Support Statutory Guidance (Department of Health and Social Care)

Managing Care Home Closures: A Good Practice Guide for Local Authorities, Clinical Commissioning Groups, NHS England, CQC, providers and Partners Department of Health et al, 2015) 

June 2017: This chapter was revised in June 2017 to add a link to Managing Care Home Closure guidance, as above.

1. Introduction

Provider failure is the period from a company’s first difficulty to the moment of going out of business. Here are some common factors leading to provider failure:

  • failure to understand the market and customer’s needs;
  • operating at low profitability;
  • inadequate financing (cash flow);
  • failure to anticipate or react to competition, technology, or marketplace changes;
  • overdependence on a single customer;
  • not knowing when to say ‘No’;
  • poor management and planning;
  • not meeting regulatory requirements;
  • single crisis event or repeated minor failures leading to loss of confidence in the company’s ability to deliver.

The Care Act 2014 gives local authorities the power to intervene and minimise the impact of provider failure on individuals, carers, family and friends. If a provider does fail then the local authority has to manage the effects of the failure in its area and ensure minimal overall impact to the market as a whole.

2. Preventing Provider Failure in Bedford Borough

The fact of a company entering provider failure can be indicated by:

When warning signs like these are observed then the provider concerned will be prioritised for support through the Quality Assurance Feedback Procedure (see Section 4. Quality Assurance Feedback Procedure).

3. High impact providers

High impact providers are described in the Care Act as providers that are particularly important to a local market because of the amount or type of care they deliver. They may be especially difficult to replace if they fail. ‘High impact’ is a description brought in by the Care Act and used in a market management context.

The Council is clear that if a provider is not deemed ‘high impact’ for Care Act purposes this does not mean it is ‘low impact’ or that difficulties experienced by it are low priority or that service users of it are low priority.

For Bedford Borough, providers meeting at least one of the following criteria are deemed high impact providers:

  • providing 10%  or more of beds;
  • providing 10%  or more of the home care hours;
  • providing services to 10% or more of service users;
  • providing services amounting to 10% or more of service spend;
  • providing 10% or more of a specialist service.

These providers will be prioritised for annual service reviews and offered support if required through service improvement plans.

See also Appendix 1: Registered Care Home Providers for Bedford Borough Council.

4. Quality Assurance Feedback Procedure

Click here to view the Quality Assurance Feedback Procedure. It confirms the Council’s preventative approach to provider failure by acting quickly on concerns about quality standards.

Staff must use the Quality Assurance Feedback Form to record concerns.

The Care Standards Review Service then decides what action should be taken to raise standards. When the action is complete the person who made the report and their manager receive a copy of the actions taken and resulting outcomes. Reports of good practice are also acted on with a recognition letter being sent to the provider.

All information relating to concerns is recorded on the Quality Assurance Database, resulting in a record of providers for whom concerns have been identified, whether they required action or not. Information is shared with Commissioners and may trigger contractual action to run alongside the Care Standards approach. Similarly sharing with the Care Quality Commission may lead to regulatory action being taken.

5. Service interruption or permanent failure

When there is service interruption or permanent failure, the Council has a duty to ensure the needs of individuals continue to be met. This duty applies whether or not:

  • there is a contract between the provider and the Council;
  • the people affected pay for their own care;
  • other local authorities had made the arrangements to provide service.

The Council will seek to minimise disruption to the people receiving care by quickly arranging replacement care. In most cases the aim will be to provide a similar (but non-failing) service.

However the Council may take the provider failure as a trigger point for review of needs and services. This could result in a different type of service being offered on practicality, suitability or value for money grounds.

In deciding how an individual’s needs will be met, the Council will involve the person concerned, any carer that the person has, and reasonable others that the person asks to be involved.  If the individual lacks capacity to decide who should be involved, the Council will involve anyone who appears to have a legitimate interest in the person’s welfare.

The Council routinely manages local service closures successfully. However, difficulty can arise in the event of no alternative provision in the area to cope with the number of people affected, or if the provider has been providing services to people across a number of different authority areas. Coordinating an effective response in such circumstances takes careful planning to ensure service user’s welfare is not put at risk.

The Council’s duties in managing provider failure do not apply to anyone receiving Continuing Health Care where the NHS remains responsible for intervening in the event of provider failure (see Continuing Healthcare – NHS).

6. How does the CQC Market Oversight Duty link with Local Authority Duties?

The Council’s duties in managing provider failure do not include the market oversight duties required of the CQC by Sections 54, 55 and 56 of the Care Act 2014. However the Council’s duties to take action could be triggered by market oversight information provided by the CQC.

7. Charging for Actions taken in the Event of Provider Failure

The Care Act 2014 states that a local authority may charge a person for the costs of arranging alternative services, where the person is funding the costs of their own care. The Council will only seek to recover costs incurred in arranging the alternative care in order to ensure this service is cost neutral to the local council tax payer.

In the event that the service was arranged by another local authority, the Care Act 2014 allows the cost of arranging alternative services to be recharged to the placing authority and Bedford Borough Council will do this.

Transport, removal charges and other sundry charges may be applicable. These will be discussed and agreed on an individual basis with the person concerned, or their representative. The underlying principle remains that there should be no cost to the local council tax payer for the provision of this service.

The Council will not charge for the provision of information and advice to individuals related to provider failure.

Charging for actions taken in the event of provider failure does not apply to people who are receiving care that is paid partially or fully by the Council.

8. Useful Links

Care Act legislation – clauses 48-57

Care Act Guidance – sections 4-5

Care Act Regulations:

Care Act Factsheets

CQC  – Our new role in the market oversight of adult social care

Appendix 1: Registered Care Home Providers for Bedford Borough Council

This appendix of registered care home providers who are deemed ‘high impact’ is reviewed on a regular basis and held by the Commissioning Team.