Ireland’s nursing homes are facing an existential threat

Have you ever imagined yourself or a loved one as an older person being cared for in a nursing home? There’s a good chance you have visited a nursing home or have some connection with a home in your community and observed the person-focused, specialised care in place there.

Unfortunately, this specialised health and social care provided by our private and voluntary nursing homes is facing a very real threat to its survival, at exactly the time when a strong and resilient sector is needed most. The number of people aged 85 and over increased by 25 per cent between 2016 and 2022. In the next 20 years, this demographic is forecast to double – and will be most dependent upon the requirement for the person-centred, round-the-clock care provided by nursing homes.

Yet, in the last three years, 31 private and voluntary nursing homes have closed, equating to the loss of 915 beds from the sector. Last year alone, 18 nursing homes closed and just four new homes opened. The immediate requirement is to stem further closures.

The loss of the services provided by nursing homes within communities is devastating for residents, their families and friends. Closures entail nursing home residents moving out of communities they’ve lived in all their lives. This has knock-on effects for residents, particularly in terms of visitors, social activities and links to their general practitioner or pharmacy.

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A new independent report by PwC lays bare the issues facing the private and voluntary nursing home sector. Entitled Challenges for Nursing Homes in the Provision of Older Persons Care, it is based on PwC’s engagement with sector stakeholders, an independent survey of private and voluntary nursing homes, and analysis of publicly available information and research.

The findings are sobering: over the past five years, the cost of caring for a nursing home resident has risen by 36per cent. The costs that we all see increasing in our daily lives – food, rent, energy, staff – are hitting nursing homes hard.

Against a backdrop of the Department of Health and ESRI projecting requirement for an additional 10,000 nursing home beds come 2030, financial viability is critical

Staff shortages are pushing employment costs higher and forcing nursing homes to rely more on higher-cost agency workers. Energy costs alone rose 71 per cent between 2020 and 2022, with the Government’s Temporary Inflation Payment scheme covering less than half the cost of the increase. Food costs have risen 13 per cent in two years and are forecast to rise further.

At the same time, the care requirements of nursing home residents have become more complex: 50 per cent of nursing home residents are aged 85 or older and 56 per cent have a form of dementia, according to the PwC analysis.

Unlike other sectors, nursing homes cannot reduce energy usage, trim their food bills or lay off staff. They cannot simply increase their fees, which are fixed through the Fair Deal scheme. It was first put in place in 2009 and involves the National Treatment Purchase Fund (NTPF) setting rates with registered private and voluntary homes.

[ Nursing home providers warn of potential ‘tidal wave’ of operators leaving Fair Deal ]

The Fair Deal rates are primarily based on historical financial data from nursing homes and typically fixed for 24 months. The PwC analysis shows that weekly rates for the Fair Deal scheme in the private and voluntary sector have risen by just 3.1 per cent a year since 2017, less than half the rate of increase in homes’ operating costs.

This mismatch has clear negative consequences: 33 per cent of nursing homes surveyed by PwC reported an operating loss in 2022. As recently as 2017, 100 per cent of those homes were operating on a sustainable basis.

Against a backdrop of the Department of Health and the Economic and Social Research Institute projecting requirement for an additional 10,000 nursing home beds come 2030, financial viability is critical. Older homes need renovation and adaption to meet the requirements of the Health Information and Quality Authority (Hiqa) but the development cost per bed has risen by 47 per cent since 2017, according to PwC.

The warning is stark in this regard: no new nursing home capacity will be added as long as the prospective returns on investment remain lower than development costs. Our population is ageing at the fastest rate in Europe, our nursing homes are facing a viability crunch and the number of new beds coming on stream is facing a collapse.

Analysis commissioned by the department and undertaken by independent organisations point to Fair Deal not recognising the reality of nursing home residents care needs. Hiqa, as regulator, has called for a reformed funding model.

So, what can be done? The National Treatment Purchase Fund must immediately be given the financial resources to prevent further nursing home closures. Unlike other times in the past, the State is well funded to address this issue, with a daily debate about how best to allocate the multibillion-euro budget surplus from windfall corporation taxes.

[ The Irish Times view on the Fair Deal nursing home scheme: time for a proper review ]

A pricing mechanism must be developed that, unlike the current model, recognises an individual resident’s care needs, the operating environment for nursing homes and all the associated costs. A properly constructed system of care services and fees could facilitate the removal of additional service charges in the sector.

Finally, for the sector to remain viable in the longer term, there must be a clear business case for new nursing home developments, as well as the upgrade and expansion of existing homes. This means that nursing home providers can have confidence in having the required long-term return on their investment, which is not currently the case.

Once an overhauled Fair Deal scheme is in place, the path for new developments can be smoothed by proper planning engagement between stakeholders, similar to the model for developing primary care centres. With this three-pronged approach, the future of nursing home care can be secured.

Because this is not just an issue that affects nursing home providers. It affects their residents and residents’ families, staff and suppliers, and local communities. It affects anyone who may require nursing home care at some point in the future. Our health service and acute hospital system require nursing homes to facilitate thousands of discharges every year. It is a critical societal issue and simply too important to ignore any longer.

Tadhg Daly is chief executive of Nursing Homes Ireland