Beyond government control
British lawmakers in the winter of 2021-2022 tried – and failed – to bolster financial reporting rules for care homes, including banning the use of government funds to pay off debt.
“I don’t have a problem with offshore companies that make profits if they offer good services. I don’t have a problem with private equity and hedge funds who deliver good returns to their shareholders,” Ros Altmann, a Conservative Party member in the House of Lords and a pension expert, said in a February debate. “I do have a problem if those companies are taking advantage of some of the most vulnerable people in our society without oversight, without controls.”
She cited Four Seasons as an example of how regulators “have no control over the financial models that are used.” Ms. Altmann warned that economic headwinds could worsen matters: “We now have very heavily debt-laden [homes] in an environment where interest rates are heading upward.”
In August, the Bank of England raised borrowing rates. It now forecasts double-digit inflation – as much as 11% – through 2023.
And that leaves care home owner Robert Kilgour pensive about whether government grasps the risks and possibilities that the sector is facing. “It’s a struggle, and it’s becoming more of a struggle,” he said. A global energy crisis is the latest unexpected emergency. Mr. Kilgour said he recently signed electricity contracts, for April 2023, at rates that will rise by 200%. That means an extra $2,400 a day in utility costs for his homes.
Mr. Kilgour founded Four Seasons, opening its first home, in Fife, Scotland, in 1989. His ambition for its growth was modest: “Ten by 2000.” That changed in 1999 when Alchemy swooped in to expand nationally. Mr. Kilgour had left Four Seasons by 2004, turning to other ventures.
Still, he saw opportunity in elder care and opened Renaissance Care, which now operates 16 homes with 750 beds in Scotland. “I missed it,” he said in an interview in London. “It’s people and it’s property, and I like that.”
“People asked me if I had any regrets about selling to private equity. Well, no, the people I dealt with were very fair, very straight. There were no shenanigans,” Mr. Kilgour said, noting that Alchemy made money but invested as well.
Mr. Kilgour said the pandemic motivated him to improve his business. He is spending millions on new LED lighting and boilers, as well as training staffers on digital record-keeping, all to winnow costs. He increased hourly wages by 5%, but employees have suggested other ways to retain staff: shorter shifts and workdays that fit school schedules or allow them to care for their own older relatives.
Debates over whether the government should move back into elder care make little sense to Mr. Kilgour. Britain has had private care for decades, and he doesn’t see that changing. Instead, operators need help balancing private and publicly funded beds “so you have a blended rate for care and some certainty in the business.”
Consolidations are slowing, he said, which might be part of a long-overdue reckoning. “The idea of 200, 300, 400 care homes – that big is good and big is best – those days are gone,” Mr. Kilgour said.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.