According to a report in The Independent, over 370 nursing and care homes have been given "no star" ratings after the independent Commission for Social Care Inspection (CSCI) assessed their services as "poor".
A further 31 have been sent legal notices stating the CSCI plans to cancel their registration and move their residents elsewhere.
Britain's Health Minister Ivan Lewis said: "If at the end of three years, local government has not delivered on those building blocks, I think there will be some really big questions to be asked about its capacity to commission these services in the future."
Last week, the CSCI obtained a court order to cancel the registration of a residential nursing home in Brackley, Northamptonshire, after a random check found the safety and welfare of its elderly residents were "at serious risk". Several residents of the home had to be taken to hospital for treatment. Two subsequently died after inspectors shut the home.
The paper claims that the sector's reputation has been damaged by repeated revelations of abuse and neglect of residents in some of the 10,000-plus private homes across the country.
Some 150 local authorities across England spent 14.2 billion pounds on social care for all adults last year including elderly people, residents with dementia and young people with learning difficulties.
Reforms in the pipeline include giving individuals "personalized" control over their own care and a personal budget under the Government's Putting People First Program.
Healthcare councils like Age Concern have given a cautious welcome to the Government's proposals, but the Local Government Association (LGA), a cross-party organization representing councils in England, insisted that local authorities still had a vital contribution to make.
"Councils are best placed to make decisions on providing care and support to local people, thanks to their knowledge of what's available in each area and how best it can be managed," the paper quoted a spokeswoman, as saying.