9 Sept 2016
Suburban Senior Care
As with many developed nations, China is experiencing a change to its population demographic. Better healthcare and improved diet have led to more people in the Chinese mainland living far longer than previous generations. Inevitably, this places a considerable strain on healthcare providers, with a lack of residential-care home spaces becoming a growing problem, particularly in first-tier cities, where high population numbers and rising land costs make developing appropriate care facilities an unreasonable proposition. In Beijing, however, moves are underway to address the problem by establishing care homes in suburban districts and in neighbouring provinces that have a lower cost base.
Rising Elderly Population
According to statistics from the Beijing Municipal Bureau of Civil Affairs, Beijing was home to some 3.4 million elderly residents as of the end of 2015, representing some 15.7 per cent of the city's total population. On average, every day more than 500 of the city's residents turn 60, while 120 reach the age of 80.
Recent media reports have suggested that 30 per cent of those with a Beijing hukou (household registration) will be officially classified as elderly by 2030, a figure that would see the city home to 6.3 million pensioners by 2050. With elderly people representing a continually rising proportion of the city's population, Beijing's age demographic will shift dramatically towards the higher end of the scale.
Beijing, however, is not the only city facing an aging population. According to a study by the China National Working Commission on Ageing (CNCWA), more than 400 million (30 per cent) of the total mainland population will be aged 60 or above by 2050. Inevitably, the provision of elderly care will be a major challenge for China's healthcare services in the 21st century.
Senior Care Services
At present, there are three main forms of elderly care available on the mainland – homecare, institutional care and community care. Homecare is currently the preferred option for many families. Despite this, the homecare capabilities of many mainland families are surprisingly low given the challenges posed by chronic disease and deteriorating physical ability that characterise old age.
The development of community care has been relatively slow, largely because of the lack of perceived demand. According to staff at one Beijing daycare centre, it only has two patients a day on average. As a result, institutional nursing homes are expected to play an increasingly important role in providing elderly care. As the number of seniors increases, though, the available institutional elderly care places will inevitably fall far short of demand.
According to the CNWCA, there were 5.85 million elderly care spaces (beds) available across the mainland in 2015. This is equivalent to 27 spaces per 1,000 residents aged 60 or above, well below the 40 per 1,000 available in the United States. Removing from the equation the more upmarket elderly homes – those beyond the means of the majority of families – the remaining low- to mid-range institutions are now positioned to serve a market worth some Rmb200 billion.
Business opportunities are believed to be particularly good in Beijing. At present, many of the low- to mid-range elderly homes in the central area of the city reportedly have no vacancies. Furthermore, one elderly home in a non-prime location said it had more than 5,000 people on its waiting list, representing an expected waiting period of some five years. While there is a slightly greater availability of elderly home spaces in the suburbs, there is still only a relatively small number of vacancies.
Central Area Limitations
Despite demand for elderly care homes in Beijing, there is little space in the central region for such developments. The city's suburbs and neighbouring provinces are the most likely locations for any new facilities.
According to a manager of one elderly care home in Beijing, the cost of setting up such facilities depends heavily on local property prices. With its spiraling land costs, the Beijing central area is clearly an unsuitable location for such homes. In May 2016, a survey by one Beijing real estate company found that the price of residential properties in the city had soared to around Rmb44,000 per square metre, while in the central area it can exceed Rmb50,000 per square metre.
High property prices inflate the cost of running an elderly home, which, in turn, push up fees. Residents of one city-centre Beijing care home, for instance, are reportedly charged between Rmb4,200 and Rmb12,200 a month. Care homes based in the suburbs could potentially charge lower fees, but still remain highly profitable.
Apart from the Beijing suburbs, several neighbouring provinces – notably Tianjin and Hebei – also have relatively low property prices, making them prime sites for elderly care homes for the city's residents. Besides property prices, the development of the elderly care industry in the two areas also hinges on future government policies. According to the Beijing Municipal Bureau of Civil Affairs, extending medical bill and elderly home subsidies for Beijing residents to include facilities in Tianjin and Hebei are expected to be introduced by the end of September.
The lack of out-of-town medical insurance cover caused by hukou restrictions has been targeted for major reforms across the mainland in recent years. The progress highlighted above represents a big step forward and forms part of the ongoing Beijing-Tianjin-Hebei integration process.
Chain Operated Model
Currently, many elderly people are shifting their focus of care from treatment to prevention. With this form of care among the priorities of China's 13th Five-Year Plan, facilities and services catering for this requirement are expected to find ready support.
Visits to several private elderly homes in central Beijing found that the quality of medical and general-care services varied. In one care home located in the Beijing West district, a full range of facilities – including a medical room, nursing station, pharmacy and a resident doctor on 24-hour call – were available. In addition, this particular home had just been certified as an approved institution for medical insurance claims. The elderly residents of this particular home, then, are able to access medical treatment in-house simply by swiping their payment cards without having to visit external hospital facilities. Other elderly care homes, however, had no medical facilities, forcing residents to seek treatment from nearby hospitals. Should better-resourced facilities be established in the area, this type of care home would struggle to compete.
Very few of the mainland's elderly care homes currently are part of a multi-site chain operation. The Beijing Municipal Government will reportedly seek to upgrade operational standards across the industry by promoting franchised elderly home operations throughout the region. Such a business model will allow the best-managed facilities to flourish and will be easily identifiable by prospective residents and their families.
For more China market opportunities, please visit: http://research.hktdc.com.