Can Europe Make It?: Analysis

Europe’s elderly care problem

Europe’s care homes have seldom been out of the news during the COVID crisis. Why is this sector so understaffed and underfinanced?

Juliet Ferguson
22 July 2021, 12.01am
It's estimated that 41% of COVID deaths in Europe were care home residents
Matthew Horwood / Alamy Stock Photo

“You could see what was coming… and it was like your worst nightmare. Because you felt like, oh my God, I’ve never seen anything like this before,” says Eileen Chubb, who runs the charity, Compassion in Care, describing her horror last March as Europe’s care homes were ravaged by COVID. News bulletins reported residents abandoned to fend for themselves and workers forced to continue their jobs without proper protection. And all the while, the death rate among residents climbed higher and higher.

Chubb says the situation that unfurled when COVID reached the UK was “horrendous” but, for her, sadly not surprising. For years, she has campaigned on the behalf of elderly people, who she says are “treated as separate citizens in this country, but [with] less rights”.

The picture across Europe was not a pretty one. It is no coincidence that in February, the International Long-Term Care Policy Network estimated that 41% of COVID deaths in Europe were care home residents. “It went through care homes like a fire,” says Chubb, recalling receiving calls from terrified staff in care homes in Spain and Italy.

Both Spain and Italy, along with Belgium and the UK, have since been accused in reports by Amnesty International of being in violation of human rights and residents’ right to health, as well as abandoning old people to die, citing structural problems, underfunding and under-staffing as reasons.

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In 2020, an OECD study raised concerns about structural problems in elderly care and concluded that there was “insufficient staffing, poor job quality and insufficient skills, all of which have a toll on quality of care and safety.” When COVID came, says Chubb, “we saw it in motion”.

Against the backdrop of an ageing population and increasing life expectancy, governments across Europe are struggling to find ways to care for people in their final years. Peter Folkman, British venture capitalist and Honorary Professor at Manchester Business School, explains that elderly care “is expensive, and [governments] don’t want to do it; they do it, but there’s not enough money”.

This has been the case for decades. Referred to in the UK’s Griffiths report back in the 1980s as “a poor relation; everybody’s distant relative but nobody’s baby”, how to fund social care is a question that governments Europe-wide are reluctant to confront.

Enter the private sector

Privatisation opened up a huge market for private corporations and investors across Europe. Most of the revenue from care homes comes from the fees, which are largely paid by the state. According to the OECD, state funds transfer around €218bn to care home operators each year, with a further €65bn paid by the residents or their relatives.

Research from commercial data provider and Investigate Europe (IE) has found that the private sector now leads the way in Spain, where 81% of care homes are privatised, followed by 76% in the UK (down from the 2019 figure of 84%), 49% in Austria, 43% in Germany, 29% in Portugal, 23% in Sweden and France, and 21% in Belgium.

There’s a lot of public funding going in, but it’s not being spent well

The attraction to the private sector is clear. Christine Corlet Walker, doctoral researcher at the Centre for the Understanding of Sustainable Prosperity, told Investigate Europe that care homes “have a stable cash flow, because we know that, over the long-term, the population is ageing, and those people are going to need social care.”

And in the early days, this indeed was an attractive market. Folkman says that “this was a sector that was poorly run” and as the state increasingly out-sourced things that had previously been managed in-house, such as catering and cleaning, the private sector could develop more efficient models. This meant it could, he explains, “build new care homes that are to scale; where they can put in decent management: 60 rooms rather than 20 rooms, and put in proper controls”.

But once the efficiencies have been made, it’s a difficult sector to make big profits from. As Vivek Kotecha, author of ‘Plugging the Leaks’, says: “It’s a stable kind of investment, which is low risk, relatively low return.”

So when headline-grabbing dividends of £48.5m over two years are paid out by UK care home-provider HC-One, many would question where this money is coming from and if greater public funding would actually lead to better care or just bigger dividends.

“There’s a lot of public funding going in, but it’s not being spent well. And it’s being used to support rates of return that seem outsized, given the risk that’s involved in the service, and seem to generate really high-profit levels, given what it should be for a labour-intensive industry,” says Kotecha.

High returns for pension funds

What has happened, and is particularly marked in the UK, but can also be seen in other European countries, is known as financial engineering. This is an investment by private equity – often pension funds – that has the sole aim of maximising profits. This can be achieved by putting “in a lot of debt… If you’re going to be paid a pension, your pension fund needs to make a return,” explains Folkman.

Unlike the private investment seen by larger chains such as ORPEA, Korian and their ilk, which dominate in many parts of Europe, these private equity funds aren’t in it for the long-term. And while these private companies have a strong profit motive and adopt many of the same methods (offshore companies, driving down costs) to achieve this, they are nevertheless still in the business of providing care services and have shareholders invested in doing so – albeit for their return on investment.

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High levels of debt to maximise profit bring with them high levels of risk, and it doesn’t take much – an increase in the minimum wage, or a cut in government spending, as happened in the UK with austerity measures after the financial crash, for example – for the business to fail.

Both Southern Cross and Four Seasons were private equity-funded UK care home providers that collapsed in recent years. “The underlying problem is that private equity finance is debt-loaded… this is not unique to this sector, but, of course, obviously, the human impact is greater in this sector,” said John Spellar Labour MP, who has long warned about private equity’s involvement in care.

The UK probably leads the way in private equity investments – nearly one-fifth of the social care sector is taken up by the big five providers, three of which are private equity-funded – but it is not unique in turning to this method of funding. According to IE research, 30 private equity companies own 2,834 care homes throughout Europe with nearly 200,000 places.

Care not profit

Many have called for stricter checks and controls to deal with companies performing badly: “Proper regulation gives you the best chance, and you give the regulator strong powers. If the companies aren’t performing, then they can move in hard to take over and put it into a protective receivership,” Jon Moulton of the private equity firm, Better Capital, told Investigate Europe.

Eileen Chubb doesn’t have much in faith in regulation. “They’re not seeing the reality, what they’re seeing is a brushed-up performance for that hour or two – just for them,” she says of Care Quality Commission visits to care homes.

And there is also financial oversight, which can involve very complicated structures, often in multiple jurisdictions. “Whether we want to put all that effort into regulating – that’s a question about what kind of complexity do we want to allow in an essential service,” explained Kotecha.

Many have questioned whether the profit motive – not just private equity – can ever be compatible with delivering good care, as the pressure to cut costs will inevitably lead to reduced staffing levels in this labour-intensive sector. When the focus is solely on the profit, it’s easy to lose sight of providing care that goes beyond the basics of keeping people comfortable.

Matt Egan, national care officer for UNISON, explained that when staffing levels are cut, “there is not time to actually sit down and have a conversation, or to help that person do anything that they might be interested in doing. So, it’s a sort of reductive model of care that becomes quite widespread.”

30 private equity companies own 2,834 care homes throughout Europe with nearly 200,000 places

And not being able to have a conversation is the least concern of the families of many residents, who have told us harrowing stories of loved ones receiving poor care: untreated bedsores, missed medication, urine-soaked clothes and sheets not changed. The complaints have come from all over Europe and while they may be the extreme examples, they’re too numerous to be dismissed as one-offs. Care workers, too, share a common experience: not having enough time to wash and change patients, too many charges to provide adequate care, low-pay, long-hours, anti-union practices and dismissal for anyone that speaks out.

Kinga Milánkovics, an economist and an activist working as a care provider in the UK, says “governments try to pass on a liability of the state to the for-profit sector. This is the easiest solution for this problem: governments pass elderly care to companies to take the blame but in the end care workers and patients bear the consequences.”

Unless we want this neglect of the elderly and undervaluing of staff to continue, it’s time for a proper debate about something that, in one way or another, will affect all of us.

Now is the time to make social care somebody’s baby.

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