COVID-19 Corporate Update: Next Steps for the Irish Nursing Homes Sector

The Irish Minister for Health Simon Harris announced in April 2020 new measures to help tackle the rising COVID-19 crisis in nursing homes. This temporary scheme is intended to help nursing homes financially with up to €72 million available in supports over a three-month period (the Scheme).

At the time of writing there are 264 clusters reported in nursing homes around the country. A cluster has been defined as three cases or more within an institution over a 72 hour period. Currently, 55% of deaths in Ireland which are associated with COVID-19 have taken place in nursing home facilities.

Nursing homes have been a major concern regarding the spread of COVID-19. As at the end of April, 285 of 435 residential care facilities in the country were receiving support for COVID-19 cases. 75 of these nursing homes have received a status red designation and needed intensive support. Staffing levels are a major factor in a nursing home receiving a red designation, and these homes are where the HSE have deployed the highest number of staff.

The Scheme

Under the Scheme, the maximum assistance that has been available to a nursing home per month has been €75,000.

Although the measures introduced were much needed and welcome, nursing homes have had the following difficulties with the Scheme:

• The amount of the assistance does not come close to compensating some larger nursing homes, particularly those which have suffered outbreaks of COVID-19. Some nursing homes in this category have incurred very large expenses arising from this, which comprehensively exceed the amount available under the Scheme.

• There were issues with the implementation of the Scheme, resulting in severe delays to nursing homes drawing any money under the Scheme.

• There is confusion over what expenses nursing homes can actually claim for. It has been unclear as to whether any allowances will be made for those nursing homes that were dealing with COVID-19 and incurring expenses to battle it long before the Scheme was announced. Many nursing homes pre-empted the need for PPE and bought and paid for this prior to the Scheme being introduced. It is unknown whether they will be able to claim these expenses under the Scheme.

• The Scheme also leaves some 5,000 residents in nursing homes not covered. Nursing home residents who are not Fair Deal recipients are not supported under the Scheme. This includes residents accommodated for respite, transitional care, or who self-pay for their care in nursing homes.

The future of nursing homes in Ireland

We have seen a large number of nursing homes acquisitions in Ireland, during the 15 months which preceded the crisis. We believe that the crisis is having, and will have, the following consequences:

1. Ongoing acquisition processes have slowed down, as repeat acquirers and owners of multiple nursing homes in Ireland have focused their resources on operational issues during this difficult time, and upon consolidating their existing platforms of nursing homes in Ireland.

2. Financial impact on family-owned nursing homes or private individual owners – the financial impact on many nursing homes in Ireland arising from the crisis is extreme, and will not be fully remedied by the Scheme. Some of the questions raised in this ezine about how comprehensively nursing homes will ultimately be compensated, are as yet unknown. It is likely that some individual nursing homes will have to seek further capital in the short- or medium-term, to try and address these losses. We understand that in some instances owners will be more willing to sell their nursing homes to appropriate buyers once the crisis has fully stabilised, than would otherwise have been the case.

3. Financial impact on larger institutional owners of nursing homes – the financial impact of the crisis has been severe for some nursing homes that are owned by larger institutional players. For some, this may decelerate their wish to acquire further nursing homes. Others may regard the post-crisis period as an opportunity to increase the pace of their consolidation, as nursing homes may become more readily available for acquisition than has more recently been the case.

4. Future consolidation – on the basis of the above factors, we believe that the nursing homes sector will continue to be consolidated in Ireland once the period of emergency in many Irish nursing homes has fully passed. This consolidation may even surpass the pace at which it was happening prior to the crisis.

5. Deal terms – it is likely that acquirers of nursing homes in Ireland in the next 12-18 months will require additional COVID-19 related deal protections than has been the case previously:

• We would expect specific COVID-19 warranties to be included in the deal documents;

• We would expect that indemnities for COVID-19 related losses to be required from sellers in such transactions;

• Warranty & Indemnity insurance is a popular product in the market already, and this will be a useful option in transactions where the sellers are unwilling to provide the level of protection the buyer requires; and

• Escrow / holdback – an element of the purchase price may need to be retained or placed in an escrow account, to be released after a certain period of time, or upon a COVID-19 liability crystallising.

6. Independent Living Units (ILUs) – there has been some commentary in the media about whether the spread of COVID-19 among residents of nursing homes could have been remedied by a different model and approach to the sector and this demographic in Ireland. One such approach that has been prevalent in the market in the past, has been ILUs, which give residents of such ILUs access to the resources of a nursing home near their premises. As well as granting such residents autonomy and space, it would be far easier to manage the spread of infection when residents are not sharing the same spaces. We expect that other such solutions will be considered at a strategic level over the coming months and years.

Conclusion

As Ireland emerges from the COVID-19 pandemic, nursing homes will have a particularly challenging balance to strike, both in ensuring restrictions are sufficient to prevent the further spread of COVID-19; and ensuring the appropriate steps are taken to protect the nursing home financially.

Should you require any further guidance about any of the issues discussed in this ezine, contact a member of our Corporate team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.