1. Planning for the Future CORI Conference on Healthcare Brian McEnery 15 th February 2015 CORI - Planning for the Future Page 1

2. Contents About BDO Healthcare Health’s Ageing Crisis Report Facing the Challenges Mapping a sustainable solution Nursing Homes Ireland Survey 2015 Trends in the Sector Governance & Culture HIQA – its methodologies and focus CORI - Planning for the Future Page 2

3. BDO Healthcare CORI - Planning for the Future Page 3

4. 500+ Over 500 partners & staff 3 Three offices across the country ABOUT BDO Ireland 4 World’s largest European led accountancy network 1 st 60,000 Almost 60,000 Partners and staff world wide 1,328 Offices in over 151 countries

5. ABOUT BDO Our Healthcare Team Older Person Care Banks & Lending Institutions Private Investors & EIIS Funds Construction Industry National Treatment Purchase Fund Age Action Ireland Nursing Home Operators HIQA HSE/ Department of Health Department of Finance / Revenue The National Nursing Home Survey – In association with Bank of Ireland & NHI, BDO is once again carrying out an in depth survey of private & voluntary homes to identify the key issues impacting on the industry at present. Health’s Aging Crisis – Commissioned by NHI this report comprised an analysis of the supply and demand factors at play in the nursing home industry. Cost of Care Report – In association with Age Action Ireland the firm conducted a detailed analysis of the costs associated with the provision of older person care in order to arrive at a ‘fair price’ for long term residential care. 5

6. Some of the bodies we interact with frequently.. CORI - Planning for the Future Page 6

7. Working with the Voluntary Sector As a firm we work with about 15 Congregations Great privilege to do so – good clients Work of the Congregations has been invaluable to Irish Society for decades and longer So every Congressional need is different, therefore we offer: Strategic reviews – route to better outcomes – find solutions not problems!  Operational reviews – benchmarking – often labour related  Income negotiation – NTPF negotiations  Banking financial and commercial advices e.g. accessing philanthropy  Budgeting, accounting, audit and financial management  Asset management & advisory CORI - Planning for the Future Page 7

8. “Health’s Ageing Crisis” BDO Report 8

9. CORI - Planning for the Future Page 9 A MARKET IN FLUX Fair Deal Review Sustainability of Scheme in Current Format Variance in rate and lack of transparency Process of negotiating the rate- no negotiation of public FDR Accessibility to development capital and funding Funding & Fair Deal HIQA Physical Environment Deadline (July 2015) Focus on risk based regulation Regulation A growing and ageing population Growth in the older old Changing levels of dependency & acuity Demand (Need) Low levels of new supply entering the market Equity Gap Shrinking capacity in public and voluntary sector Supply Objective of Government to provide more care in the community Continue to provide 20% overall bed provision 4.5% of over 65+ population in residential care not sustainable Policy

10. DEMOGRAPHICS – KEY NUMBERS - KEY CHALLENGES CORI - Planning for the Future Page 10 Age 20112021% Growth (2011-2021) 203120412046% Growth ( 2011-2046) 65-69 172.1225.631%281.2333.2354.6106% 70-74 130.1191.647%238.3291.1318.7145% 75-79 101.4139.538%192.1245.6269.3166% 80-84 69.890.129%143.9187.4213.8206% 85+ 58.285.046%135.5219.0262.9352% Total 65+ 531.69731.938%991.01,276.31,419.3167% % of Pop 11.6%14.9%18.7%22.4%24% 4.5% 23,92032,93044,59057,43063,870 Source: CSO Census of Population 2006 + 2011 & Population and Labour Force Projections 2016-2046

11. CORI - Planning for the Future Page 11 DEMOGRAPHICS – AN AGEING POPULATION Across all 65+ cohort, population to grow from 2011 - 11.6% population 2046 – 24% population 65+ population to grow 2011-2021 + 38% 2011-2046 + 167% 85+ to grow 2011-2021 +46% 2011-2046 +352% Source: CSO Census of Population 2006 + 2011 & Population and Labour Force Projections 2016-2046

12. CORI - Planning for the Future Page 12 CHANGE IN OVER 65 AS % OF TOTAL POPULATION By 2046, the over 65 population will account for approximately 1 in 4 of the total population.

13. CORI - Planning for the Future Page 13 BRINGING IT TOGETHER – DEMAND (NEED) > SUPPLY For the purposes of our analysis, we have equated demographic and disability driven NEED for Beds as being equivalent to actual DEMAND for beds. In practice, actual Demand for beds, as manifested by residents and waiting lists may be moderated by factors other than need - such as affordability and geographic location

14. CORI - Planning for the Future Page 14 BRINGING IT TOGETHER – THE RESULTING SHORTFALL Assumptions Based on Likely Scenario Based on no reduction past 4.5% Based on Av home size of 80 beds Private: Bed additions : adds net 3,051 by 2021 New Homes – equivalent to 38 new homes Public Bed additions : net additions nil Focus on having existing stock HIQA compliant Voluntary Bed additions : reduction 400 New Homes – equivalent to loss 5 homes NET Remaining Shortfall Significant growth in shortfall 2011-2021 2012 – 1,898 - equivalent to 24 homes 2021 – 7,986 – equivalent to 100 homes “To maintain current provision and address current capacity issues – requirement of €834m”- Action Plan – Public Residential Care 2013 - 2023

15. Meeting Challenges ‘Head On’ 15

16. Income and expenditure relationship CORI - Planning for the Future Page 16

17. The Mission in Ireland For many Congregations the Mission in Ireland is becoming hard to fulfil This can be both a physical and emotional weight on the Congregation For sure vocational decline is disappointing but….. Its important to recognise and have recognised the value of the Religious contribution when Irish Society most needed it in health, education It should be a celebration of this rather than mourning lesser input going forward For many Congregations their strength is in lesser developed countries and these regions need healthcare, educational and pastoral support even more than Ireland For many Congregations the process of supplementary lay support is well underway to ensure the Mission also continues in Ireland There are many ways to ensure the Mission endures! CORI - Planning for the Future Page 17

18. Optimal care setting – dependency based CORI - Planning for the Future Page 18 Increases in dependency

19. Healthcare Solutions Healthcare Mission Other Mission e.g. education Objective Ensure Mission continues Ensure care solutions exist for Congregation Partnership for care Procurement solutions Good care solutions Pastoral needs met CORI - Planning for the Future Page 19

20. Where there is a healthcare Mission Health & Social CareContinued operation Laicisation Professionally & Governance Partnership Joint ventures / Management contracts Disposal Sale and reuse of resources CORI - Planning for the Future Page 20 In all instances care of the Congressional members can be central to the solution

21. Issues to consider Investment More non Religious input Future Governance structures Overall plan for Congregation Action Plan CORI - Planning for the Future Page 21

22. Ageing facilities, poor Fair Deal rates & Sec 39 CORI - Planning for the Future Page 22

23. For some Congregations…. Sec 39 As part of our strategic reviews we have: Determined the true cost of care, having Factored in the likely re-development cost Worked in interest & capital repayments Included the impact of HRA reversals Frankly determined the rate per resident per week is not near adequate Difficult but necessary discussions with NTPF to get an appropriate rate Section 39 was a last minute inclusion in 2009 and is UNFAIR Big issue for the some of Religious in care provision Needs to be addressed and we have got some acknowledgement of the issue CORI - Planning for the Future Page 23

24. Ageing Congregations & State Supports Medical Cards Drug Payment Scheme (DPS) Homecare Packages Carer’s benefit Tax refund (Med 1) Age tax credit Community Care Services CORI - Planning for the Future Page 24

25. The Fair Deal Financial Needs Assessment Medical Needs Assessment Financial needs assessment should be satisfactory If medical needs are of a scale requiring long term care Then 80% of pension contributed to care Care has to be exercised for dedicated Congressional Homes that they qualify under the NHSS – need to be seen as generally accessible This has been a very positive scheme for the Religious CORI - Planning for the Future Page 25

26. Living in Community Care often provided within the community Assisted Living Solutions – very satisfactory for the Congregation and the resident Important to have proper staffing and supports particularly with high dependency With lower Congressional staffing – external employees will be more involved This brings a need for staffing processes, employment law responsibilities, health & safety legislation These facilities can fall to be registered by HIQA – Decision of the Chief Inspector In many instances settings which were not registered and now requiring registration CORI - Planning for the Future Page 26

27. CORI - Planning for the Future Page 27 Ensuring that the Mission Lives On Diminishing numbers of members in recent years has lead to an increased lay involvement in the day to day operations of many Congregations whether that be Education, Care of the Elderly, Social Services etc. As a result many Orders are seeking to put in place appropriate structures and governance systems to ensure that there is an organisation capable of continuing the Mission even if the Congregation no longer has a day-to-day involvement These structures and governance are particularly important in light of the requirements of the Charities Act 2009 This is not a straightforward process as it may involve the transfer of assets and the setting up of charitable companies In some cases the operations of the Congregation may be significantly loss making and reliant on donations – sustainable solutions need to be plotted In an environment of diminishing donations it may be necessary to review the operating model to ensure that it is possible to continue to carry out the Mission on a sustainable basis into the future

28. Solutions need to be tailored to the needs No one solution meets the needs of every Congregation Solutions need to be tailor made Invariably good outcomes evolve Dealing with the issues early is important CORI - Planning for the Future Page 28

29. Mapping a Path to a Sustainable Future 29

30. CORI - Planning for the Future Page 30 Securing the Mission for Future Generations Until recently the operations of Religious Orders in Ireland were carried out under the almost exclusive stewardship of the members of that Order In recent years due to declining numbers it has been necessary to involve lay people in this stewardship function The Catholic Church has recognised ‘Ministerial Juristic Persons’ in which laity can join with religious/clergy to carry out the role and responsibility of sponsorship of a Mission There is an intersection of Cannon Law, Company Law and in recent years the Charities Act The process is undoubtedly complex but with the right supports and advice it is possible to put in place the appropriate structures and governance to continue the mission long into the future

31. CORI - Planning for the Future Page 31 A Sustainable Business Model In the past many of the operations carried out by Religious Orders in Ireland have been subsidised by large donations and state funding In recent years both sources have diminished and there are increasing pressures to carry on operations on a more commercial basis Clearly, the main focus is not to generate a profit, however, it is important to generate sufficient return to reinvest in the Mission for the future BDO has worked with a number of religious nursing home operators to ensure that their nursing homes will be capable of continuing operating many years into the future This has included, NTPF negotiations, strategic reviews of operations and assistance with development and expansion In many cases this is not an easy process, however, it is possible to travel the journey from a precarious financial position to a long term sustainable future Sometimes the organs of state took advantage of the voluntary sector and this has led to a lack of reserves for capital investment

32. CORI - Planning for the Future Page 32 Alternative Options In some cases the Order may take the decision that they no longer wish to have control of their nursing home or other operation However, they do not wish to see their Mission come to an end It is possible to ensure that the Mission be continued outside the control of the Order by a similarly minded organisation Taking nursing homes as an example; it may be possible to sell or lease the home to an operator with a compatible vision and approach to care provision BDO have assisted in a number of these transactions also It is important for the Order to be clear on their required covenants around continuing use for care purposes or priority of access for members of the Congregation Any transfer of asset by a charitable organisation must be approved by the Charities Regulatory Authority

33. Nursing Homes Ireland – Industry Survey Survey 2014/2015 33

34. NHI Survey 2015 - authored by BDO Survey sponsored by Bank of Ireland, BDO and Homecare Medical Supplies Survey secured responses from over one third of operators Very detailed questionnaire Useful for benchmarking purposes Gives an overall sense of the sector Survey was welcomed and launched by Minister Lynch Minister spoke of public finance challenges Congratulated the private and voluntary sector for their development Spoke of challenges in meeting the deadlines for physical environment Standard 25 Government is studying incentives to encourage private sector investment 34

35. Some Important Numbers 2003200420052006200720092014 Rate€557€578€640€694€778€850€896 Beds14,94616,46117,72217,90918,88320,59022,342 Homes408427431433435447437 Wage %56% 57%60% 62%61.5% HSE beds 32%41%30%28%32%9% More beds 42%21%24%29%22%20%42% 35 Key Stats Rate is the average national rate across the country i.e. €896 per resident per week The trend of larger homes continues in this survey i.e. more beds & fewer homes Wages as a percentage of turnover stays at about 62% The incidence of directly funded HSE beds continues to fall - just 9% now Operators demonstrate a growing appetite to further develop their existing or new homes

36. Opening Numbers (Cont) The average national Fair Deal rate has increased by 5% since 2009/2010 (a five year period) - i.e. during the financial crisis Overall bed numbers have increased by approximately 8.5% or 350 beds per year This occurred during a time when the total number of private & voluntary homes has reduced by 10 homes The average home size is now 51 beds, up from 46 in 2014 36

37. Resident profile - Source of Funding 37

38. Resident profile 38

39. Resident profile - Dependency 39 83% of respondents use Bartel methodology For the first time 2/3 of residents are in the high & maximum dependency profile

40. What does this tell us? 40 The implementation of the Fair Deal scheme has been a success from a resident perspective, however, the State are now in a monopoly purchaser position The medical needs assessment has led to more older persons being cared for in their own homes for longer and so residents are now older when admitted to nursing homes As a result the dependency levels of residents admitted to nursing homes has increased with almost two thirds now in the High and Max dependency categories These residents require a greater level of care which is driving increased staffing requirements at homes across the country This trend is likely continue

41. Recent Trends in the Sector CORI - Planning for the Future Page 41

42. Revenues January 2016 saw some modest increases in NTPF rates in NH’s Inconsistent approach being adopted by NTPF negotiators Really need to be well prepared Need to be ready for the long negotiation Persistence is a virtue Have a negotiation strategy well thought through or retain a negotiator Small increases are happening Ever little helps when margins are under pressure CORI - Planning for the Future Page 42

43. Costs & Margins Labour costs are rising rapidly Agency staffing needed Rosters hard to fill Recruitment fees are a large cost Margins are down in the sector Banks are getting worried about serviceability of debt CORI - Planning for the Future Page 43 Margin falling Costs Revenues

44. The Importance of Governance / Regulation 44

45. A More Regulated World “It takes many good deeds to build a good reputation, and only one bad one to lose it.” Benjamin Franklin Good deeds are not enough in todays environment Methodologies need to be strong and fit for purpose Lay structures are “in your name” Ensure they are appropriate, accountable, robust Lack of evidence of methodology is akin to not having the methodology itself CORI - Planning for the Future Page 45

46. HIQA focus The Physical Environment remains a real focus While HIQA was issued with a Ministerial instruction, we retain the ability to refuse registration or limit it where the environment manifestly causes dignify and respect issues HIQA encourages improvements in governance and culture within providers These are key strengths with organisations which lead to good outcomes for residents HIQA is focussed on risk based monitoring and this is evident in the number of visits which we might have with providers Regulators can always learn and do things better, but The sector has improved through standards and inspection We don’t want to necessarily find fault – we want to drive improvement CORI - Planning for the Future Page 46

47. Driving Safer Services Poli cxy policy RegulationCommissioning (Funding) Safer Services

49. Detection and Enforcement Legislation, Regulations, Standards and Policy HIQA Regulation Model Direction and Strategic Influence Change Agent / Quality Improvement

50. Thank you for your attention CORI - Planning for the Future Page 50 Brian McEnery Partner & Head of Healthcare BDO Tel: 061 414455 Email: bmcenery@bdo.ie