The market for medicalised retirement homes - Portugal

1.2 A growing worldwide market

The industry of Nursing Homes and Care Facilities includes continuing care retirement communities and assisted living facilities for the elderly. The former offer personal care (***) in a variety of residential settings and include on-site nursing care facilities. The later, provide similar room, board, supervision, and daily assistance services, but do not provide on-site health care. On this study we will focus on the retirement homes that provide, among many other things, on site healthcare, although most of the data and reports available may not make this specific distinction.

The rapidly aging of senior populations around the world, especially in developed countries, is the main driver pushing the demand for elderly care. The profitability is deeply connected with a positive relation with the clients, which may include not only families, but governments and commercial insurers. Big companies are able to take advantage of economies of scale and franchising. Nevertheless, small players are also capable of competing effectively by focusing on premium quality services and operating at prime locations with attractive amenities/activities for the elderly.

Worldwide, some major companies are Brookdale Senior Living, Genesis Healthcare(***). [***]

1.3 The Portuguese market

Following the world trend, the Portuguese market for retirement homes is becoming increasing, particularly on the Algarve region (***). [***]

The services offered consist mainly of one-bedroom flats or a combination of flats and villas, which can be purchased freehold or leasehold. It is hard to estimate precisely the market for medicalized retirement homes in Portugal, since most establishments do not operate exclusively on this segment, but also on day care, temporary care, childcare and other kind of treatments. One should also take into consideration that the market is mainly made off public and non-profit institutions, and it is still a very fragmented segment with no huge players (***). Nevertheless, there is a clear tendency for new private entrants in the last couple of years, favoured by a rising demand for premium services and by the fact that health insurance is becoming more common in the country.

Considering all categories of the retirement homes, there are more than **** residences around the country. Most of them are located in the capital Lisbon (***). Known for its beautiful beaches, hot and long summers and mild winters, the region has a historical booming tourism sector. Nevertheless, the conditions are also proving to be very convenient for the settlement ...

2.1 New demographics

The medicalized retirement home industry is believed to be strongly influenced by changing demographics. The largest age group in Portugal, indeed, is the one represented by the so called “over **”, which define approximately **% of the entire population. The database from the Portuguese National Institute of Statistics show that this age group already surpassed the youngest group (***) since ****. Moreover, there is a clear tendency for this gap to become even wider throughout the next years, as we see from the graph below.

Source: ****

The country already occupies the third place in the EU ranking regarding the ratio of elderly to young: *** elderly people for every *** young people, only surpassed by Italy and Germany. The number of elderly (***) is expected to increase from *.* to *.* million, and, as a result, the rate may almost double from *** to *** elderly people per *** young people in ****.

These numbers denote an ageing population tendency that is affecting the Portuguese territory. The ageing rate in the country is expected to stabilize only by ****. Until then, the market for retirement homes displays an enormous capacity to expand, as the potential is growing is at a considerable fast pace. [***]

This trend will involve higher health care costs in order to keep ...

2.2 Profile of seniors in Portugal

Senior citizens, who are people over ** years old, are increasingly numerous in Portugal. This is, above all, linked to an increase in life expectancy, which is gradually rising from **.* years old at birth in **** to **.* years old in ****. At the same time, healthy life expectancy at birth has not enlarged in the same pattern, rising by *,* years in * years. In this context, there is still a significant gap between the onset of life difficulties and the death of senior citizens (***).

Source: ****

In Portugal, more than three-quarters of the **-** year olds are still autonomous. More broadly, only *.*% face severe difficulties that prevent them from living properly on their own. With age, the difficulties increase, and around **% of seniors over ** years of age face some kind of care problems.

Source: ****

There was still a large proportion of senior citizens with absence of difficulties by ****, even though it is likely that this number has decreases after six years of ageing process in the country. Nevertheless, as the tendency is pointing to a future with more people over ** years old, there is a clear margin for the retirement market to expand.

However, the last few years have not been good for the Portuguese senior ...

2.3 Where do senior citizens live?

The old-age dependency ratio is the ratio of people older than ** to the working-age population--those ages **-**. Data are shown as the proportion of dependents per *** working-age population. Analysing the old-age dependency ratio by municipality, we notice some concentration at the Northeast of the county, around the regions of Trás os Montes e Alto Douro and Beira Interior, as well as some municipalities in the south, especially around the Alentejo region. This set up hitches particularly interesting places for companies managing retirement residences to stablish themselves.

Source: ****

Nevertheless, the estimations from the National Institute of Statistics point out that the most aged region in **** will be the Autonomous Region of Madeira (***), with this rate reaching *** elderly people per *** young people, and the least aged region will be the Algarve, with *** elderly people per *** young people.

2.4 How and how long?

If we look at the distribution regarding how much time the elderly stay at those types of residence, we will notice that the vast majority do not stay more than * years. In other words, the retirement homes indeed happen to be the place to spend the last years of their lives.

Source: ****

It is also possible to observe the distribution regarding the accommodation of the retirement homes. There is a basically a prevalence on the use of single room, possibly related to the high costs of hiring this kind of service.

Source: ****

3.1 Organization and dynamics of the market

Given the estimated decrease in the population (***), more than **% of the population will then be dependent on third-party care. This worrying scenario is outlined in a report by the European Commission on health care, long-term care and sustainability of public accounts.

In the coming decades, due to accelerated ageing and technological innovation, Portugal will be one of the countries where health expenditure will grow the most, *.* percentage points of GDP against *.*, in the European average.  In long-term care, where public spending is estimated to rise from *.*% of GDP in the European Union in **** to *.*% in ****.

According to Santiago Calvo Ramos, an expert from the European Commission's Directorate-General for Economic and Financial Affairs, Portugal is still very dependent on informal caregivers and that there are even "many elderly couples where each takes care of the other." In addition, Portugal is one of the least generous countries in Europe in the health care of the elderly population. In addition to the small number of professionals dedicated to this task, it has one of the smallest public expenditures in this specific area among ** countries analysed by the International Labor Organization.

Moreover, the study "Access, quality and competition in Continuing and Palliative Care" developed by ...

3.2 New trends

Residents wish for more autonomy

If, on the one hand, we find that the main reasons for entering a home are the state of poor health, psychomotor difficulties and lack of autonomy for the activities of daily living, it is also true that, in the current model of home (***), there is a gap in expectations and possibilities between what the elderly can and wants to do and what they are allowed to do. The homes offer a model of "passive life", without tasks, disguised as a permanent holiday with bed, table and washed clothes and activities of cognitive stimulation, physiotherapy and cultural tours. Over time, this imposition becomes a disconnection from social life, without worries or obligations, disengagement with the community and a progressive disconnect, with the consequent disinterest in life.

In this context, alternative co-housing models for homes and residences are arising. An example is the Aldeia de São José de Alcalar, in Portimão, a case of great success in the national and even international scenario. There, the residents help each other, have the possibility to choose between a more autonomous life (***). The Aldeia de São José de Alcalar is a residence in which users can maintain ...

3.3 A new refuge for the British

Since ****, European retirees who settle in Portugal are exempt from paying taxes for ten years of the pension they receive in their home countries. This tax relief has seduced thousands of retirees from all over Europe, and a big part of them are the British. It is estimated that there are more than **,*** British people living in Portugal. Most of them are pensioners living in the coastal Algarve region. The popularity of the resort, the presence of a thriving expatriate community and the wide spread of English spoken almost is making Portugal something close to another British home, warmer and with more sunshine.

One case of success is the Monte da Palhagueira (***), with its Anglican church and gorgeous English gardens, the residence is British oasis in southern Portugal. [***]

COVID-19 impact expectations

The unexpected Covid-** outbreak took all the retirement homes managers and employees by surprise, resulting in a high percentage of positive cases and associated mortality rates in several residences around the world. This situation served as an in-depth reflection on this type of institutions, essentially in terms of rethinking its function and forms of organization so that new residential solutions are developed in order to ensure the quality of life and safety of the older citizens of our society.

The recent study by researchers at the University of Tel Aviv regarding the large percentage of deaths by Covid-** in elderly residents in nursing homes, points out to the structure of the facilities themselves, namely the existence of a common living area, shared rooms and the fact that multiple caregivers treat multiple residents. Although the cases in Portuguese residences were far from the disaster that took place in the British and Italian retirement homes, for instance, players will have to respond quickly and adapt their structures, so people won’t be afraid of moving to nursing homes. [***]

On the “bright” side, there should be a positive impact on the growth of the sector, as there has been a strong growth in the ...

4.1 Historical short of supply

The use of this kind of solution to treat and care for fragile elderly people is somewhat new. In the beginning of the ‘**s only *% of the elderly population had a place in nursing homes. A significant increase in the number of nursing homes units created by the solidarity network took place in the following years, expanding by ** nursing homes per year between **** and **** and then ** nursing homes per year between **** and ****. As a result, coverage rate went up to *.*% by ****. The number of nursing homes institutions continued to increase between **** and ****, as we can see in the graph below.

Source: ****

From ** to ****, the number of beds raised from ***** to *****. At the same time the demand also increased from ***** to ***** in the same period. However, this increase has not been enough to keep up with the rising number of elderlies, resulting on the maintenance of a low coverage rate and the need for several missing places. Nowadays there are still long waiting lists, in particular for the low-cost non-profit institutions where families are able to pay according to their budget.

4.2 Great price variance

As one would expect, prices vary according to the amount of nursing care required by the person, to the region’s cost of living and how premium the location is in terms of natural beauty and distance from city centres, for instance. The cost per person may also be reduce in case of a couple sharing a room. Those prices do not include costs with specific medications or some special medical treatment.

Source: ****

4.3 Segmentation in terms of recovery programs

Some residences may cover some specific treatments or either adapt to all the needs of any potential client. Nevertheless, we tried to segment some areas of recovery that players usually offer to their seniors.

Neurofunctional Recovery

Conducted by a team of physiatrists, neurologists, neuropsychologists, physiotherapists, occupational therapists and speech therapists. A customized recovery plan is developed focused in the functional activities, through the recovery and maximization of motor functions, stimulation of cognitive functions, deficit reduction and symptom relief. The main goals are to:

Improve functional capacity Stimulating autonomy in activities of daily living Maximize independence by stimulating active participation

Recommended to the following cases:

The treatment of central nervous system injuries resulting from strokes Traumatic brain injury Neuro-degenerative syndromes such as Parkinson's, Alzheimer's, Dementia Syndromes

Orthopedic Recovery

Conducted by a team of physiatrists, neurologists, neuropsychologists, physiotherapists, occupational therapists and speech therapists. The goals of this recovery treatment are to:

Improve functional capacity Stimulating autonomy in activities of daily living Maximize independence by stimulating active participation

The main purpose is to recover and maximize motor functions, reduce deficits and alleviate symptoms. This kind of treatment is recommended to the following cases:

Recoveries after surgeries (***) Traumatic injuries of the upper and lower limbs ...

4.4 Included services versus a la carte services

Senior citizens' residences differ from each other in that they offer regarding a certain number of services and activities, in addition to the rental or purchase of housing adapted to senior citizens. An example of an offer is as follows:

Rental accommodation (***) Home purchase (***) Additional services and activities

It is these additional services that generate additional income for the management companies, in addition to the charges levied on the amount of the rents. These services may be entertainment or catering offers, tailored to the individual's interest. The services and activities offered in the senior residences can be divided into two main categories: Services included with the rent and à la carte services (***):

Services included

Use of the flat and the storage room specified in the contract Daily meals that obey the package chosen by the resident. Meals are served in the dining rooms according to the available menu Access to indoor and outdoor common spaces and equipment Cleaning services of indoor and outdoor common spaces Cleaning services of the flat General storage: Cleaning of kitchenette and bathroom Daily rubbish removal Cleaning of dust and glass Weekly aspiration Laundry service and bi-weekly change of sheets and towels White personal laundry service Current maintenance ...

5.1 Regulation

The economic activity of a Nursing Home is included in the CAE *** group - Social Action Activities, more specifically in subclass ***** - Social action for elderly people with accommodation.

The main regulations that future and current players should beat in mind are listed below:

Decreenº **/****: about functioning and installation of residential structures for the elderly Decreenº **/****: licensing and supervision of the provision of services and social support establishments Decreenº ***/****: establishes the legal regime for urbanization and building

To create a residence, it is necessary to comply with the following requirements:

To be a natural or legal person who exploits the establishment as an owner, lessee or in any other title Suitability of the applicant and the staff at his service Appropriate facilities and equipment, in accordance with the rules in force Technical personnel and assistant necessary for the operation of the establishment, in accordance with the rules in force Regularized contributory situation in the face of social security There should be at least one employee with adequate technical and academic training, preferably in the area of social sciences and humanities as part of the technical direction of the home

Conditions for implantation/building, whatever the installation model, must be implanted in ...

5.2 Medical benefits

Complemento por Dependência

Complemento por dependência, or “supplement by dependency”, is a cash payment given to necessary people and the elderly who are in a situation of dependency, that is, who provides daily help from another person (***).

For this Complement, two degrees of dependence are considered:

*st grade - elderly people without autonomy to meet the basic needs of daily life (***) *nd degree - in addition to the *st degree dependency, elderly people who are bedridden or with severe dementia

The dependency supplement is paid together with the pension that the elderly person already receives or will receive. In July and December of each year, pensioners are entitled to receive the double supplement. If the elderly person is in a private nursing home, they are entitled to the *nd Degree of Complement by Dependency.

Tax “benefits”

The entry of an elderly person to a home, in many cases, is not an easy situation. For both the family and the elderly, this process can be very complex, and among the biggest issues, on the part of the family, is the financing of this type of services. As one would expect from a very qualified and specific job, monthly fees ...

6.1 Segmentation

• Santa Casa da Misericórdia de Alhos Vedros
• Residências Montepio
• Monte da palhagueira
• José de Mello Residências e Serviços (Groupe)
• Luz Saùde
• Orpéa Emeis