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More smaller nursing homes set to close as rising costs and ‘Fair Deal’ disparity takes hold – author of Nursing Homes Ireland/BDO report

Monday September 5, 2022

Findings of report also reveal:

  • Donegal has lowest fair deal rate – up to €859,040 less than Dublin per annum for average number of beds per home
  • Planning applications up 25% nationally but 40% down in Connacht and Ulster
  • 96% of nursing home respondents say Fair Deal not fit for purpose

Monday, September 5, 2022: More smaller nursing homes across Ireland are facing closure due to rising costs while at the same time it is estimated that some 45,000 beds will be needed here by 2031, according to the latest BDO/Nursing Homes Ireland ‘Private and Voluntary Nursing Homes’ report published today.

The report, conducted in late 2021 and based on survey results for 2020, will be published at a webinar this morning hosted by BDO. It reveals the challenge facing nursing home providers in particular counties, with the disparity in Fair Deal rates/fees making it impossible for many homes in lower-rate locations to survive. Some 96% of nursing home respondents said they did not believe the Fair Deal Rate covered the operational costs of the nursing home.

The county with the lowest Fair Deal payment (as at May 2022) is Donegal, where the average weekly rate of €955 is €280 less per week than for residents in Co. Dublin (€1,235), which has the highest average weekly rate.  This equates to €14,560 per resident per annum per resident, amounting to a disparity of €859,040 per average size private & voluntary home (59 beds based on total beds/total homes) between Donegal and Dublin. Meanwhile, the Dublin public nursing home rate is 44% higher than the private nursing home rate.

The report also finds, through analysis provided by Building Information Ireland, that while planning applications were up 25% nationally compared with 2020, Connacht and Ulster – where some of the lowest Fair Deal rates exist – recorded a decrease of 40%. Granted permissions were down 31% nationally compared with 2020 and this decrease was seen in all regions with the exception of Leinster. On commencements, Dublin recorded a spike in activity which was up 307% in 2021 over 2020 figures.

Taking into account Fair Deal incomes only, respondents in the Dublin North region received the highest average turnover per bed at €63,955, with respondents in the Midwest region reporting the lowest average turnover per bed at €50,392.

The report also found that the number of persons over 65 per private & voluntary bed has risen from 24 at the time of the 2014/15 survey to 28.9 in 2022, a 20% increase and reflecting our ageing population trend and the necessity for the State to prepare for and invest in this.

Report author Brian McEnery, Partner and Head of Advisory at BDO Ireland, said that overall nursing home bed numbers decreased since the previous survey (from 31,909 to 31,743) despite the estimated requirement for 45,000 beds by 2031.   There was an increase in private & voluntary bed numbers from 26,221 to 26,561, though this was less than expected due to the slowdown of construction activity arising from Covid-19. However, the overall reduction was mostly due to a drop in the number of public beds, from 5,688 to 5,182.

The report notes the trend of smaller nursing home closures was in effect two years ago when the survey was undertaken, with it now being expedited given the current unprecedented cost pressures environment. The reduction in the number of homes under 40 beds, those mostly located in regional areas, was largely due regulatory requirements for physical upgrades as well as rising costs, the report states. Overall, the Fair Deal rate increased since 2020, with a circa 2% annual increase, which has been insufficient and significantly less than inflation rates.

However, the average weekly rate of public homes is 58% higher than the private & voluntary home average weekly Fair Deal rate.

Other key findings in the report were that staff costs per registered bed accounted for 60.9% on average of turnover in respondents’ homes while dependency levels in nursing homes continue to be very high, with 55% of residents in survey respondents’ homes classified under high and max dependency levels and approximately half of residents clinically diagnosed with dementia.

“Smaller homes, particularly in regional areas, are struggling to meet existing regulatory demands and rising costs under the constraints of the prevailing Fair Deal scheme,” said Mr. McEnery. “This is a worrying trend, not least for the more sparsely populated area where these nursing homes are integral in the community but are not sustainable. Typically, these areas have low Fair Deal rates, and this combined with rising costs, is undeniably putting at risk the survival of these smaller homes, with others inevitably set to close.

“The differential between the highest and lowest rate is significant for home operators with the current rising cost environment. We do acknowledge instances whereby counties with lower Fair Deal rates have received a higher proportionate increase in rates in comparison to counties with higher weekly average rates but this was from a very low base. We hope that this signals recognition by the State to address prevailing issues with the scheme and share in NHI’s desire to see swift and effective reform of the scheme.”

Said Tadhg Daly, Chief Executive of Nursing Homes Ireland: “This year’s survey points to a reduction in the number of nursing homes with fewer than 40 beds and highlights that smaller nursing homes are facing closure or the requirement to increase capacity in order to meet rising costs.”

Mr. Daly said that there is now a body of evidence that highlights that the Fair Deal scheme is not commensurate with the reality of nursing home resident care costs. “The utter lack of confidence in how the scheme operates is reflected within the survey. It reports the overwhelming majority of providers, some 96% of them, believe the methodology for the setting of pricing care is not fair, or resident focused. Within the current unprecedented cost environment, the failings of Fair Deal become compounded. The closure of smaller nursing homes is a manifestation of the squeeze being placed upon all nursing homes, with the fee payable ignorant of the reality of regulatory and resident care costs.

“Given the critical role of the nursing home sector in a well-functioning health service together with an ageing population, there is an immediate requirement to address the under-funding of nursing home care.”