Podcast Ep 200: While the Irish healthcare system has obvious challenges it is improving by the day, says Bank of Ireland’s head of Health Sector Gráinne Henson. She warns that staffing challenges and the closure of smaller nursing homes need to be addressed.
As Gráinne Henson talks to the ThinkBusiness Podcast, the lamentable capacity issues and resulting tragedies in a hospital in Limerick dominate the airwaves and newspaper headlines.
It seems the news is never good when it concerns the Irish health sector but Henson is clear that change is coming, however slowly it may seem.
“We have an ageing population. The over-65 population is going to double between now and 2050. The over-85 population is going to triple. So there are huge capacity issues that need to be met”
Henson, a former nurse with more than 30 years’ experience in health services management, and who now leads Bank of Ireland’s Health Sector team focused on driving change across businesses ranging from pharmacies to nursing homes, agrees the challenges from a brain drain of medical talent to resource allocation to making the sector more sustainable, are problems worth solving.
Change is the cure for the Irish health sector
“Healthcare is the business of caring and your biggest asset is your staff”
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“Slainte Care, which is Government policy over several years with the aim of providing universal care free at the point of delivery, so looking at Bevan’s NHS and trying to do the same here, has to be a good thing right? For the population as a whole, we are definitely edging there. There have been changes over the last several years in terms of free access to GPs, the increase in primary and community care centres, community health teams and integrated care for older people.
“So all of these systems are trying to care for the health of the population in the local community, preventing people from going into acute hospitals and trying to ensure that the acute hospitals are being maintained for accident and emergency and scheduled care, which is the way it should be.
“There’s been an increase in home care provision over the past several years. Pharmacies have gone through huge evolution in terms of increasing their scope of practice. Recently pharmacists have been enabled to change a prescription time and extend these without the need for people to pay €70 to see a GP.”
Henson acknowledged that while there are lots of different and progressive things happening across the board, the reality is most people will in reality view the sector in the light of what is happening to them and their loved ones. “If good things are happening we probably won’t hear about them because things are working as they should.”
What she is particularly concerned about, however, is staffing issues. Ireland is facing a brain drain of talented medical professionals to higher-paying jobs in what they perceive to be better-resourced healthcare systems overseas. At the same time Ireland is recruiting medical staff from India and the Philippines with varying degrees of success.
“This is creating a conflict in terms of the private sector trying to hold on to some of these professionals who may prefer to go to work for the HSE.
“Healthcare is the business of caring and your biggest asset is your staff. It has been more marked since Covid, there’s a lot of fatigue and burnout in the sector. There were recruitment and retention issues prior to Covid. But they’ve just become progressively worse, unfortunately.”
She admits to being perplexed at why young people are going to the UK for nursing training when they should be trained in Ireland.
“One aspect is there is a huge reliance on overseas recruitment.”
Citing a PwC report, Henson noted that between 2017 and 2022 the attrition rate for staff in the private sector was 38% compared with 11% in the public sector HSE.
The real challenge for private sector operators like nursing homes is after recruiting overseas staff and retaining them for two years, many end up leaving to join the HSE where there are better terms and conditions.
“It comes down to the funding structure within Ireland. It’s well known in the media that private sector operators get less money from the Government per resident per week than the public sector nursing home. So it’s very difficult for private operators to compete with the public sector and within the current funding structure we have in place.”
The recruitment issue, she warns, is affecting the quality of care because with the constant churn of staff, new people need to be trained, ultimately impacting on the consistency of care.
Transforming nursing homes
In her recent Sector Insight report for 2023/2024, Henson noted how the private nursing home sector, across the whole size spectrum, is undergoing a turbulent period marked by economic, operational, and regulatory challenges. Staffing costs, interest rates, and related macroeconomic factors continue to impact the sector, squeezing margins.
This has resulted in a general decrease in nursing home valuations with EBITDA multiples being paid ranging from 6x-13x depending on the quality and location of the asset (Irish Nursing Home Sector Annual Report, JPA Brenson-Lawlor).
That said, H2 2023 also saw some positive developments, including a move towards equalisation of the Fair Deal Rate (FDR) (particularly beneficial for smaller rural operators), improved bed occupancy levels, and a small degree of staff stabilisation. Following the large number of smaller nursing home closures in 2022 (14 homes, avg size=30 beds), fewer closures occurred in 2023 (11 homes, avg size=42 beds), with three of those (Aperee Living Group) deregistered as a result of governance concerns rather than financial viability.
She noted the decrease in closures between 2022 and 2023 has been attributed to post pandemic stabilisation in the sector and the higher FDR.
Henson says the reality is the number of nursing homes and assisted living facilities will need to grow.
“We have an ageing population. The over-65 population is going to double between now and 2050. The over-85 population is going to triple. So there are huge capacity issues that need to be met. So between our Government Fair Deal scheme and this burgeoning [elderly] population, Ireland is a very, very attractive proposition for investors. So in recent years we’ve seen companies from Belgium, France and China all setting their sights on Ireland and either purchasing going-concern nursing homes or greenfield site to develop nursing homes.”
At the same time many of the smaller, perhaps family-run nursing homes are feeling the challenge, particularly with increased costs caused by inflation and also the reality that older nursing homes need to be modernised.
The Irish Government has released draft design guidelines for future nursing homes that will create a framework for homes that are more community-oriented. “It’s going to be really interesting to see how this plays out. At the moment there are nursing homes with up to 190 beds. This guideline will change the trajectory in terms of economies of scale and investors wanting to reduce the overheads per resident. The new guidelines will cap all future nursing homes at 84 beds, which will be divided into 12-bed households.
“This is going to be challenging for the sector. It could cost up to €300,000 per bed to build a nursing home, compared with €110,000 in 2017 and €162,000 in 2022.”
Another trend to watch is the rise of assisted/independent living units. She cited The Grove development at Marymount Care Centre which has developed 12 independent living units as a model for the future.
“Over the next five-to-10 years we’re going to see new models of care that will be attractive to our generation and the generations behind us.”
A fundamental issue for the sector will also be sustainability and the reality that nursing homes are a high energy consumption business. “There are other aspects to the ESG question, such as the ‘S’ for social aspect and connecting with local communities and groups such as the local creche or the Men’s Shed, simply strengthening community links, which also increases the reputation and credibility of the nursing home.”
Looking to the future, Henson believes increased funding will eventually help to resolve capacity issues in hospitals. “I have faith that primary care initiatives in the community such as getting GPs access to diagnostics and the ability to order X-rays and MRI scans as well as pharmacists being able to prescribe for minor ailments will all help to relieve acute pressure. So much has happened since Covid in terms of telemedicine. I think there have been a lot of positives and we will get a health service we can be proud of.”
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