The increased closure of care homes has sparked fears that the elderly could end up taking more beds in hospitals.

Care North East, which represents more than 100 care home owners in the region, says the industry is in crisis, as fees paid by local authorities for vulnerable individuals is "woefully inadequate."

The umberella group says further pressure has been piled on the industry by the increased National Minimumn Wage, which comes into effect in October.

"We will see people go out of business, staff will be made redundant and homes will close unless the local authorities and government listen," said Janette Malham, a spokeswoman for Care North East.

"It seems to me it will be pushed onto the hospitals and they will end up providing a long-term care service in a semi-acute setting. Then the cost to the tax payer will rise because it's more expensive."

The organisation, which says 15,000 beds have been lost in the last twelve months, will highlight the depth of the "crisis" by destroying a bed during a protest in Newcastle tomorrow.

Alma Caldwell, chief executive of Age Concern North Tyneside, said there were "more and more closures," particularly among small residential homes.

"The ones that are being built tend to be much larger and owned by larger companies," she said.

"I think the choices are going to be reduced for people who might feel a lot happier in a smaller home and would like to stay in a local community."

The closure of a care home is also extremely distressing for residents.

"They see it as their home and they have their friends," said Ms Caldwell.

"When that home closes they have all the trauma of having strange staff and a strange home and that can be very traumatic."

A spokesman for the Department of Health said funding had increased for social services by 12 per cent since 1997.

"We are working to ensure that there is a balance between supporting independent living and making sure there is sufficient supply of good quality residential care for those who need it," he said.

"It is for care home owners and local councils to agree on the appropriate fee levels for services provided."

A spokeswoman for Newcastle City Council was unavailable for comment.