The closure of care homes could “escalate at speed” amid a cash row over a key contract, providers fear.

Scottish Care said the National Care Home Contract (NCHC) with Cosla, which sets weekly care home fees, is no longer viable due to challenges faced by rising costs and recruitment issues.

Cosla said the latest offer in March – following an “intensive period of negotiation” – was at the “limits of affordability”.

However Scottish Care, which represents independent private and charity providers, said it’s not enough to cover outgoings, such as paying staff £12 an hour – which the Scottish government has committed to implementing.

In a statement, Scottish Care said: “Over the last few years despite the many challenges facing the sector it has been possible to arrive at an agreement which has enabled the NCHC to continue. This year this has not been possible.”

Scottish Care explained that the Scottish government’s Agenda for Change settlement will see NHS staff being paid 19% more than a worker in a similar role in a care home setting.

It also said smaller care homes have seen a 500%-plus increase to their bills due to surging energy costs but have been unable to increase their NCHC rates to combat the rise.

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Scottish Care added: “Faced with these significant pressures we have sadly witnessed the largest number of care home closures the sector has experienced in the last few months and the very real fear is that this will escalate at speed.”

The NCHC was set up around 15 years ago to provide stability in the care sector.

The contract is renewed annually between Scottish Care and Cosla, which represents local authorities. As well as fees, the NCHC also caps profits at 4%.

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Since January, Cosla has made two offers which have been rejected by Scottish Care providers.

The latest offer was an increase of 6% to fees.

Currently, NCHC rates for residential and 24/7 nursing care are £855 per week for a nursing home and £719 for a residential care home.

Scottish Care said the contract is based on an “outdated model”.

Scottish Care said it has been in discussions with Holyrood since April in regards to the proposed £12 per hour wage pledge, but talks to seek “clarification and a timeframe for this commitment” are “no further ahead”.

Scottish Care said: “Our care homes are at a critical juncture. We need to all work together to preserve the NCHC and to ensure continued care and support is possible in a local care home.

“The loss of the NCHC will result in the closure of many more care homes across the country, most especially in rural and remote communities, and even more importantly will cause huge damage and distress to hundreds of care home residents.

“There is a real urgency to save Scotland’s care homes.”

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Councillor Paul Kelly, Cosla’s health and social care spokesperson, said the offer made in March was the “highest ever proposed increase” to the contract and was “the best offer we can make and is at the limits of affordability”.

He added: “Local government budgets have been under severe pressure in recent years.

“Despite this, the offer sought to recognise the essential and invaluable role of care homes and their staff within our communities and was inevitably shaped by the severe financial and inflationary pressures we collectively face.

“We understand that as part of Scottish Care’s rejection of this offer there was direct engagement with Scottish government in relation to the financial challenges across the sector.

“Meanwhile, councils have continued to ensure payments are timeously made to care home providers, including to enable adult social care workers to receive the Real Living Wage.

“The full offer remains on the table.”

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