Low Fair Deal rates mean HSE is the real bed blocker

According to Eunice O'Raw, the Health Service Executive's head of legal services, some families who want to avoid having their parent's assets used to fund a nursing-home place are leaving them in hospital. These elderly people, unfairly and unkindly, have previously been called "bed blockers" by the HSE.

But there is another reason why elderly people aren’t in nursing homes. It’s because nursing-home beds in many areas don’t exist. Money, or the lack of it, is at the root of the problem.

The economics of nursing-home care in Dublin are very different to the rest of the country. Outside of Dublin the reason there are so few beds, relative to demand, is that it is not profitable to build and run nursing homes.

At its simplest, a nursing-home bed costs between €120,000 and €150,000 to construct (including site cost) in Dublin. To buy an existing nursing home business in Dublin costs up to €126,000 per bed. As an investment, building a nursing home in Dublin just about makes financial sense as there may be some equity left after you have built it.

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But things are very different outside Dublin. Here construction costs (and site costs) are just slightly lower at an average of around €115,000 per bed. However, if you go to sell a nursing home in rural Ireland the market value can be as low as €60,000 per bed, that's less than the cost of building the home.

Even at these prices the return on your investment could be as low as two or three per cent – after you have paid bank loans and wages. A commercial property can be let for twice that margin and does not involve the enormous amount of work nursing home operators have to put in.

Fair Deal

The difference in nursing-home values is explained by the rates paid by the National Treatment Purchase Fund (NTPF) to nursing-home operators outside the greater Dublin areas. The average weekly amount paid to nursing-home owners for NTPF Fair Deal residents is €1,008 a week in Wicklow; in Donegal it is €773 a week.

Why? Does it actually cost 24 per cent less to keep a resident in Donegal than in Wicklow? No. It’s just bureaucracy run amok and the payments should be increased reflect the true cost of care, as acknowledged by the higher payments in Dublin.

Increasing the level of payments outside of Dublin would make perfect sense. The cost of keeping a patient in a hospital bed can run to €7,000-plus a week. However, the HSE also holds the purse-strings on nursing homes – the natural home of those well enough to leave hospital, but who still need care – through the NTPF. It would seem obvious that any additional payments to nursing-home operators outside of Dublin would be more than recouped through the money saved by freeing up hospital beds.

The state of nursing-home bed numbers is already parlous. Just as those who were not listened to 10 years ago, when they said there would be a national housing crisis, the same claim can be made for nursing homes.

The State has an aging population. Central Statistics Office figures show that six years ago there were 128,000 people aged over 80 in the State. In less than 30 years – remember how long it takes to plan anything in this country – that figure will have grown almost four-fold to nearly half a million people. As the average age of a person going into a nursing home is 82, we are going to have to find many thousands of nursing-home beds over the coming years.

The HSE prefers to pay thousands of euro more keeping people in hospitals – complaining about it at the same time – rather than saving the exchequer many millions of euro by simply increasing the NTPF payment to encourage a large increase in nursing-home beds around the country.

The NTPF is in the process of reviewing the mechanism for agreeing weekly rates, so let’s hope for some common sense to increase supply. Otherwise it will be shown that the Government, via the HSE, is the real bed-blocker.

Jason Bradshaw is a partner in JPA Brenson Lawlor accountants whose clients include nursing homes