Summary of our market study
The Orpéa affair has brought scrutiny to the EHPAD (nursing home) market in France, particularly highlighting the company's high profitability compared to its main competitor, Korian, and the negative net results of public and private non-profit EHPADS. The disparity between Orpéa and Korian, alongside allegations of cost-cutting measures such as understaffing raises concerns over the practices employed to achieve such margins. Moreover, the sector faces structural problems such as recruitment difficulties, with 44% of EHPADs experiencing challenges in hiring, exacerbated by the health crisis and resulting in longer vacancy periods for positions.
Scrutinizing the Performance and Challenges in France's Ehpad Market
In examining the French market for Ehpads (Etablissements d'Hébergement pour Personnes Âgées Dépendantes), which encompasses nursing homes catering to the elderly, significant trends and statistics have emerged. Private commercial Ehpads command a notable fee premium for accommodations, which can reach over €6,000 monthly, implying a price point between 40% and 55% higher than public or non-profit counterparts. Notwithstanding the higher costs, private establishments, particularly those under larger chains, surprisingly exhibit lower staffing levels, with autonomous public Ehpads staffing approximately 72.1 full-time equivalents per 100 spaces in comparison to the private sector's lower average of 52.3 full-time equivalents. The financial performance of key players in the sector presents conspicuous disparities.
Orpéa, a major brand in the market, operates close to 20,000 beds (near 20,000 specifically in France and the Benelux region), and achieves sales figures in the ballpark of €2.36 billion. Its closest competitor, Korian, while surpassing Orpéa in bed numbers with nearly 25,000, garners about 25% less in sales, highlighting a perplexing profitability gap. Notably, Orpéa's operating income ratio stands at a striking 11.9%, whereas Korian's ratio is significantly lower at 6.9%.
The broader financial landscape in the Ehpad sector reveals that public and non-profit Ehpads generally endure an average net loss of around -2%, underscoring the unusual financial results seen for companies like Orpéa. Furthermore, staffing shortages, accentuated by the unparalleled demands of the pandemic, have further stressed the sector, contributing to recruitment problems where nearly half of Ehpads face hiring challenges, with many positions remaining open for extended periods exceeding six months.
Despite these insights, the information provided in the text underscores the complexity of the French Ehpad market, highlighting the varying structures, financial performances, and operational challenges faced by different entities across the spectrum of public, non-profit, and private for-profit organizations.
Leading Entities in the French EHPAD Sector: A Landscape Shaped by Dominant Providers
In the intricate tapestry of the care sector, particularly within the EHPAD (Établissement d'Hébergement pour Personnes Âgées Dépendantes) market in France, several key players emerge as central to the narrative. These entities not only showcase the dynamic interplay of care provision and business models but also highlight variations in size, scope, and staffing within the industry. Let’s delve into the fabric of this sector by looking at the principal organizations that define its contours.
- Orpea: As one of the titans of the care market, Orpea has firmly established its presence not only in France but also beyond its borders into the Benelux countries. With a substantial number of beds under management, Orpea stands out for its expansive workforce and its strategic approach to upscale care services. This group's practices and financial outcomes, as seen through high operating income ratios, have attracted scrutiny and raised questions about the balance between quality care and profitability.
- Korian: Synonymous with competence and widespread reach, Korian is another vanguard of the care sector, wielding a greater number of beds than its counterpart Orpea. Despite this larger capacity, Korian exhibits a contrasting business model when benchmarked against Orpea’s profit margins, hinting at a different operational ethos or a divergent strategy in the marketplace.
- Colisée: With a strategic focus on the French market, Colisée is a noteworthy contender that enriches the diversity of the sector. Although the group maintains a smaller scale of operations compared to the sector's giants, its role is essential in providing another facet of care housing for the elderly.
- Domidep: As a more compact operation in the industry, Domidep is an example of a provider catering to the needs of the nation's seniors. This organization, despite its smaller number of beds and workforce, is integral to the mosaic of services contributing to the holistic framework of elderly care in France.
- DomusVi: Encompassing a significant number of beds and supported by a robust workforce, DomusVi is a substantial provider within the marketplace. This organization adds to the collective capabilities of the sector, contributing its share to the variety of services on offer across the country.
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Summary and extracts
1 Market overview
Summary of the Orpéa affair
Orpéa, the world leader in the care sector, has been seriously shaken by the publication of the book "Les Fossoyeurs". In this book, the result of a three-year investigation, journalist Victor Castanet paints a disturbing picture of the group's practices. According to the journalist, practices such as rationing meals and medical supplies, and chronic understaffing were organized by the company with the aim of maximizing margins. The publication of the book led to the dismissal of the group's CEO Yves le Masne, as well as to the opening of an investigation by the Ministry of Autonomy.
The aim of the investigation is to determine whether the problems detailed in Victor Castanet's book are one-off dysfunctions or systemic symptoms engendered by a purely financial policy. To better understand the case, we decided to take a closer look at Orpéa's finances and those of its competitors. An analysis of the latter may reveal whether Orpéa's results were abnormally high compared with the rest of the sector.
Table of differences between public and private
Ehpads have three sources of revenue:
accommodation fees: **% of sales for private commercial Ehpads budget allocation for residents' care needs: **% of sales budget allocation for dependency care: **% of sales
Private for-profit Ehpads are the only ones free to set their own room rates. Those of Orpéa, a group that has focused on the "premiumization" of its offer, very often exceed €*,*** per month. There is therefore a considerable difference between the prices charged by private for-profit operators and those charged by public or private not-for-profit Ehpads:
Dispersion of prices in permanent accommodation for a single room, by legal status France, ****, €/day Source: ****
Individual permanent accommodation in a private commercial Ehpad is therefore **% to **% more expensive than in other Ehpads. Theoretically, this difference is justified by better supervision, more luxurious facilities and more personalized care. However, when we look at average staffing levels in Ehpads, we see that the most expensive establishments (***) are often the least well-equipped in terms of personnel: according to the CNSA, in autonomous public Ehpads there are **.* full-time equivalents per *** places, while in private commercial establishments the average is just **.* full-time equivalents. In short, private commercial care is often **% more expensive than public care, but has almost **% fewer ...
A disparity in profitability between the leaders that raises questions
Now, let's look at the financial data of the main players to see whether Orpéa's financial performance suggests different practices from those of its competitors:
The first notable difference is in sales and beds: Korian, Orpéa's main competitor, has around **% more beds but generates **% less sales. The difference in profitability is just as marked: Orpéa's operating profit is almost twice that of Korian.
Profitability of the two leading Ehpad operators France, ****, in thousands of euros and % Source: ****
Although not-for-profit Ehpads do not aim for profitability, they do offer a second point of comparison. According to the CNSA, public and private non-profit Ehpads have, on average, negative net results (***), so Orpéa's staggering figures were abnormal. Even its nearest competitor does not have similar results.
Staff numbers and staff shortages: a structural problem accentuated during the crisis
Although the revenues and margins generated by Orpéa raise real questions about the company's practices, it's important to bring some nuance to this complex subject. Indeed, one of the practices denounced by Victor Castanet's book (***) can also be attributed to structural difficulties in the sector. Offering relatively low salaries for jobs that are highly strenuous and often psychologically taxing, the health and social services sector is experiencing major recruitment difficulties. According to the French Ministry of Health and Solidarity, **% of Ehpads are experiencing recruitment difficulties, and most positions remain unfilled for more than * months. The health crisis hasn't helped matters either, as the sector has had to replace sick staff on numerous occasions, followed by a wave of departures that has affected the entire healthcare sector. This even led to salary increases, necessary to make up for the shortfall.
So, while the abnormally high margins achieved by Orpéa inevitably raise questions, it is impossible to determine whether the malfunctions described in "Les Fossoyeurs" are the result of a system designed to maximize profits at all costs. Our aim here is above all to provide additional clues. If you'd like to find out more about the Ehpad market, take a ...
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