Cashing in on care — the UK and Europe

“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,” Eileen Chubb, who runs the charity, Compassion in Care, describes to Investigate Europe her horror last March as Europe’s care homes were ravaged by Covid. News bulletins reported that residents were abandoned to fend for themselves, while workers had to manage without proper protection. And the death rate amongst residents climbed higher and higher.

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

The picture across Europe is not a pretty one. It is no coincidence that almost half of all Covid deaths in Europe were care home residents.* “It went through care homes like a fire,” says Chubb, who talks about getting calls from terrified staff in care homes in Spain and Italy.

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

In 2019, an OECD study had raised concerns about structural problems in elderly care and concluded that there were “inadequate staffing levels, poor quality of work and lack of qualifications, which come at the expense of quality of care and safety.” And when Covid came, “we saw it in motion”, says Chubb.

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, explained 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. Described 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 are reluctant to confront Europe-wide. The UK government has yet to publish its long-promised social care strategy; the Polish government is equally reticent.

And while the models for elderly care across Europe may vary, the need for more money is almost universally agreed upon. The question is where this money should come from.

Enter the private sector

Commercial data provider and Investigate Europe’s research show that the private sector now leads the way in Spain at 81 per cent, the UK is now in second place with 76 per cent, down from the 2019 figure of 84 per cent. Other countries’ figures include: Austria (49 per cent), Germany (43 per cent), Portugal (29 per cent), Sweden (23 per cent), France (23.9 per cent) and Belgium (21 per cent).

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

The attraction to the private sector is clear. Christine Corlet Walker, Doctoral Researcher at the Centre for the Understanding of Sustainable Prosperity, told us “they 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 was an attractive market. Folkman explains that “this was a sector that was poorly run” and as the state out-sourced more things, the private sector could develop more efficient models and “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 on. Vivek Kotecha, the author of Plugging the Leaks, tells Investigate Europe that “it’s a stable kind of investment, which is low risk, relatively low return”. 

So when headline-grabbing dividends of £48.5 million over two years are paid out by the 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,” says Kotecha. “And it’s being used to support rates of return that seem out-sized, given the risk that’s involved in the service, and seem to generate profit levels that seem really high given what it should be for a labour-intensive industry.”  

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, often by pension funds, that has the sole aim of maximising profits. This can be achieved by putting “in a lot of debt in,” according to Folkman. “If you’re going to be paid a pension, your pension fund needs to make a return.”

Unlike the private investment of the kind seen by the larger chains — Orpea, Korian and their ilk, that dominate in many parts of Europe — the 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 do this, they are nevertheless still in the business of providing care services and have shareholders invested in this — albeit for their return on investment.

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

Southern Cross and Four Seasons were both private equity funded UK care home providers that collapsed in recent years. “The underlying problem is 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,” says John Spellar, Labour MP who has long warned about private equity’s involvement in care.

The UK may lead the way in private equity investments — nearly one-fifth of the 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 PE companies own 2,834 care homes in Europe with nearly 200,000 places; 57,000 of these are in Germany.

Care, not profit

Many have called for stricter checks and controls in the sector. “Proper regulation gives you the best chance, and you give the regulator strong powers,” says Jon Moulton of the private equity firm, Better Capital “If the companies aren’t performing, then they can move in, hard; takeover put it into a protective receivership.”

Eileen Chubb, though, doesn’t have much faith in the regulators. “They‘re not seeing the reality, what they’re seeing is a brushed-up performance for that hour or two — just for them.”

There is also financial oversight which can involve very complicated structures, often in multiple jurisdictions, explains Kotecha. “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.”  

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 profit, it’s easy to lose sight of providing care that goes beyond the basics of keeping people comfortable.

Matt Egan, National Care Officer at Unison, one of the UK’s largest trade unions, 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.”

And not being able to have a conversation is the least concern of many families of residents who have told us harrowing stories of loved ones receiving poor care: of untreated bedsores, missed medication, urine-soaked clothes and sheets not changed. The complaints have come from all over Europe and while these may be extreme examples, they’re too numerous to be dismissed as one-off events. Care workers too share a common experience — not 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 activist and working as a care worker in the UK, sums it up: “Governments try to pass on the 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.

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

This article is a co-publication with our media partner, OpenDemocracy.

*Based on data from 21 countries, in October 2020, the International Long-Term Care Policy Network (LTCPN) estimated that 46 per cent of those who died from or with COVID-19 during the first two waves had been elderly care home residents. Later, in February 2021, the percentage decreased to 41 per cent.  Taking into account all the limitations in data collection, the researchers estimate that the proportion of Covid-19-related deaths that occurred in long-term care facilities by early October was 35 per cent in Denmark, 53 per cent in Norway and 63 per cent in Spain. In Scotland, 46 per cent of all Covid-19-related deaths occurred in nursing homes. In Finland, 42 per cent of all Covid-19-related deaths occurred in 24-hour elderly care units. In Germany, researchers calculated that 49 per cent of all Covid deaths could be linked to nursing homes.