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How will the elderly care sector weather the storm?

As Orpea faces a media and political storm following the publication of a critical book – the contents of which it rejects – it is worth noting that accusations of abuse and neglect within care homes are not a new phenomenon.

Click here to read more about Orpea, here to see the HBI Intelligence elderly care report, and here to see the largest players Europe by revenue.

Both Orpea and rival Korian, as well as other French nursing home groups, have been the subject of previous bad publicity. And the issue is certainly not limited to France. In 2019, multiple elderly care groups in Finland – Esperi Care, Attendo and Mehiläinen – were in the headlines for the wrong reasons. In 2011, Casa Reha in Germany and Carema in Sweden both saw their reputations muddied as they had accusations hurled at them. Only a few months before that, it was UK care groups Castlebeck and Southern Cross that were in the crossfire.

The claims are often of a similar nature: residents left unchanged in their excrement, helpless in their beds to the point of getting bed sores, or not properly fed. Very occasionally there are accusations of outright abuse by staff.

On one level it perhaps shouldn’t be surprising that in such a large sector individual cases of malpractice exist. And the bigger the group, the more accusations there will be – though one would hope these are a tiny proportion of the numbers cared for. No sector is perfect, and the care sector is one in which a lot can go wrong. But when individual allegations of neglect turn to accusations of group-wide top-down conspiracies of plots to exploit the people they are meant to be caring for, perhaps a certain amount of scepticism is warranted. This is certainly what experts on the sector have suggested to us this week.

Whilst for-profit care groups do of course exist to make a profit, it’s simply bad business practice to do anything other than strive to maintain the highest standards of quality of care, and be seen to be doing so – and the management of elderly care companies are well aware of this. Cases of malpractice also exist in the public and not-for-profit care sectors as well, of course, though these do not always attract the same headlines as their for-profit peers.

With rapidly ageing populations across the developed world, demand for the services provided by elderly care companies will only continue to grow. Alternatives, such as assisted living and domiciliary care, may begin to appear increasingly attractive and take on a greater share of the market, but – at least for the foreseeable future – nursing homes are clearly not going anywhere, and they will remain the necessary go to for specialist care like dementia.

This does not mean investors have nothing to worry about, however. For the moment, billions have been wiped off Orpea’s market cap. The sector is already subject to stringent regulation, and tighter controls could be on the horizon. That will likely increase costs and reduce profit margins. It is new regulations, rather than a public or media backlash, which could be what will have the most lasting effect here.

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