Good plan­ning can make el­der­care prof­itable

Pri­vate in­vestors tend to build such homes in re­mote ar­eas and charge con­sid­er­able amounts for their ser­vices.

China Daily (USA) - - VIEWS -

As China presses ahead with sup­ply-side struc­tural re­form to boost the ter­tiary in­dus­try and im­prove peo­ple’s liveli­hoods, el­der­care has be­come a po­ten­tially prof­itable busi­ness and a key fac­tor pro­mot­ing so­cial har­mony.

At the end of 2015, China had more than 222 mil­lion peo­ple above 60 years of age, or about 16.5 per­cent of the to­tal pop­u­la­tion. And about 11 per­cent of them (24 mil­lion) were aged 80 years or above and 16 per­cent (37 mil­lion) were phys­i­cally chal­lenged or par­tially phys­i­cally chal­lenged.

The de­mand for special care for se­nior cit­i­zens is high, yet only a lim­ited num­ber of them (25 per­cent to 30 per­cent) can af­ford it. A 2014 study on old-age pen­sion showed the av­er­age cost for a pri­vate nurs­ing home was as high as 2,100 yuan ($320) a month while the av­er­age monthly pen­sion of peo­ple who re­tired as em­ploy­ees of en­ter­prises was just 2,000 yuan, and 60 per­cent to 70 per­cent of them re­ceived less than that.

As part of the sup­ply-side struc­tural re­form, some lo­cal gov­ern­ments have started oper­at­ing nurs­ing homes as a van­ity project, equip­ping them with thou­sands of beds— far more than needed. On the other hand, pri­vate in­vestors such as prop­erty de­vel­op­ers and in­sur­ance com­pa­nies tend to build such homes in re­mote ar­eas and charge con­sid­er­able amounts for their ser­vices. And not sur­pris­ingly, both types of ser­vice providers, be­cause of low oc­cu­pancy lev­els, are strug­gling to even re­pay their loans.

Only a struc­tural over­haul can fix this im­bal­ance be­tween sup­ply and de­mand.

There is no rea­son to as­sume gov­ern­ments at dif­fer­ent lev­els are obliged to pro­vide fi­nan­cial sup­port and land for old-age homes. To turn the po­ten­tial de­mand of phys­i­cally chal­lenged se­nior cit­i­zens— not all but those who can af­ford to pay— into prof­itable mar­ket de­mand, the gov­ern­ments should of­fer so­cial and com­mer­cial in­sur­ance, proper sub­si­dies and fa­vor­able poli­cies.

Be­sides, un­used prop­er­ties could be turned into el­der­care es­tab­lish­ments. Against the back­drop of the eco­nomic “new nor­mal”, run­ning nurs­ing homes can be­come prof­itable once the busi­ness is put on the right track. This is cru­cial be­cause China’s ag­ing pop­u­la­tion is ex­pected to peak by the middle of this cen­tury and re­main at that level for an­other 50 years.

Nor­mally, the profit mar­gin of an old-age home with less than 400 beds can be be­tween 5 per­cent and 8 per­cent, or even higher, if its oc­cu­pancy rate is 80 per­cent or more. But it will take a fewyears and ef­fi­cient man­age­ment to make that sort of profit.

A suc­cess­ful nurs­ing home should be able to pro­vide mod­er­ate fa­cil­i­ties, flex­i­ble ac­com­mo­da­tion and qual­ity ser­vices. In other words, the ac­cept­able monthly The author is a re­search fel­low at the Charhar In­sti­tute. Cour­tesy: chin­aus­fo­ cost of old-age homes should be about 5,000 yuan ($751.5) per se­nior cit­i­zen in me­trop­o­lises such as Beijing and Shang­hai, and less than 3,500 yuan in other cities. The num­ber of beds, too, should be be­tween 200 and 400.

As for ser­vices, daily nurs­ing care and re­ha­bil­i­ta­tion, ex­clud­ing med­i­cal treat­ment, should be the pri­or­ity of all nurs­ing homes, which would re­quire them to em­ploy trained nurses for the pur­pose; to meet the med­i­cal needs of the el­derly they have to em­ploy re­tired doc­tors.

And sign­ing agree­ments with hos­pi­tals in the neigh­bor­hood to en­sure fast-track med­i­cal treat­ment for se­nior cit­i­zens will be the cherry on the cake. The author is a so­cial pol­icy re­searcher at the Chi­nese Academy of So­cial Sciences.


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