Profit-making has no place in care homes

Profit-making has no place in care homes
Опубликовано: Wednesday, 08 March 2023 06:31
(Photo: Pexels — Matthias Zomer)

This op-ed was originally published by Equal Times on 3 March 2023.

Often framed as a burden by politicians, many investors see the ageing population as an exciting growing market with infinite demand, a steady stream of public funding and the possibility to yield big returns. But with a surge of care providers filing for bankruptcy and the French multinational care company Orpea having to be saved with public money at the end of January 2023, it’s time to challenge the commodification of care.

In a 2015 interview, Jean Claude Marian, founder of the disgraced French multinational care company Orpea, explained the market mentality behind the group’s expansion strategy: "We are lucky to be riding the wave of the exploding needs of the very elderly. This will allow us to continue having for the coming 5, 10, 15 years the possibility for considerable growth."

Indeed, research from the Centre for International Corporate Tax Accountability and Research shows that since 2015, Orpea added on average one bed per hour to its operations. In 2020, the group acquired a new care home or hospital every 3.3 days and between 2015 and 2020, turnover increased by 64 per cent (from €2.4 billion to €3.9 billion), with profits growing from €183 million to €210 million.

This reality was laid bare in 2022 with the publication of a book by investigative journalist Victor Castanet, Les fossoyeurs (The Gravediggers). Castanet’s damning exposé of the company’s practices sparked outrage in France and beyond and caused the group’s shares to fall by 90 per cent in value in a year.

But another aspect of Orpea’s expansion strategy not mentioned in the interview with Marian was that it was fuelled substantially by debt rather than the group’s own profits. When the share price crashed, the company became unable to handle these heavy debts. At the end of January 2023, following a year of uncertainty for workers and residents, the financial arm of the French state, the Caisse des dépôts et consignations (CDC), had to step in and reach a deal with the group to save it from bankruptcy.

For residents and workers, this comes with a plan to restructure the company, as proposed by the new management of the company. The first example of this is Belgium. In an extraordinary works council meeting on 16 February, the management presented union representatives with its "future plan" which includes the closure of ten Belgian homes, seven in Brussels and three in Flanders. Whilst it currently seems no jobs will be lost, having to transfer to other homes will be far from easy for the elderly residents and around 400 workers affected. A concern for the unions in Orpea is that the plan will involve selling the group’s real estate to make quick profit, and then renting it back at huge risks and costs, a common tactic used by for-profit operators.

A recurring story

Orpea is not the only private care provider to apply risky expansion strategies at the expense of workers and residents. In fact, the whole story closely resembles the rise and fall of one of Britain’s largest care home providers, the Four Seasons.

The group’s rapid expansion was fuelled by private equity investors betting on the rising needs of an ageing population. Nick Hood, an analyst at Opus Restructuring & Insolvency in London explained: "People often say: ‘Why have American investors, as well as professional investors here and in other countries, poured so much into this sector?’ I think they were dazzled by the potential of the demographics."

Similarly to Orpea, the expansion was pursued via complex debts schemes, and revenue was extracted through a maze of subsidiary companies and offshore structures. Despite cutting costs on the quality of care and working conditions in order to maximise profit, the group eventually became unable to keep up with its debts. Since 2019, it has been managed by insolvency experts, and the uncertainty is no doubt unsettling for residents and workers. Hood explains that this is what happens when care is commercialised: "Their owners are playing with the debt and expecting returns of 12 or 14 per cent and that is simply unsuitable for businesses with huge social responsibilities."

Reacting to the collapse of the German group Convivo, a senior citizens’ representative in Bremen stated: "This is the result when nursing homes come into private hands." Sylvia Bühler of the German trade union Ver.di commented: "Elderly care must not be a playing field for rich investors. Social security money and people’s futures must be protected from speculation."

All this begs the question: what place does profit-making have in care? Long-term care facilities are subsidised to a large extent by public money. When financial risks aimed solely at increasing profitability do not pay off, it is the state which must ultimately step in to ensure the welfare of care recipients, once again from the public purse. The above examples each come at great expense to the public and redirect funds which could otherwise be spent on improving working conditions and the quality of the services.

Trade unions in EPSU, the European federation organising workers in care services, have warned of these risks for years and have called for deep structural changes to the whole sector. In her 2022 book The Care Crisis, Professor Emma Dowling is unequivocal in arguing that we need to stop the financialisaton of care: "The realms of care should not be available to high-risk forms of financial investment, including private equity and debt-based forms of financial engineering, where expectations of high returns on capital are upheld at the expense of quality of employment and quality of care." Money allocated for care should remain in the system and not be distributed to private investors. Market mentality must be replaced with a human-centred and needs-based approach.