As a privileged witness in the field, it seemed useful to us to explain the reasons that drive shareholders of nursing homes to sell their establishment (article below) and to analyze the sale process as well as the consequences for the various stakeholders (following article). These articles only deal with the situation in the Walloon Region, as the subject matter varies greatly from one region to another.
It must be noted that the manager of a family-owned entity faces numerous difficulties. Combining the human approach so necessary for managing end-of-life care with an increasingly heavy regulatory and financial burden often proves to be akin to squaring the circle.
Let us summarize the main challenges that the manager must face:
Overwhelming Demand. The aging of the population inevitably leads to growing demand, which unfortunately is not sufficiently met. Nursing homes, across all regions and sectors combined, post an occupancy rate of practically 100%. This shortage of places is explained by the moratorium put in place in 1998. With budget control in mind, an agreement between the federal government and the communities set the number of beds at 130,000 for Belgium as a whole, including 49,000 for Wallonia. A meager allocation in 2012 (612 beds in the Walloon Region, representing an increase of barely 1.2%) helped slightly relieve the demand. The consequence of this situation is that residents enter nursing homes increasingly late—over 80 years old on average—and in poorer health. Managing these increasingly heavy cases and waiting lists is a initial source of stress encountered.
Complex Regulation. In order not to lose their operating permit, issued by the mayor on the advice of the Walloon Region, the manager of a nursing home must satisfy a multitude of standards:
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Management: holder of the required diploma;
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Staff: adequacy of medical staff relative to the number of residents and their degree of dependency, night watchman, etc.;
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Fire safety: fire-resistant (RF) partitioning, door width, detection system, dual evacuation path, etc.;
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Building: room size, sufficient glazing, private bathroom/washroom, nurse call system, height-adjustable bathtub, corridor width, etc.;
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Technical installations: periodic inspection of heating, electrical system, fire detection central unit, elevators, and even the drainage system;
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Care: nursing office, medication intake monitoring, care tracking, etc.;
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Kitchen: compliance with HACCP standards, kitchen layout, food traceability, display of menus, etc.
These standards are constantly evolving. The beginning of this year saw the implementation of the "2015 Standards," introducing new constraints. The manager is forced to periodically review the operation of their institution and, in some cases, to carry out major works. Unannounced inspections by the Walloon Region are often a source of irritation because there are always items to point out, even when doing everything possible to keep the home well managed
Strict Financial Framework. The resources of a nursing home come from two main sources, each being strictly regulated. On the one hand, the lump-sum allowance granted by INAMI covers the costs associated with caregiving staff (nurses, nurse aides). A complex calculation, taking into account the number of residents, their level of dependency (Katz scale), and actual bed occupancy, is carried out for the reference period (July 1st to June 30th) preceding the current year. This lump sum, set annually, determines the amount to be paid quarterly by INAMI to the nursing home. In the event of insufficient caregiving staff, severe sanctions are imposed, reducing the lump sum almost to zero, which leads the manager to adopt prudent management by aiming for a slight surplus of caregiving staff.
The recent regionalization of this INAMI component, following the sixth state reform, raises fears that the lump-sum allowances will be revised downward due to budgetary constraints.
The other source of revenue comes from the daily accommodation rate, paid by the resident as "rent" for their room. This rate, highly variable from one establishment to another, is controlled by the Ministry of Economic Affairs, which strictly limits the possibility of rate increases. The accommodation rate covers practically all services provided by the nursing home, strictly limiting the extra charges that can be requested (for example: diapers, etc.).
This financial framework leaves little room for creativity.
When the institution is in financial difficulty—and it is generally accepted that the breakeven point for a nursing home lies around 60–70 beds—what options are open to the shareholders? The sale of their establishment is often, much against their will, the only reasonable solution.
We will see in a subsequent article the different forms these sales can take, the valuation formulas used, as well as the consequences of these transactions for residents and families.
