An elderly dementia patient had her care funding wrongly stopped by a council after a "flawed assessment" by social workers concluded she was able to manage her own finances.
In a highly critical judgment by the care ombudsman, Worcestershire County Council was found to have acted "contrary to the law" when it cut off the woman's funding.
The Local Government and Social Care Ombudsman also criticised the operator of the care home contracted by the council to look after the woman's needs for charging and back-dating payments for support it was unable to prove it had ever delivered.
The operator of Haresbrook Park care home "upped its fees by £700 a week, from £500 to £1,200", three months after council funding was stopped.
The local authority has now apologised and paid compensation.
Giving its findings, the ombudsman said: "It (the care home) also back-dated the increase, something the ombudsman was particularly critical of as there was no evidence the care home provided any increased care for the back-dated period.
"It therefore charged a vulnerable woman several thousands of pounds for a service it never delivered.
"The home claimed the increase was due to the woman's care needs, but when challenged could provide the ombudsman with little evidence the extra care was either needed or delivered."
Although the woman, who has not been identified in the ruling, had money to pay for care the ombudsman found she had no capacity to manage her own affairs.
The woman's son attempted to gain legal authority to manage her finances, but his mother died before the process was completed.
After her death, the care home "chased the family and threatened to refer the outstanding debt to solicitors following the woman's death even before probate had been granted", according to the ombudsman.
The council remained responsible for the woman's care throughout.
The ombudsman's investigation found that "because of this flawed assessment, the council wrongly regarded the woman as capable of self-funding her own care".
Its findings concluded: "Although the woman had the savings to fund her own care, she had no capacity to do so and no-one to manage her finances.
"Despite this, and contrary to the law, the council stopped paying for the woman's care.
Michael King, Local Government and Social Care Ombudsman, said: "Had social workers assessed her needs properly from the outset, much of the distress caused to the family could have been avoided.
"Instead the council left the woman and her family to deal with the care home alone.
"I am pleased the council has agreed with my recommendations and now urge it to learn from this case to ensure others are not similarly affected."
The council has since apologised and paid the woman's son £1,000 compensation.
Invoices from the care home for support provided from March to August 2015 are also to be re-issued, minus the £700 per week, with any credit refunded to the woman's estate.
A Care Quality Commission report into the care home, in Tenbury Wells, Worcestershire, rated it as "good" overall in 2016.
Sander Kristel, Director of Adult Services, said: "We apologise to the family for the distress that has been caused.
"We provide care to around 6,000 individuals who are some of the most vulnerable people in society and we pride ourselves on the high quality service that is provided. Worcestershire's Care providers are amongst the best in the country according to the Care Quality Commission.
"Unfortunately on this occasion however the care that was provided fell short of our own high expectations and we deeply regret this. The Council fully accepts the recommendations in the report and are taking the appropriate steps to carry out the actions in the report within the timescales set."
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