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A regional approach to assessing the risk of market failure

The East Midlands Association of Directors of Adult Social Services (ADASS) Network group commissioned a project on how to assess the risk of market failure at a regional and sub-regional level. This project was based on the premise that early communication between authorities can enable interventions to prevent market failure, or help manage the impact of any failure. The project was supported by the LGA through the Care and Health Improvement Programme (CHIP).

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The challenge

The aim of this project was to develop a regional approach to identifying those providers working across the authorities in the East Midlands that were potentially at risk of market failure.

The Care Act 2014 regulations and guidance have provided local authorities with powers to discharge their duties where service users are at risk, due to an unplanned or planned closure, or interruption of service. This is particularly the case where there has been a business failure. In addition, the Care Quality Commission has powers to monitor a designated number of providers through a national “Market Oversight” regime, and liaise with local authorities should they determine any designated provider is at risk of business failure. The arrangements within this study go beyond national CQC arrangements and are designed to support local management of care providers within the East Midlands region.

Across the East Midlands a number of providers have been at risk of market failure in recent years, resulting in some exiting the market. Although many of these providers did so in a planned way, a number of exits were unplanned.

One of the most significant risks of market failure in the East Midlands region in 2018, in the run up to this work, related to Allied Healthcare. Each authority in the region was impacted with different degrees of risk and exposure. The CQC issued a Stage 6 notification to provide an early warning to the authorities that the business failure of this provider was likely. Some authorities decided to terminate their contracts with Allied Healthcare and transfer these services to other providers or bring them ‘in-house’, although ultimately the Allied Healthcare business was sold to another company (CRG).

The East Midlands approach to assessing the risk of market failure has been based on that developed by the Yorkshire and Humber ADASS region, where an information sharing protocol was produced. A similar information sharing protocol has also been adopted by the West Midlands ADASS region.

The East Midlands ADASS Network group had to resolve a number of issues about the scope of the protocol. The key issues related to the types of services that should be covered by the protocol and the criteria for triggering the protocol.

The solution

The solution to assessing the risk of market failure across the region has involved developing an East Midlands ADASS information sharing protocol and process. The Network group agreed that the information sharing protocol should apply to all commissioned adult social care services, as well as services that are not commissioned. Most of these services are CQC regulated, although unregulated services will also be covered under the protocol.

The protocol and process were established on the following principles:

  • The protocol is based on sharing information between authorities in the region, where there are significant risks with a provider;
  • The process is focused on providers in the region that work  across authorities and are at risk of market failure;
  • The process is not about data collection - it is not necessary to know everything about a provider;
  • The process concentrates on identifying when providers hit certain trigger points;
  • The process has to be simple;
  • Each council has to identify a nominated lead.

A number of products were developed to enable the East Midlands authorities to share information more effectively. These were:

  • An information sharing protocol, which each authority in the East Midlands region is expected to sign up to;
  • A proforma for sharing information on those providers that are at risk of market failure;
  • A process for escalation where a provider is at risk of market failure;
  • A risk register, in the form of a heat map, for those providers identified by the process as at risk of market failure.

The ADASS East Midlands protocol is almost the same as those for the Yorkshire and Humber and the West Midlands regions. The most significant difference is that the criteria for triggering referrals through the East Midlands protocol are different. The East Midlands authorities agreed quite a ‘low bar’ in terms of the criteria for making referrals through the protocol, as it was considered important to communicate any serious concerns, even where there is limited cross authority activity.

The proforma will be used to refer a provider to the East Midlands Network Group using a generic email address. To be referred the provider must provide cross authority services that are at risk of market failure, or where it has exited the market in an unplanned or unforeseen manner. The provider must also meet certain triggers which are:

  • Quality concerns
  • CQC Notices of Proposal (NoP)
  • Extended contract suspension by an East Midlands Council
  • Contract default notice issued
  • Increase in Safeguarding Section 42s
  • Sustainability or financial concerns e.g. high voids or agency staff use
  • More than 30 per cent voids/vacant beds
  • More than 30 per cent agency staff and/or staff vacancies
  • Unplanned exit from the market
  • Financial viability
  • Company is in administration
  • Company is for sale

The proforma process will be activated by the authority that first identifies concerns about a provider. This authority would then become the ‘lead’ authority as a result of activating the process and act as the main point of contact for further intelligence. If another authority is more affected by the risk it can take over the ‘lead’ role.

This process will provide real time market information, which can be reviewed at the regular East Midlands regional network meetings. Where a more immediate regional response is required the chair of the network can activate the ADASS regional guidance in Appendix 1 of the protocol i.e. refer to the ADASS Regional chair.

The impact

The East Midlands information sharing protocol is due to be signed off by each authority in spring 2020. Once signed off the protocol and process can be implemented.

The purpose of the protocol, and related process, is to enable the authorities to intervene early to either prevent provider failure or mitigate the impact of failure. The protocol will also enable the region to co-ordinate a regional response in the event of the failure of a large regional or national provider.

More generally the protocol will allow information to be shared regularly between the authorities and the CQC at a local level. This will ensure that authorities can be more proactive about the type of support they may need to offer providers to mitigate risks. The process will involve placing providers on a regional risk register, which can be collectively reviewed at each regional network meeting. Those providers that are no longer at risk can be removed from the register.

The new protocol is at an early stage so it’s not possible yet to say what the exact impact will be, however authorities have already benefited from improved collaboration through the process of working together on this project.

How is the new approach being sustained?

The protocol will allow information to be shared regularly between the authorities and the CQC at a local level.


Sue Wilson

East Midlands Regional Improvement Programme Manager


07843 582304

[email protected]


In November 2018 the Care Quality Commission (CQC) issued a “stage 6 notification” to councils regarding Allied Healthcare on the basis of a likelihood, not certainty, of the possible failure of this supplier. A stage 6 notification was being issued to allow councils to plan for potential service failure. Allied Healthcare was a major home care provider. The reason for issuing the stage 6 notification was because the company’s borrowing facilities expired on in November 2018 and the company had been unable to provide adequate assurance to CQC that it has suitable replacement funding arrangements in place to ensure its medium-term viability. Consequently the criteria for CQC to make a stage 6 notification (likely service cessation as a result of likely business failure) was satisfied for the first time since the CQC major oversight regime was set up in 2015. The company was eventually sold.