BRRS partner Markus Ritterrath explains four key influencing factors
So far in 2023, a striking number of large nursing and retirement homes have filed for the opening of insolvency proceedings, such as the Convivo Group at the end of January 2023. Markus Ritterrath, BRRS partner and location manager in Bonn, was also appointed insolvency administrator for a retirement and nursing home that was unfortunately unable to continue as a going concern. This is not an isolated case – and there are special reasons for this, which Markus Ritterrath explains in this article.
Four factors are driving the crisis in the care sector
The care sector has changed in recent years. Four decisive factors have intensified or changed, which every organisation has to deal with.
Factor 1:
Inflation and price increases
Factor 2:
Care reform
Factor 3:
bureaucratic requirements
Factor 4:
Shortage of skilled labour
Higher costs are a major burden
We are currently experiencing inflation in Germany, which means that prices have generally risen. Not least due to the Russian war of aggression against Ukraine, utility costs have risen significantly in some cases. Last winter, people were urged to heat less and conserve resources. The Federal Environment Agency has recommended reducing room temperatures to 17 to 20 degrees during the day in winter to save costs. This is not possible in a retirement and nursing home and would lead to health problems for the residents. In addition to the rise in ancillary costs, there are also other cost increases. For example, the procurement of food in such facilities is also regulated. Not just any caterer can deliver, but only suppliers specially certified for the healthcare sector. As a result, the facilities have to bear higher costs.
Wage increases and more staff
Added to this is the implementation of the care reform, which is a significant cost-increasing factor. The coronavirus pandemic has once again emphasised how important and vital the care sector is. Accordingly, a gradual increase in nursing wages was decided with the Healthcare Further Development Act (GVWG). The increase in labour costs is just under 20%. The staffing ratio was also changed. For example, where previously one specialist had to be present on each shift, two specialists now have to work. In addition to the increased labour costs, this also led to the need to hire additional staff. In view of the shortage of specialised staff, however, new recruitment was only possible to a limited extent. The measure makes sense for staff and residents, but results in considerable additional costs for the facilities.
Bureaucracy and negotiations on care rates
The care rates were last increased in 2017 and were not adjusted upwards, particularly in the course of the approved care reform. It is not possible for a facility to pass on the shortfall to the residents and freely set its prices. This requires going through a procedure beforehand, which is associated with bureaucratic effort and costs. The costs must be individually renegotiated with the care insurance funds and social welfare providers in accordance with the fixed care rate procedure pursuant to Section 85 SGB XI and the Residential and Nursing Care Act (WBVG). To this end, increased costs must be summarised and measures in all areas of activity in the past must be presented. If all parties reach an agreement, the changed rates for care, accommodation and catering are recorded in the so-called care rate agreements. Otherwise, arbitration proceedings will take place before the state authorities. The process is not only time-consuming and cost-intensive, but the outcome is also open. In addition to a rejection of the price increase, it may even result in a reduction in the services previously provided.
Nursing crisis and shortage of skilled labour
The nursing shortage has been a recurring theme in Germany for decades. As early as the 1980s, there was a lot of talk about this and countermeasures were taken. During the coronavirus pandemic, the care sector once again came under the spotlight. The care reform that was subsequently passed is intended to counteract a care crisis. Higher pay and a better staffing ratio should encourage more people to work in the care sector. So much for the theory.
In practice, it is much more complex: qualified personnel are sought and needed everywhere, including in the care sector. In some regions, the situation is exacerbated by temporary employment agencies or companies that specialise in temporary employment. The temporary employment agencies employ skilled workers and pay them above the standard rates. The care facilities then have to hire the skilled workers from the companies at higher prices. The requirements described above create a dependency of care facilities on temporary employment agencies, through which staff must be obtained at greatly increased costs. Without the legally required specialist staff, especially overnight and at weekends, it is not only the authorisation as a care facility that is at risk. In fact, if there is a lack of staff, considerable damage to the health of residents can occur, along with subsequent liability issues. It is not possible for facilities to poach staff. On the one hand, temporary employment agencies pay better. On the other hand, employers do not have the same right to issue instructions to external employees as they do to their own staff. However, due to the legally prescribed staffing ratio in order to guarantee the professional care of residents, the facilities have no alternative but to buy in these staff at high cost.
The solution for the future?
The care sector will and must be co-financed by the general public. However, the increased care contribution must reach the facilities and the care rates must be increased. A simplification and streamlining of the bureaucratic burden would also be desirable.