Why is an essential sector not a more appealing investment?
Which is the least investable sector in health care services at the moment? A few years ago, answers would have differed, but increasingly – and contrary to rising demand – HBI hears it is nursing homes.
Anecdotally, HBI can confirm that its usual cohort of chatty nursing home operators has become less forthcoming. And practically, across Europe, the evidence why is clear. Covid – and the fallout reputationally and otherwise – has played a huge part. But it is not the full story.
Germany has seen a raft of insolvency proceedings with other firms queuing up to look for protection. Low occupancy and raging costs are taking their toll on groups like Curata, Convivio and Dorea.
In the UK, the cry is for “fair fees” – seemingly baked into regulation now and yet, if our operator sources are to be believed – very much not in place. Some of the comments HBI hears about the “one sided contracts” negotiated by commissioners would require the deployment of industrial language to print in full.
And that is before we even consider staffing issues which – as operator HC-One has found out recently – are a thorny issue. A union has alleged (and HC-One strongly disputes this) that as many as 40% of its workforce is unhappy with what the union called “poverty pay”.
What is happening in France surely needs little repetition. France’s largest group Orpea has reacted swiftly to stem the tide of criticism it faced following the publication of a highly critical book, but reputational issues across the sector persist, and further legislation/regulation will surely follow.
And legislation is also a key issue in Spain, where a promising Covid recovery is threatened by the promise of more stringent legislation on issues such as minimum facilities and staffing levels is a concern.
And yet – despite all this – residential elderly care should be a fundamentally safe investment, because the need is going nowhere. Indeed, it is growing, although it is changing with an increasing emphasis on dementia/medicalised care.
And while the share prices of some of the biggest hitters in this sector may have plummeted (Orpea is 98% down compared to the start of 2022) the fundamentals of a strong business are still unchanged.
For years now we have heard operators say that something has to give. Fees have to rise. Demand must be met and that means a fair appraisal of the needs of the elderly, appropriate legislation and incentivisation and a matching appreciation and budget is a gimme. Which leaves but one question.
When?
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
