February 28, 2018

CQC introduces statement of financial viability

From 12 February 2018, care providers will have to submit a statement of financial viability in the form of a statement letter from a financial specialist, usually the provider’s accountant.

Statement of financial viability

The purpose of the financial viability statement is to demonstrate to CQC that a provider can sustain compliance with Regulation 13 of the CQC (Registration) Regulations 2009, the Financial Position regulation. This requires providers to take all reasonable steps to provide services in a manner which ensures the financial viability of the carrying on of that activity in order to meet the aims and objectives of the service’s Statement of Purpose and meeting all other registration requirements set out in the Health and Social Care Act 2008.

Providers have always been required to demonstrate compliance with Regulation 13. However, in the past, a lack of clarity about how providers needed to do so and what information and evidence CQC needed to see had resulted in CQC taking an inconsistent approach and applications being delayed.

Why is CQC introducing the statement?

As CQC are looking to streamline their processes and state that they are striving to take a more proportionate and risk-based approach to registration, the need for a statement is intended to clarify the process and focus providers’ attentions on the need to have robust financial systems in place to provide a sustainable service to clients.

A template statement letter has been produced and, although it is not mandatory that the template is used, CQC have indicated that use of the template will be preferable to ensure that all of the required information is included in the application. The template includes a declaration by the financial specialist that either:

a) the applicant does have the financial resources needed to provide and continue to provide the services as described in its Statement of Purpose;

or, if the specialist cannot, in their opinion, give that assurance, a declaration that:

b) the applicant has not provided sufficient information for them to answer A.

If the specialist chooses option B, CQC will need to consider other evidence and may require assurances about a provider’s financial standing from a bank or evidence of support from a shareholder. This suggests that CQC may require shareholders or investors to provide personal guarantees.

When will the new statement be required?

The statement will need to be submitted for all new providers submitting a new registration application except NHS services or services with NHS contracts.

Existing providers applying to remove or vary a condition of registration (such as adding an activity or new location) will not generally be required to submit a statement. However, CQC can at its discretion request that a provider submits a statement with any application.

In the guidance it is suggested that they may ask for a statement if a provider is looking to increase the scale of its services or if it has received intelligence to suggest that a provider does not have the financial standing to provide the services set out in their Statement of Purpose. It is unclear what sources of intelligence CQC will be able to rely on but we expect that the new Provider Information Collection ("PIC"), which is replacing the Provider Information Returns, will be one such source of evidence which may be used to alert CQC to concerns about financial viability.

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