Erik Hamann, PDG de Orpea Allemagne : « Nos actionnaires font du bénéfice sur la hausse de la valeur de l’action »

Excerpts from an interview:

The four leading companies in the European market for retirement and nursing homes all come from France. How can that be explained?

Erik Hamann: In France, the care sector was already opened up to private operators in the ’80s. But there is a fixed number of licences. When these were mostly awarded, the companies could only grow abroad. In addition, service providers have much more prestige in France than in Germany. Working for Orpea makes people lick their fingers. And then there is a self-reinforcing effect. Orpea now has well over a thousand facilities. You have experience — in terms of construction and quality — that you don’t gain with small companies. So we can offer a lot of care with high quality. That brings efficiency.

All over Europe, experts complain that there are too few staff in care homes. How does this staff shortage affect your company?

Staff shortage is something relative. We meet the staffing ratios…

i.e. the legally prescribed number of nursing staff per resident in a home, at least 50 per cent of whom must be trained specialist nurses…

…The question is: Are they always the right ones? When I came here, we had a lot of temporary workers. Personally, I don’t think it’s an optimal solution. First of all, it’s a quality issue. If you know you have a project for three months and then you’re gone again, you don’t care about a lot of things. Secondly, temporary workers are more expensive. And it’s frustrating for the permanent staff. We try to make sure that the permanent workforce grows. That’s why we have a programme to train nursing assistants to become skilled workers. We invest a lot of money in that. Yes, we are also looking for staff. Nursing is personnel-intensive. We also recruit staff abroad, but that is often double-edged because sometimes the employees’ commitment to the home is missing. But it is clear that we fulfil the legal [requirements]. If we didn’t, there would rightly be an occupancy freeze.

But that doesn’t always work out. Weren’t there occupancy freezes by the authorities at Orpea facilities?

Very few. In fact, it was about temporary staff who didn’t arrive on time. But that is not a serious problem for us.

Caring for the elderly is actually a social task that all citizens and the state must fulfil —everyone has parents. What makes this service so attractive to commercial investors?

In our case, we are building something to which others attach value. That’s why there are people who invest in it. Our biggest shareholder is a pension fund in which many people from different professions are insured for pensions.

In Germany alone, experts say that there is a shortage of €5 billion a year which is needed to employ enough nursing staff. If so much money is needed, how is that compatible with dividend payments or profit transfers?

Orpea Germany pays zero dividends to its shareholder. Conversely, we receive millions from France to build the modern facilities that we are creating. We do not payout, but we receive money to invest in new facilities.

Nevertheless, the goal of Orpea SE, which is listed on the stock exchange, is to make profits. Whether that translates to a rising share value or dividends is the same. But money flows from state coffers, making your shareholders richer, while at the same time there is a lack of money to improve the quality of care.

The dividend yield is 1.1 per cent for investors. This is very low for the risk of investing in a highly regulated market. But what is the alternative? 41 per cent of the nursing homes in Germany are over 30 years old because no one invests anymore because the market is over-regulated. Who should invest? And can the state can do it better, i.e. more efficiently? Looking at infrastructure projects like Berlin Airport or Hamburg’s Elbe Philharmonic Hall, I’m not so sure.

So you think the state is not capable of investing and managing the necessary care infrastructure?

It is no coincidence that around half of the nursing home capacity in Germany is in private hands. This is because a solution had to be found quickly in the mid-1990s, parallel to the establishment of long-term care insurance. The private sector [is] much faster and more efficient than the non-profit sector or the state. That was a pragmatic solution to a concrete problem. We are not non-profit. Yes, we make profits, but the money is fully reinvested in modern care, buildings and staff training. Certainly, our shareholders benefit. But not because they receive a distribution, but because they have a share in a company that becomes more valuable. This is a paradox for some, that you can be attractive even if you have not paid your shareholder a dividend, as we have, but that is how it is.

We spoke to geriatric nurses from some of your homes who complain about poor pay and overwork. What would have to happen to change that?

What is bad pay?

Carers who only earn the minimum wage.

There are no care workers who only receive minimum wage, neither here nor anywhere else.

But you employ mostly auxiliary workers who only get minimum wage.  

The ratio of skilled workers is 50%. So we don’t employ mainly unskilled workers. But, it makes a difference whether you have training or not. Skilled nursing staff in Germany are difficult to find for less than €3,000 per month. The so-called starvation wages for skilled nursing staff may have existed in the past, but not anymore. The salaries of care professionals are now at the level of the average salary in Germany. And for the support workers, we offer to train them to become care workers. Most auxiliary workers earn close to the minimum wage for the care sector, that’s true. But then the question arises: who should pay the higher wages for them?

And yes, it is a high workload. It is a challenging job. But that is also due to the fact that there is still too much disorganisation in the facilities, for example, when employees are called out of their weekends off at short notice because it is said, « Bernhard can’t make it today, now you have to fill in ». I call that bad leadership. That’s why, in addition to training for managers, we have also introduced a duty scheduling software that makes staff scheduling forward-looking and transparent, also for the works councils. Nurses know that working in nursing is exhausting when they choose this profession. What really bothers them is when the distribution of duties is not comprehensible or when they are repeatedly called out of their free time — and then of course the consequences of fluctuation that arise from such dissatisfaction.

Experts put personnel costs in good nursing homes at around 70 per cent of turnover. In your case, it is only 50 to 55 per cent. Are you saving too much on staff?

No. We just make more turnover than others. We have comfort rooms and solutions. Our residents pay more for these. They don’t have to take these extra services, but they can. Of course, the care is exactly the same. We don’t make a two-class society in care. It has to be up to standard. But there are people who pay more for comfort solutions. With the salaries of the nursing staff, one no longer makes a profit, since the [passage of the] Nursing Care Strengthening Act III. To illustrate: for « risk and profit », the long-term care insurance funds pay a surcharge of 1 to 1.5 per cent. The profit must therefore come from other sources. Not 100 per cent of our places are comfort solutions, but the proportion is growing. Currently, about 20 to 30 per cent of residents want additional and comfort services. They want a bigger room or a better-equipped room. And they are willing to pay for that.

One of your nurses told us, and we quote: « People can’t concentrate anymore, they are just through. There are so few staff. We are trying to absorb that, we are going at the limit. Our sickness rate is high. People are busting their guts, and at some point, they can’t take it anymore. » This begs the question: do they (you?) not care about the welfare of the workers?

On the contrary — if you tell me where it is, I’ll look into it.

We have to ask the people concerned first. Do you think this is an isolated case?

I get every complaint on my desk. On average, there are maybe five complaints a month from a current staff of 10,300. That is not much. What is sometimes missing is leadership. If you are a facility manager, you have to take care of your staff. You have to talk to them and understand what is bothering them. Finding staff who are willing to take that responsibility [is not easy]. That’s why we have an academy. There, they learn about leadership and responsibility, not just to hole themselves up in their workrooms. Our understanding of responsible leadership is not to simply let care be care. There are always problems. I look into every single case.

So you think you have enough staff in your companies?

I know that we fulfil our legal staffing ratios. But there are individual cases where we can’t do it without temporary staff, who are sometimes not so reliable. We have reduced that considerably, but it is still too much. But it is not our policy to lower the legal requirements for the number of staff.

Is the statutory staffing ratio sufficient for good care?

It would be good if we had more care workers, no question. We do activation and employment programmes in our facilities. But when you get a « venture and profit » surcharge of only 1 to 1.5 per cent from the care insurance funds, the question is how that is to be financed.

Orpea, with its many facilities, could demand more staff during care rate negotiations.

Good luck with that. Our facilities always negotiate individually. Care rate negotiations are tough, I used to do it myself. The insurance companies protect their budgets. They say « staffing ratio » and look for reasons everywhere to take something else from away. They don’t give anything. But that’s not their role either. They are not there to make us happy, and from their perspective, I can even understand that.

The federal government has now obliged all care companies to pay collectively agreed wages from autumn 2022. Do you support this plan?

We think higher wages are good. And we do so out of self-interest. We are in competition with hospitals. They pay 10 to 15 per cent more than geriatric care — we have to go there too. But we are clearly against this law. It is knitted with a hot needle, just to get the issue out of the way before the Bundestag elections. The financing is not serious. At least 4 to €6 billion are missing for what is planned. That’s writing a bad cheque. You also cannot extend a so-called collective agreement, which was concluded by a trade union representing not even one per cent of the employees and with a so-called employers’ association like that of Arbeiterwohlfahrt, to 100 per cent of the employees. Here is what will happen: The collectively agreed wages describe the lower edge of what they have to pay the employees. But the collectively agreed wages also describe the upper edge. Because of this, the health insurance funds will say there is this collective agreement and anything above it is uneconomical. Assuming you take the collective agreement for the public sector — the TVÖD, a collective agreement that has been completely irrelevant in nursing up to now — you will find that it allows a comfortable life in Emden, but not in Munich Schwabing. People don’t want collective agreements, they want higher wages….

…and above all, they want more colleagues…

…I think so too. If the nurses wanted collective agreements, they would be members of Verdi and would strive for it. But they aren’t. This collective agreement will only define a maximum wage. This is egalitarianism of the worst kind. The insurance companies will say that the personnel costs of nurse XY with so and so many years of experience are €3233.70. But you want to pay €3800 just because she lives in Schwabing. We won’t do that. Do you know what will happen then? No one will build any more new nursing homes. The problem with such collective agreements is the lack of flexibility.

The car industry has a lot of regional flexibility in its collective agreements. Why shouldn’t that also be possible in the care sector?

And who do you negotiate with then?

We’re asking you that. The compulsory collective agreement has been passed in the Bundestag. With whom will you negotiate the corresponding agreement?

We pay according to performance and we pay according to the market so that we get our skilled workers and support workers. I don’t see myself doing anything different from what I have done so far. We will see how the implementation goes.

But couldn’t you refinance the higher wage costs through public care insurance?

Not everywhere — I refer to my Schwabing example. The Tariftreuegesetz means that you won’t actually get any more staff there. There, you already pay more than TVöD. In Bavaria, by the way, that’s what most people in the sector do. That is not the case in Friesland.

You can also negotiate regional collective agreements. What is the problem?

Once again, collective agreements do not make sense for our sector, on the contrary, they inhibit investment and innovation. Then the trade unions should become powerful in striking or effective —as the law says. Then they should convince members. But they don’t. There is hardly anyone who is a member in the care sector, probably less than one per cent of the care workers. Interestingly, the unions do not disclose their membership figures.

But your company also tries to discourage workers from organising. In Bremen, the management even dismissed a chairperson of the works council, although this is not possible under German law. The labour court promptly declared that null and void. Why do you do things like that?

Our facility, Senioren Wohnpark Weser, aims to establish a trusting cooperation between the works council and employer, as is the case with works councils in other regions. In this specific case, however, various facts need to be legally clarified. The fact is: We have not yet terminated the contract, but we have requested the consent of the works council body, which is required for termination. The procedure has not yet been decided. We have not taken this decision lightly. We believe that we will be successful in the end.

Your lawyer announced that you would have the person in question constantly monitored in the future. What is such a threat supposed to achieve?

I will not comment further on the proceedings here and now for legal reasons. It is a pending case.

Another example: You banned a trade union worker from your premises when he tried to advise the workers in Leer on how to form a works council.

If someone comes into a nursing home without registration and puts up posters without being asked, this is unlawful. Nursing homes are private, protected living spaces and not station halls.

Then there was the first election meeting at the facility where the management sent lawyers to observe the workers. That looks like intimidation.

I am not familiar with that. Where and when was that?

And, a European works council was to be established and the group management systematically delayed this until the legal window for a consensual agreement had passed. Why was this done?

As Managing Director of Orpea Germany, I am responsible for the facilities in my country. I cannot and will not comment on issues outside my area of responsibility.

Our research gave the impression that a pattern is being repeated here. Are there instructions from Paris to obstruct the work of trade unions as much as possible?

I see no pattern and there is no directive of this or similar kind from Paris. Again, as CEOs, they are responsible for their country and their institutions.

Do you have no problem with workers organising and forming works councils?

No, not at all. I myself was the managing director of municipal nursing homes in Mannheim. I had politicians and works councillors on the supervisory board, e.g. from the two big parties. The most constructive ones were the works councils. They were also the ones you could rely on and whose word was good even when everyone else was mainly giving window-dressing speeches. The works councils represented the people who work in the company for the long term, for whom the company is a question of their own existence. I think that’s good. And you can then also run the facilities with the help of a works council.