A report published by the Public Accounts Committee raised a number of concerns about how the Department of Health’s scrutinises the health of the UK’s care homes.
The committee stated there was a lack of clarity about what would happen in the case of another industry failure and criticised the DoH for not monitoring the financial health of large-scale providers.
It highlighted the "considerable level of debt" currently held by Four Seasons Health Care as evidence the care home was no longer the "Land of milk and honey".
The report explained: "There must be greater clarity over what will happen in cases of large-scale provider failure.
"The Department admitted to having insufficient powers, and must decide what pre-and-post failure regime powers it needs to put in place to protect care home residents, many of whom are frail and vulnerable, if or when large-scale providers fail."
The Committee also stressed the fact the DoH had no idea Southern Cross was heading towards financial meltdown until it had been approached by the company in March 2011.
It continued: "The department must decide how it will monitor the financial health of large-scale providers so that it has early warning of difficulties and develop ways in which it might respond should problems arise, so that the interests of both social care users and the taxpayer are protected."
According to the report, some £23bn is spent annually by the government and private individuals on care services in the UK.
In July, shockwaves were sent through the care home industry when Darlington-based Southern Cross- which owned 752 care homes and cared for 31,000 residents – collapsed due to crippling debts.
By Andy Pearce