Nursing homes seek acceptance

Updated: 2014-05-27 05:13

By Li Yang in Shanghai (China Daily)

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Nursing homes seek acceptance

A man from a social welfare center for the aged in Guiyang, Guizhou province, washes the feet of 87-year-old Cai Sifen. China is in great need of nursing home beds and professional caretakers for the elderly. [Photo by Qiao Qiming/For China Daily]

The elder-care sector in China is set to add more services in the domestic market, but greater efforts need to be made to handle the sharply increasing number of old people, according to experts.

One solution is to move some elderly care out of the traditional family environment and into professional nursing homes, exchanging filial ties for a business model.

As of last year, China had nearly 200 million citizens older than 60, half of whom lived alone. Overall, the elderly population is expected to rise to 250 million, nearly 20 percent of the national total, by 2020.

Estimated to need more than 10 million nursing home beds for the elderly, China currently has only 5 million.

Anticipating the demand, companies from the United States, Europe and Japan started building nursing homes in big cities like Shanghai as early as the 1990s.

The US-based Holiday Retirement Cor invested in a center for affluent retirees in a suburb of Shanghai in 1998. But the project became a Holiday Inn hotel in 2006.

The venture's vision may have been right, but its timing was off. The accelerated aging of the Chinese society did not become apparent until years later, and the government had not yet openly welcomed foreign capital in the "gray" industry. German Augustinum Group's retirement home project in Shanghai in 2006 also faced obstacles, mainly because of difficulties in buying land from the local government.

Dozens of Japanese and German nursing home companies planned to start similar projects in the coastal city of Qingdao, Shandong province, in 2007. But they also faced a lack of support policies and difficulty in buying land.

Now, the rising demand for pensions — especially after 800 million farmers were included in the basic social security system — has been leaving the authorities with limited resources with which to establish a national nursing home network.

In mid-2013, the central government decided in a working conference presided over by Premier Li Keqiang to open the elderly nursing home market to investors, both at home and abroad. The conference recognized private capital's significant potential.

Before that, there were only sporadic Sino-foreign joint ventures providing medical services, consulting and holidays for wealthy Chinese elderly in big cities.

The government's green light whetted foreign investors' appetite for the big market.

Yet they still needed to do their homework to determine how best to access the right groups of customers after the government unveiled a practical set of rules and policies.

In 2012, the professional nursing and medical care investment company Columbia Pacific Management and the retirement house management firm Emeritus Senior Living jointly started the first foreign venture, Cascade Healthcare, in Shanghai and Beijing.

Half of Cascade's Shanghai beds remain empty today. Project manager Zhang Fan explained: "It takes time for the Chinese to accept professional nursing for the elderly in place of home care."

In addition to the demographic factors, the presence of professional foreign nursing homes is only slowly helping to transform care from a family tradition into a business. A significant inflow of foreign nursing homes has yet to come. Investors cling to a wait-and-see attitude on future government policies, especially land acquisition and taxes.

The current administrative systems and rules were established in a planned economy decades ago for nonprofit, and mostly government-funded, agencies.

Under these circumstances, it's been a challenge for private investors in for-profit nursing homes to work with various levels of administrations, investors said.

A year has passed since the central government welcomed foreign capital to the elderly market, yet there are still no specific rules or policies on the books to transform that welcome into tangible business opportunities, they said.

Professional nursing for the elderly costs money. It features disease prevention, rehabilitation training and customized, comprehensive nursing. It differs from the temporary nursing services available in Chinese cities, typically undertaken by middle-aged jobless women and female migrant workers at low prices.

Most of the nursing homes look like hotels. Monthly costs range from $1,311 to more than $5,000.

The average monthly pension for an urban Chinese retiree is around $2,000, while a farmer's monthly pension is about $8.33.

Even after elderly Chinese mortgage their houses, as the Shanghai government advocates, their earnings from commercial pension insurance are insufficient for the high costs of a nursing home, analysts said.