Residential care concepts offer a solution for health care institutions

Abstract

The sustainability of current healthcare systems is threatened by several societal and economic developments, including an aging population, an increase of unmet medical needs and rising healthcare costs. The consequence of these developments gave rise to new healthcare legislation. These new healthcare legislations force health care institutions to become financially responsible for the profits and risks of their real estate investment. In the Netherlands there are about 1,300 caring homes and some 340 nursing homes with a capacity of respectively 100,000 and 65,000 places. The standard elderly care institutions offer nursing care and residential care as well as homecare from various locations and also on location. These locations may either be owned by the health care institutions or be rented from housing associations or other private parties. A combination of owned and rented locations is also possible. Housing associations own more than 50,000 units of these caring homes. The nursing and caring capacity will diminish over the coming years, due to reform in the government policy that elderly people should live as long as possible independently, but also as a result of the growing need of this elderly people to live independently as long as possible. The vacancy risks for housing associations and health care institutions are increased due to a number of new healthcare legislations. First, of all from 2018 onwards, the health care institutions will bear the entire risk of vacancy. This is due to the gradual introduction of the so-called normative housing component (NHC). In contrast to the past, health care institutions will get fees which will be linked to the actual number of clients in the healthcare facility. No client, no fee. Because of this the health care institutions it is expected that they will have significantly lower incomes due to vacancy. Second, contrary to the former situation, the residential- and care component are now separately funded and financed. The client pays for his/her residence rent, whereas received care is separately paid for by the Health Insurance Act, Social Support Act (SSA), Exceptional Medical Expenses Act (EMEA) and possibly own resources. For caring homes (for example, caring homes with large common areas) the housing costs may be bring along higher costs than the rents of a room or apartment that the caring homes can ask. This makes renting these homes financially unprofitable. For health care institutions with elderly care real estate, it is important that both the services offered by them as well the real estate owned by them will be involved in decision making and is thus properly addressed in the underlying business model. This is important because in the past, caring homes were often an important source of the revenues, which was invested in the nursing homes. Health care institutions must also respond to the opportunities offered by the new playing field by better addressing the needs of their (future) clients. The aim of this research is to gain insight into how real estate can offer opportunities for business operation by developing Residential Care Concepts in conjunction with a real estate strategy as an input of their business model, to better deliver care and services to elderly.