Imbalance due to the corona crisis: Many nursing homes are threatened with bankruptcy

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At the topping-out ceremony two and a half years ago, Thomas Klinke had made great promises.

"We do things differently," announced the managing director of the operating company Cura Sana at the time.

In the new nursing home in Grävenwiesbach, Hesse, twelve senior citizens were to live together in a group with their own kitchenette, while a wellness area with a wellness bathroom was intended to increase the elderly residents' attitude to life.

The home has now been completed.

However, no one has moved there to this day.

At the end of January, Cura Sana filed for bankruptcy.

This affects nine nursing homes and four day care facilities in Hesse and Baden-Württemberg.

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Retirement and nursing homes are actually considered facilities with a stable and future-oriented business model.

As society ages, demand increases.

The government grants also guarantee secure income.

This has also made senior accommodation attractive for investors in recent years.

6500 of the total of 15,000 German nursing homes today have a private provider.

But now the boom is over for the time being.

Since homes have been considered dangerous places since the outbreak of the corona pandemic, seniors and their relatives avoid them as long as possible.

For many operators, occupancy rates and financial reserves are shrinking.

According to the care market service, the operators of around 100 care homes have filed for bankruptcy or voluntarily given up since the outbreak of the crisis.

Experts expect that there will be significantly more in the coming months.

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“In some nursing homes, almost a third of the residents have died.

They are still not fully occupied again, ”says Bernd Meurer, President of the Federal Association of Private Providers of Social Services (bpa).

The lack of utilization leads to high losses that no operator can permanently compensate.

In North Rhine-Westphalia alone, around 3400 long-term care places are currently available immediately.

In March of last year there were temporarily only 450. The Ministry of Health in Düsseldorf explains this with the fact that families are postponing the search for home places for relatives in need of care because of Corona.

At the beginning of the pandemic a year ago, today's problems were not foreseeable: the number of infections initially remained manageable, and the federal government financially supported the changes required for more hygiene.

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However, from autumn onwards the situation worsened dramatically.

"The serious outbreak events were an enormous emotional burden for everyone involved - and also a very tangible economic problem for the wearer," says bpa President Meurer.

In addition to the bad image, the delayed vaccinations and the lack of referrals from hospitals ensure that demand will not normalize anytime soon.

In addition, in some cases government aid did not flow quickly enough to avoid liquidity bottlenecks.

They can happen quickly.

The homes can hardly keep their costs down

Despite the attractive business prospects, some operators have hardly any reserves and high obligations with their banks, and the entire industry is on average considered to be moderately capitalized.

If the occupancy rate drops by only ten percentage points, this already puts some home owners in distress.

Some investors have had to pour in more money several times, says a lawyer.

The situation is also exacerbated by the fact that the homes can hardly reduce their costs.

They still have to pay for rent, equipment and maintenance themselves, despite state support programs.

Often tens of thousands of euros per month are incurred for this, which is currently offset by significantly lower income.

“Hug tunnels” finally make encounters possible again

Hardly any other region in Europe has been hit as hard by Corona as Lombardy in northern Italy.

Many people in nursing homes have not been able to meet their loved ones for months.

Now special "hugging tunnels" are supposed to bring relief.

Source: WORLD / Kevin Knauer

Some experts are already assuming that the demand for home places will also be lower than expected in the coming years.

"Many families will increasingly try in the next few years to keep their relatives at home and to look after them with outpatient care services," says Peter Lennartz, former partner at the management consultancy EY and a member of the board of a large non-profit care association.

As a result, even after the pandemic is over, some business models may prove unsustainable.

Lennartz expects an increasing number of bankruptcies, which the state rescue package, which was extended until June, and the partially suspended bankruptcy law currently still prevented.

Smaller operators in particular are threatened with extinction.

Because unlike larger chains, they cannot compensate for it with stable income from several other houses if many residents die in a facility due to a corona outbreak - and their rooms remain empty from then on.

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Larger chains have even more advantages: They often work more efficiently through joint purchasing and central billing systems.

Some also run their own academies where they train nursing staff.

This enables them to react better to the acute shortage of staff: many nursing staff are currently exhausted or are not allowed to work due to health restrictions.

The homes have to bridge the shortage with expensive temporary workers.

The big ones could use the crisis to take over struggling competitors.

Financial investors in particular could try to optimize their returns with takeovers.

In recent years, private equity companies have founded or bought up around 20 care chains active in Germany, and the second largest German operator, Alloheim, has already changed hands several times.

The number of transactions and prices for homes and other healthcare facilities have risen sharply in recent years.

Christoph Scheuplein, finance expert from the Institute for Labor and Technology, expects this trend to continue over the next few years.

"However, I also expect that the number of bankruptcies will increase significantly," he says.

Since financial investors financed their takeovers with loans to an above-average extent, they also recorded an above-average number of bankruptcies in the long term.

Scheuplein believes that homes that have already been resold several times are particularly at risk.