Planning for the Future
CORI Conference on Healthcare
Brian McEnery
15th February 2015
Contents
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About BDO Healthcare
Health’s Ageing Crisis Report
Facing the Challenges
Mapping a sustainable solution
Nursing Homes Ireland Survey 2015
Trends in the Sector
Governance & Culture
HIQA – its methodologies and focus
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BDO Healthcare
ABOUT BDO
Ireland
3
Three offices across
the country
500+
Over 500 partners
& staff
1st
World’s largest European led
accountancy network
1,328
Offices in over 151
countries
60,000
Almost 60,000 Partners and staff
world wide
ABOUT BDO
Our Healthcare Team
Banks &
Lending
Institutions
• The National Nursing Home Survey –
In association with Bank of Ireland &
NHI, BDO is once again carrying out
an in depth survey of private &
voluntary homes to identify the key
issues impacting on the industry at
present.
• Health’s Aging Crisis – Commissioned
by NHI this report comprised an
analysis of the supply and demand
factors at play in the nursing home
industry.
Department
of Finance /
Revenue
Private
Investors &
EIIS Funds
HSE/
Department
of Health
• Cost of Care Report – In association
with Age Action Ireland the firm
conducted a detailed analysis of the
costs associated with the provision of
older person care in order to arrive
at a ‘fair price’ for long term
residential care.
Construction
Industry
Older
Person
Care
National
Treatment
Purchase
Fund
HIQA
Nursing
Home
Operators
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Age Action
Ireland
Some of the bodies we interact with frequently..
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Working with the Voluntary Sector
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As a firm we work with about 15 Congregations
Great privilege to do so – good clients
Work of the Congregations has been invaluable to Irish Society for decades and
longer
So every Congressional need is different, therefore we offer:
Strategic reviews – route to better outcomes – find solutions not problems!
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Operational reviews – benchmarking – often labour related
Income negotiation – NTPF negotiations
Banking financial and commercial advices e.g. accessing philanthropy
Budgeting, accounting, audit and financial management
Asset management & advisory
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“Health’s Ageing Crisis”
BDO Report
A MARKET IN FLUX
Funding & Fair
Deal
Regulation
Demand (Need)
Supply
Policy
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• Fair Deal Review
• Sustainability of Scheme in Current Format
• Variance in rate and lack of transparency
• Process of negotiating the rate- no negotiation of public FDR
• Accessibility to development capital and funding
• HIQA
• Physical Environment Deadline (July 2015)
• Focus on risk based regulation
• A growing and ageing population
• Growth in the older old
• Changing levels of dependency & acuity
• Low levels of new supply entering the market
• Equity Gap
• Shrinking capacity in public and voluntary sector
• Objective of Government to provide more care in the community
• Continue to provide 20% overall bed provision
• 4.5% of over 65+ population in residential care not sustainable
DEMOGRAPHICS – KEY NUMBERS - KEY CHALLENGES
Age
2011
2021
% Growth
(2011-2021)
2031
2041
2046
% Growth
(2011-2046)
65-69
172.1
225.6
31%
281.2
333.2
354.6
106%
70-74
130.1
191.6
47%
238.3
291.1
318.7
145%
75-79
101.4
139.5
38%
192.1
245.6
269.3
166%
80-84
69.8
90.1
29%
143.9
187.4
213.8
206%
85+
58.2
85.0
46%
135.5
219.0
262.9
352%
Total 65+
531.69
731.9
38%
991.0
1,276.3
1,419.3
167%
% of Pop
11.6%
14.9%
18.7%
22.4%
24%
4.5%
23,920
32,930
44,590
57,430
63,870
Source:
CSO Census of Population 2006 + 2011 & Population and Labour Force Projections 2016-2046
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DEMOGRAPHICS – AN AGEING POPULATION
Aged Population Growth & Split by Age
• Across all 65+ cohort,
population to grow from
• 2011 - 11.6% population
• 2046 – 24% population
1,600,000
1,400,000
1,200,000
1,000,000
• 65+ population to grow
• 2011-2021 + 38%
• 2011-2046 + 167%
800,000
600,000
• 85+ to grow
• 2011-2021 +46%
• 2011-2046 +352%
400,000
200,000
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2026 2031 2036 2041 2046
65-69
70-74
75-79
80-84
85+
Source:
CSO Census of Population 2006 + 2011 & Population and Labour Force Projections 2016-2046
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BRINGING IT TOGETHER – DEMAND (NEED) > SUPPLY
Projections - Bed Demand (Need) v's Supply
40,000
38,000
36,000
34,000
Beds
32,000
30,000
28,000
26,000
24,000
22,000
20,000
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Demand for Beds
2012
26,566
2013
27,415
2014
28,293
2015
29,201
2016
30,139
2017
31,250
2018
32,405
2019
33,603
2020
34,847
2021
36,138
Supply Scenario 1
24,668
24,886
25,158
25,488
25,931
26,386
26,816
27,249
27,684
28,152
Supply : Scenario 2
24,668
24,668
24,540
24,411
24,380
24,467
24,593
24,785
25,005
25,225
Supply: Scenario 3
24,668
24,977
25,442
25,966
26,608
27,310
27,987
28,669
29,356
30,080
For the purposes of our analysis, we have equated demographic and disability driven NEED for Beds as being equivalent to actual DEMAND
for beds.
In practice, actual Demand for beds, as manifested by residents and waiting lists may be moderated by factors other than need - such as
affordability and geographic location
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BRINGING IT TOGETHER – THE RESULTING SHORTFALL
Axis Title
Projected Shortfall - Bed Demand v's Bed Supply
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Scenario 1 1,898 2,530 3,135 3,713 4,208 4,864 5,588 6,354 7,162 7,986
Scenario 2 1,898 2,747 3,753 4,790 5,759 6,784 7,812 8,818 9,842 10,913
Scenario 3 1,898 2,439 2,851 3,235 3,531 3,941 4,417 4,933 5,490 6,058
“To maintain current provision and address current capacity
issues – requirement of €834m”- Action Plan – Public
Residential Care 2013 - 2023
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• Assumptions
• Based on Likely Scenario
• Based on no reduction past 4.5%
• Based on Av home size of 80 beds
• Private:
• Bed additions : adds net 3,051 by 2021
• New Homes – equivalent to 38 new homes
• Public
• Bed additions : net additions nil
• Focus on having existing stock HIQA
compliant
• Voluntary
• Bed additions : reduction 400
• New Homes – equivalent to loss 5 homes
• NET Remaining Shortfall
• Significant growth in shortfall 2011-2021
• 2012 – 1,898 - equivalent to 24 homes
• 2021 – 7,986 – equivalent to 100 homes
Meeting Challenges ‘Head On’
Income and expenditure relationship
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The Mission in Ireland
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For many Congregations the Mission in Ireland is becoming hard to fulfil
This can be both a physical and emotional weight on the Congregation
For sure vocational decline is disappointing but…..
Its important to recognise and have recognised the value of the Religious
contribution when Irish Society most needed it in health, education
It should be a celebration of this rather than mourning lesser input going
forward
For many Congregations their strength is in lesser developed countries and
these regions need healthcare, educational and pastoral support even more
than Ireland
For many Congregations the process of supplementary lay support is well
underway to ensure the Mission also continues in Ireland
There are many ways to ensure the Mission endures!
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Optimal care setting – dependency based
Increases in
dependency
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Healthcare Solutions
Healthcare
Mission
Other Mission
e.g. education
Objective
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• Ensure Mission continues
• Ensure care solutions
exist for Congregation
• Partnership for care
• Procurement solutions
• Good care solutions
• Pastoral needs met
Where there is a healthcare Mission
Laicisation
Professionally &
Governance
Continued operation
Partnership
Joint ventures /
Management
contracts
Health & Social Care
Disposal
Sale and reuse of
resources
In all instances care of the Congressional members can be central to the solution
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Issues to consider
Investment
Action Plan
Overall plan
for
Congregation
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More non
Religious
input
Future
Governance
structures
Ageing facilities, poor Fair Deal rates & Sec 39
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For some Congregations…. Sec 39
As
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part of our strategic reviews we have:
Determined the true cost of care, having
Factored in the likely re-development cost
Worked in interest & capital repayments
Included the impact of HRA reversals
Frankly determined the rate per resident per week is not near adequate
Difficult but necessary discussions with NTPF to get an appropriate rate
Section 39 was a last minute inclusion in 2009 and is UNFAIR
Big issue for the some of Religious in care provision
Needs to be addressed and we have got some acknowledgement of the issue
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Ageing Congregations & State Supports
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Medical Cards
Drug Payment Scheme (DPS)
Homecare Packages
Carer’s benefit
Tax refund (Med 1)
Age tax credit
Community Care Services
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The Fair Deal
Financial Needs Assessment
Medical Needs Assessment
Financial needs assessment should be satisfactory
If medical needs are of a scale requiring long term care
Then 80% of pension contributed to care
Care has to be exercised for dedicated Congressional
Homes that they qualify under the NHSS – need to be seen
as generally accessible
• This has been a very positive scheme for the Religious
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Living in Community
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Care often provided within the community
Assisted Living Solutions – very satisfactory for the Congregation and the
resident
Important to have proper staffing and supports particularly with high
dependency
With lower Congressional staffing – external employees will be more involved
This brings a need for staffing processes, employment law responsibilities,
health & safety legislation
These facilities can fall to be registered by HIQA – Decision of the Chief
Inspector
In many instances settings which were not registered and now requiring
registration
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Ensuring that the Mission Lives On
• Diminishing numbers of members in recent years has lead to an increased
lay involvement in the day to day operations of many Congregations
whether that be Education, Care of the Elderly, Social Services etc.
• As a result many Orders are seeking to put in place appropriate structures
and governance systems to ensure that there is an organisation capable of
continuing the Mission even if the Congregation no longer has a day-to-day
involvement
• These structures and governance are particularly important in light of the
requirements of the Charities Act 2009
• This is not a straightforward process as it may involve the transfer of
assets and the setting up of charitable companies
• In some cases the operations of the Congregation may be significantly loss
making and reliant on donations – sustainable solutions need to be plotted
• In an environment of diminishing donations it may be necessary to review
the operating model to ensure that it is possible to continue to carry out
the Mission on a sustainable basis into the future
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Solutions need to be tailored to the needs
• No one solution meets
the needs of every
Congregation
• Solutions need to be
tailor made
• Invariably good
outcomes evolve
• Dealing with the issues
early is important
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Mapping a Path to a Sustainable Future
Securing the Mission for Future Generations
• Until recently the operations of Religious Orders in Ireland were carried
out under the almost exclusive stewardship of the members of that Order
• In recent years due to declining numbers it has been necessary to involve
lay people in this stewardship function
• The Catholic Church has recognised ‘Ministerial Juristic Persons’ in which
laity can join with religious/clergy to carry out the role and responsibility
of sponsorship of a Mission
• There is an intersection of Cannon Law, Company Law and in recent years
the Charities Act
• The process is undoubtedly complex but with the right supports and advice
it is possible to put in place the appropriate structures and governance to
continue the mission long into the future
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A Sustainable Business Model
• In the past many of the operations carried out by Religious Orders in
Ireland have been subsidised by large donations and state funding
• In recent years both sources have diminished and there are increasing
pressures to carry on operations on a more commercial basis
• Clearly, the main focus is not to generate a profit, however, it is important
to generate sufficient return to reinvest in the Mission for the future
• BDO has worked with a number of religious nursing home operators to
ensure that their nursing homes will be capable of continuing operating
many years into the future
• This has included, NTPF negotiations, strategic reviews of operations and
assistance with development and expansion
• In many cases this is not an easy process, however, it is possible to travel
the journey from a precarious financial position to a long term sustainable
future
• Sometimes the organs of state took advantage of the voluntary sector and
this has led to a lack of reserves for capital investment
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Alternative Options
• In some cases the Order may take the decision that they no longer wish to
have control of their nursing home or other operation
• However, they do not wish to see their Mission come to an end
• It is possible to ensure that the Mission be continued outside the control of
the Order by a similarly minded organisation
• Taking nursing homes as an example; it may be possible to sell or lease the
home to an operator with a compatible vision and approach to care
provision
• BDO have assisted in a number of these transactions also
• It is important for the Order to be clear on their required covenants
around continuing use for care purposes or priority of access for members
of the Congregation
• Any transfer of asset by a charitable organisation must be approved by the
Charities Regulatory Authority
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Nursing Homes Ireland – Industry Survey
Survey 2014/2015
NHI Survey 2015 - authored by BDO
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Survey sponsored by Bank of Ireland, BDO and Homecare Medical
Supplies
Survey secured responses from over one third of operators
Very detailed questionnaire
Useful for benchmarking purposes
Gives an overall sense of the sector
Survey was welcomed and launched by Minister Lynch
Minister spoke of public finance challenges
Congratulated the private and voluntary sector for their
development
Spoke of challenges in meeting the deadlines for physical
environment Standard 25
Government is studying incentives to encourage private sector
investment
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Some Important Numbers
2003
2004
2005
2006
2007
2009
2014
Rate
€557
€578
€640
€694
€778
€850
€896
Beds
14,946
16,461
17,722
17,909
18,883
20,590
22,342
Homes
408
427
431
433
435
447
437
Wage % 56%
56%
57%
60%
60%
62%
61.5%
HSE
beds
32%
41%
30%
28%
32%
9%
21%
24%
29%
22%
20%
42%
More
beds
42%
Key Stats
• Rate is the average national rate across the country i.e. €896 per resident per
week
• The trend of larger homes continues in this survey i.e. more beds & fewer homes
• Wages as a percentage of turnover stays at about 62%
• The incidence of directly funded HSE beds continues to fall - just 9% now
• Operators demonstrate a growing appetite to further develop their existing or new
homes
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Opening Numbers (Cont)
• The average national Fair Deal rate has
increased by 5% since 2009/2010 (a five
year period) - i.e. during the financial
crisis
• Overall bed numbers have increased by
approximately 8.5% or 350 beds per year
• This occurred during a time when the
total number of private & voluntary
homes has reduced by 10 homes
• The average home size is now 51 beds, up
from 46 in 2014
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Resident profile - Source of Funding
12%
3% 6%
79%
Contract
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Fair Deal
Private
Subvention /Other
Resident profile
Age Profile of Residents
0.04 0.1
<65
38
0.3
65-75
0.29
75-85
85-90
0.19
90-95
95-100
0.07
0.01
>100
Resident profile - Dependency
For the first time
2/3 of residents
are
in the high &
maximum
dependency profile
13%
38%
22%
27%
83% of respondents
use Bartel methodology
Low
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Medium
High
Maximum
What does this tell us?
• The implementation of the Fair Deal scheme has been a success from a
resident perspective, however, the State are now in a monopoly purchaser
position
• The medical needs assessment has led to more older persons being cared for
in their own homes for longer and so residents are now older when admitted
to nursing homes
• As a result the dependency levels of residents admitted to nursing homes has
increased with almost two thirds now in the High and Max dependency
categories
• These residents require a greater level of care which is driving increased
staffing requirements at homes across the country
• This trend is likely continue
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Recent Trends in the Sector
Revenues
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January 2016 saw some modest increases in
NTPF rates in NH’s
Inconsistent approach being adopted by NTPF
negotiators
Really need to be well prepared
Need to be ready for the long negotiation
Persistence is a virtue
Have a negotiation strategy well thought
through or retain a negotiator
Small increases are happening
Ever little helps when margins are under
pressure
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Costs & Margins
Labour costs are rising rapidly
Agency staffing needed
Rosters hard to fill
Recruitment fees are a large
cost
• Margins are down in the sector
• Banks are getting worried
about serviceability of debt
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Revenues
Margin falling
The Importance of Governance / Regulation
A More Regulated World
“It takes many good deeds to build a good reputation, and only one bad one to
lose it.” Benjamin Franklin
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Good deeds are not enough in todays environment
Methodologies need to be strong and fit for purpose
Lay structures are “in your name”
Ensure they are appropriate, accountable, robust
Lack of evidence of methodology is akin to not having the methodology itself
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HIQA focus
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The Physical Environment remains a real focus
While HIQA was issued with a Ministerial instruction, we retain the ability to
refuse registration or limit it where the environment manifestly causes dignify
and respect issues
HIQA encourages improvements in governance and culture within providers
These are key strengths with organisations which lead to good outcomes for
residents
HIQA is focussed on risk based monitoring and this is evident in the number of
visits which we might have with providers
Regulators can always learn and do things better, but
The sector has improved through standards and inspection
We don’t want to necessarily find fault – we want to drive improvement
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Driving Safer Services
policy
Safer
Services
Poli
cxy
Commissioning (Funding)
Regulation
Detection and
Enforcement
HIQA
Regulation
Model
Change Agent /
Quality
Improvement
Direction and
Strategic
Influence
Legislation, Regulations, Standards and Policy
Thank you for your attention
Brian McEnery
Partner & Head of Healthcare
BDO
Tel: 061 414455
Email: bmcenery@bdo.ie