Waiting for the Tsunami…
Fear, uncertainty and doubt stalk the sector. Batten down the hatches and hope for the best!
As we report here, energy bills have risen tenfold for some German care homes. In the UK, not-for-profit Sheffcare has said energy bills could force it to shut homes. Meanwhile, Eurozone inflation is forecast to hit 10% with the UK potentially peaking at twice that, according to Goldman Sachs.
Meanwhile the European Public Service Union estimates that there is a shortage of 2m health and care staff across the European Union alone. Keeping pay rises lower than inflation in such an environment will be hard in 2022 and 2023.
Already we’ve seen first half results marred by staff shortages at Terveystalo and Medicover. The Portuguese healthcare minister has just resigned following widespread criticism of her decision to temporarily close emergency obstetric services, forcing risky transfers of pregnant women between hospitals. That, again, was due to workforce shortages.
All this means investors need to revisit previous assumptions. For example, the German nursing home sector has been viewed as safe because of the certainty of earmarked, long-term care insurance. But what happens when elderly residents can no longer afford to pay heat and catering costs? Local authorities will have to pay the bills, at a time when their sales tax revenue is dropping thanks to recession. How will they be able to pay? When? And how hard will they negotiate before doing so?
We will see a big squeeze on profits in the second half of 2022, with no clear idea of when this will end, or how fast governments will step in to pay the extra costs. Revisit all your assumptions about public payor health care. Stressed payors may well arbitrarily inflict tariff cuts or ceilings, across many sectors. But some private pay will thrive. UK and Spanish hospitals should see a huge uplift as people seek to avoid queues – provided they can get the staff!
Covid may be over (fingers crossed!). But this wave feels every bit as serious and opaque. The hope is that, as with Covid, the new wave will force step changes. Covid saw the mass adoption of telehealth. This crunch might see a huge increase in training with the for-profit sector allowed to develop capacity.
But don’t bet on it. Ironically, this week we were told that digital health budgets in the UK are being raided to pay staff more!
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
