How will mistreatment allegations hit Orpea’s occupancy rate?
The specialist told us journalist Victor Castanet’s The Gravediggers details “hundreds of testimonies and material evidence” of alleged negligence and financial embezzlement at Orpea care homes. Orpea is now facing a number of investigations by regional authorities and a class action by families and former families of Orpea customers – the latter of which we were told could take 3-5 years to be resolved.
The specialist said the impact of The Gravediggers could lead to improvements for care home residents such as an increase in the care home personnel to patient ratio, as well as the establishment of a public grading system for nursing homes. They also told us that as litigation continues against Orpea, it will likely find itself “least favoured” when applying for authorisation renewals from the French government, a 10% drop in care home occupancy, and struggles with recruitment.
Despite the likelihood of a prolonged period of litigation, the specialist speculated the company is still likely to benefit from France’s significant care home bed shortage, one that they added the public sector cannot fix. Such is the problem, the specialist told us, they expect Orpea to return to normal occupancy levels by 2023.
Talk of regulatory shifts to limit profits for care home operators will depend on the outcome of the French Presidential election, according to the specialist. Different presidential candidates are currently advocating alternate controls, though the specialist said a cap of 7% similar to Canada might be possible. The Orpea scandal has also highlighted problems in the French public care home sector, which the specialist told us “in terms of personnel, in terms of equipment [and] in terms of comfort of homes”, is behind the for-profit sector.
As Orpea prepares to move forward, the specialist said it is unlikely to sell large chunks of its portfolio given this would strengthen competitors such as Korian. In addition, care homes caught up in the scandal would have little sell-on value. Despite a short-term occupancy drop, the specialist told us Orpea is likely to benefit from a price increase of 4% for new care home entrants over the next 3-5 years, limiting its need to raise capital.
The specialist expects Orpea to “deepen” its presence in new markets such as Asia and South America, and said Eastern Europe offers “really good potential” in terms of wealthier individuals and a rapidly ageing population. However, any new accusations of misconduct could derail the company’s plans as well as a return to pre-scandal occupancy levels. This makes the next few months “key”, the specialist told us, with the company having been initially criticised for its poor handling of the scandal.
To access all the human insights in Third Bridge Forum’s Orpea – The Gravediggers Book, Mistreatment Allegations & French Care Home Market Impact Interview, click here to view the full transcript.
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