How is the nursing home industry in Spain?

 

The Business Federation of the Dependency ( FED ) presented at the beginning of 2021  Radiography of the sector of residences for the elderly in Spain, a report written by the prestigious consulting firm PWC. The goal of this White Paper on the Spanish care for the aged in nursing homes’ industry is to point and descrive the main factors that affect the demand for residential places for the elderly in Spain, the current characteristics of their supply and the conditions of access and sustainability of the industry, as well as the economic and labor contribution of an industry that generates an economic activity of more than 4,500 million euros a year and that directly employs almost 1% of the Spanish working population.

The document focuses on a strongly regulated industry, with more than 50 years of experience in public-private collaboration and with a very similar industrial structure to that of other European markets. However, in the case of Spain there is a clear shortage of vacancies that will increase if the necessary solutions are not provided.

On the other hand, FED has prepared a Document of Proposals on the incidence of the crisis caused by COVID-19 in the residential sector, where short-term and structural problems are analyzed and solutions to all those problems are provided. The report concludes that most of the pre-existing problems, such as financing or health care for users of residence services, have been aggravated by the health emergency.

In 2050 there will be 16 million people over 64 years of age in Spain.

Life expectancy in Spain has increased substantially.  Meanwhile, the birth rate has plummeted, producing an aging population: currently, 20% of spaniards are over 64 years old. From that age, the average life expectancy is 22 years, but only 53% of that time is lived  in healthy conditions, that is, we live longer, but the increase in longevity is associated with a deterioration that requires care from others.

According to INE (National Institute of Statistics), if this trend continues, in 2050 we will go from 9 to 16 million people over 64 years of age in Spain, approximately a third of the population, which would place us as the 4th oldest country in the European Union.

Ignacio Fernández-Cid , president of the FED has said that, “this demographic challenge constitutes a fundamental element to guarantee long-term social and economic sustainability. And it is here where the residential facilities play a very relevant role, guaranteeing  social-assistance service in the care of the elderly, since more than 80% of the residents need help with such everyday tasks as dressing, taking medication, washing or eating”.

Lack of places: more than 100 residences are needed per year

The World Health Organization recommends having 5 places for every 100 people over 64 years of age to cover the demand for residences for the elderly, a rate already met by countries such as the Netherlands, Sweden, Belgium, Finland, Germany and France; and that Spain, with a ratio of 4.4 places, has a deficit of around 66,000 places.

If there is already a deficit of approximately 550 residences for the elderly in Spain (with an average of 120 places), the gradual aging of the population and the increase in the dependency index will aggravate this situation in such a way that, based on the estimates demographics of the INE and the WHO recommendations, around 785,000 residential places will be needed in 2050, double the number existing in 2018.

According to PWC, in 2050, it will be necessary to cover approximately 400,000 additional places, which means the construction of more than 100 new residences each year.

" Doubling the current number of residences would imply an investment of approximately 35,000 million euros and the generation of 150,000 additional jobs, which we consider a feasible and reasonable challenge but that requires the necessary conditions to favor investment and that spirit of collaboration with the Administration that, historically, has worked in our country, ”says Fernández-Cid.

The sector report also indicates that, currently, there are projects in the portfolio of around 270 residential centers, with more than 25,000 spaces -of which 61% are from the private sector, either directly or through concession- an insufficient number , even to cover the current gap .

Engine of the economy and employment

Residences are an engine of the economy and job creation. It is a highly atomized sector, in which there are around 5,600 residences, with an offer of almost 381,000 residential places (compared to 112,000 hospital beds, for example), which generates an economic activity of 4,500 million euros. Furthermore, dependency has a significant carry-over effect: for every € 1 entered in the sector, an additional € 0.7 is generated in the rest of the economy.

The volume of turnover and the intensity of job creation make the sector a tool for reducing the public deficit. The economic activity generated, directly and indirectly, by the residential sector reverts to the State through a higher collection of VAT, Corporation Tax, Personal Income Tax and social contributions. According to the calculations made by the FED, for every € 1 paid in a residence, the State receives € 0.41 in taxes and contributions. If we take into account that the state finances only part of the price, for every € 1 of public spending, it receives € 0.64 back.

With regard to employment, it should be noted that the private residences sector employs more than 155,000 direct workers in 2018, around 1% of the total employed in Spain.

The residences have very high personnel costs, since they are very employment-intensive. Around 60% of the income is destined to the remuneration of the workers, 2.2 times more than the average of the service sector in Spain.

In addition, the activity of the residences contributes, on the one hand, to unloading of work to the relatives of dependents, helping their incorporation into the labor market and improving their socioeconomic situation; and on the other, to employ people with low qualifications and therefore less employability, reducing spending on unemployment benefits: for every € 1 paid for a position, the State saves € 0.31 in benefits (€ 0.47 for every € 1 of public spending).

Regarding income, the increase in activity and employment for each newly created place in a residence directly generates an increase in VAT collection (the rate will be 4% or 10% depending on whether the place is public, arranged or private), personal income tax and social contributions, in addition to the corporate tax on the margin of private residences, so that part of the aid to dependency returns to the State coffers through taxes.

In feminine

91% of workers who have a part-time job to care for a dependent are women. The professionalization of care facilitates the incorporation into the labor market of informal caregivers of the elderly, mainly family members and mostly women.

 

Very atomized industry

In the nursing home industry, small and large residences currently coexist, the latter with economies of scale that allow them to more easily meet the requirements and standards demanded by the regulator and provide more services to users.

The Spanish market is characterized by being highly atomized: 75% of the companies are Spanish SMEs that manage a single center; 11% are multinationals and only 8% are in the hands of investment funds.

Although the figure is still low, the entry in recent years of companies specializing in residential real estate assets and the arrival of new operators has significantly changed the investment landscape. In 2019, 

investment in residences for the elderly reached 300 million euros, doubling the investment made in 2018.

51% of the available places are public or concerted

25% of the places are publicly owned, although the management can be private. Of the rest of the places, 26% are arranged places, with a regulated price set according to the income and level of dependency of the user.

You can access a public or concerted (publicly finances privately provided) residential place through the regional or local social work units  and local entities for non-dependent older people in social emergency or, more commonly, through the Dependency Law, private places can Access any user by paying the fees or financing part of the economic benefit linked to the service for those dependents without access to a public square.

Proposals for improvement from the sector in the face of the health emergency

After the covid-19 pandemic, the first claim from the industry is the setting up of clear and homogeneous protocols of action, agreed between the Government, the autonomous communities (regions) and the agents of the sector (entrepeneurs and unions) with the aim of protecting a particularly vulnerable segment of the population such as the users of the residences : confinement measures, carrying out tests to identify the infected, protection of personnel, use of PPE, hospital referrals and coordination with geriatricians of the public health system, supply of medications and family visitation regimen, among others.

In addition, the nursing home industry demands the creation of a minimum stock of PPE for health emergencies . This storage can be both in the residences themselves, and centralized by each Autonomous Community or the Central Government. The maintenance of this minimum stock, in the case of being in the residences themselves, should not entail an additional cost for the residences, so it should be included in the agreed prices or be financed by Health, in the same way as is done with sanitary facilities.

Along with the lack of coordination between different levels of social and health administrations, nursing home which are not part of the health system, but depend on Wellfare Departments, have been forced to take over a series of functions that are health without having the resources and means to do so, causing a funding deficit for these functions, which are not social but health.

As a complement to the previous proposal, given that free, public health care is a right of all citizens, regardless of whether or not they reside in a residence, health personnel from the public sector should be established in residences for the elderly, covered by Administration staff through Primary Care Support Units. 

Thus, analogously to what happens in other European countries, the medical personnel of residences that have been homologated, compulsory in many Autonomous Communities, should be personnel of the public health system, whose salaries should be covered by the public sector.

Alberto Echevarría , who is also president of ECHO, European Confederation of Care Home Organizations, argues that “in this line of reinforcing medical care for nursing home users, it would be necessary to develop a comprehensive social health system that would advance from a system only focused on the cure of acute pathologies to go towards a comprehensive social health model based on care, taking into account that chronic diseases and dependency generate a large part of the social and health cost ”.

The public sector should promote the development of intermediate care services (ICS) , focused on those dependent patients who are recovering from an intervention or who require palliative care, for example. Today, neither the residences are adapted for these health services, nor the hospitals are prepared for the special care of these patients. This measure would allow the decongestion of hospitals, reducing the cost of healthcare.

Therefore, to avoid the imbalance between the agreed prices and the costs of the service, there must be an alignment between the regulatory requirements of the service and the agreed prices , in such a way that neither the former condition the cost for the user, nor the latter limit quality, which is why the budgetary development of the Dependency Law and the orientation of prices to costs would be necessary . Likewise, if we want to guarantee the maintenance of minimum standards of residences, adequately remunerate the caregiver and attract enough investment to cover the demand for places, the public prices of the concerts must be aligned with the costs, guaranteeing a minimum profitability for operators.