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Digital care: Machines as a panacea?

Digitisation in nursing care offers many opportunities, improves processes and relieves nursing staff. Prof. Helmut Kreidenweis explains in an interview how this potential can be used without overstepping boundaries and why ethical standards are important.

Although there is still a long way to go before we have a care robot with artificial intelligence, digital technology already relieves the burden today: assistance systems equipped with sensors and software solutions for automated ordering processes as well as networked “smart home” technologies make everyday care easier and provide more security. Investors and operators alike want to integrate the new digital solutions as quickly as possible so that they can ultimately offer a high-quality range of care services despite difficult conditions.

3 Questions to…

Prof. Helmut Kreidenweis is Professor of Computational Social Science at the Catholic University of Eichstätt-Ingolstadt and explains in an interview why machines should not replace people in spite of all the process optimisation they offer:

1. What opportunities does digitisation offer in nursing care?

The demographic shift is probably the greatest challenge in nursing care. As the number of people in need of nursing care grows, there are fewer and fewer skilled care workers. Digitisation is not a panacea, but the opportunities it offers are manifold, already starting with the consistent use of classic information technology such as professional documentation and duty roster software. Combined with the associated mobile apps, processes can thus be tremendously improved and the load on nursing staff can be effectively lightened. There is still a lot of room for improvement in most facilities.

2. To what extent is digital care desirable at all?

When it comes to care and digitisation, one often hears “dehumanisation of care” in the same discussion. Of course we need to discuss ethical issues. But we should also learn to listen more closely to what the people concerned themselves want. Current surveys show that 84 per cent of the population believe digital solutions make sense to alleviate caregivers’ workload. And 76 per cent support the use of robots that support those in need of care.

But we must also take the fear of new technologies seriously and carefully accompany people – both those affected and nursing staff – during the introduction of the technology. And it is also clear that people, especially if they are cognitively or physically impaired, need human contact on all sensory levels. Machines should not replace people. This point must never become a monetary issue. We must pay very close attention to this.

3. Are there other limits to the use of digital technology?

There are always limits when those affected can no longer decide or differentiate. For instance decisions like whether my intimate care should be done by a robot or a human being. With differentiating, the point is that in communicative situations I always have to know whether I am dealing with a human being or a dialogue system based on artificial intelligence. Of course, it becomes difficult when the ability to make decisions and evaluate is severely restricted by dementia, for example. This is where we must proceed thoughtfully and carefully while developing new professional and ethical standards.

Read the interview in full length in the TERRANUS Care Report 2018!

Questions? Get in touch with us!

Digitisation? Don’t panic!

Fear that jobs will vanish is spreading: critics believe that digitisation will lead to high unemployment. In contrast, economists foresee ‘a transformation with enormous opportunities’. Because demographic change and digitisation are counterparts.

Humanoid robots, artificial intelligence (AI) and autonomous vehicles – a massive proliferation of technology is heading our way and with it a major threat of widespread unemployment, warn sociologists in particular. Millions of jobs will be lost around the globe and up to 47 per cent of all professions will be wiped out by AI and its algorithms, according to the fear scenario.

“It makes little sense to think one-dimensionally of human beings and artificial intelligence as opposites,” says Carsten Brinkmann, TERRANUS Supervisory Board Chairman. “As in the past, new technologies are dramatically changing our world. However, this only means that we will once again redesign the future using ‘intelligent’ machines, delegate problems and tasks to them, and emerge stronger from this process. Much of the growth in employment since 1980 has taken place in occupations that were completely unknown back then.” Everyone should understand that change is unsettling and not automatically be ‘biased’, because that does not help us move forward.

Demography or digitisation: Which development has faster impact?

Economists such as Jens Südekum, Professor of International Economics at the University of Düsseldorf, and Gerd Zika from the Institute for Employment Research (IAB) of the Federal Employment Agency in Nuremberg also underline the huge advantages of digitisation, especially in ageing societies such as Germany. According to forecasts, we will run out of workers faster than we will jobs.

Germany currently has a workforce of around 45 million people, which will gradually shrink to 38 million over the next few decades (IAB figures). This downward trend already includes the 200,000 immigrants per year, the increase in women’s employment and longer working lives. If the majority of baby boomers retire from 2020 onwards, demographic change without digitisation will result in a considerable shortage of labour. And so economists and labour market researchers are currently asking themselves which force will be faster: Demography or digitisation? In any case, the two are counterparts – and that’s a good thing.

Care 4.0: Mitigating the enormous shortage of staff, doctors and caregivers

Maybe by 2035 around 1.5 million jobs (IAB) in a fully digitised working environment will not be refilled, but at the same time new areas of activity of roughly the same order of magnitude will emerge: the profession of Big Data Analyst, for example, was completely unknown five years ago.

The demand for qualified people in the IT sector, but above all in the health and care sector, will explode. Today there are already around 35,000 vacancies for nursing staff that cannot be filled, and this number will continue to increase. The Bertelsmann Stiftung predicts a shortfall of up to half a million employees in the care sector in 2030.

At the same time, the need for doctors and other social professions is growing. “Digitisation helps us to mitigate this enormous demographic gap,” explains Carsten Brinkmann. “Age-appropriate assistance systems, for example, enable older people to remain independent in their homes for longer, digital technologies in nursing homes alleviate and take over difficult and administrative tasks, improve communication and create modern, more attractive workplaces.”

Future-oriented education and training, retraining and lateral thinking are necessary to cope with the major changes. “Panic over digitisation is completely out of place, because digital solutions are an important building block for tackling our challenges and demographic change,” says Carsten Brinkmann.

Any questions? Get in touch with us!

Care 4.0: Wanted – creative ideas!

Time for (R)Evolution: “Ambient Assisted Living, artificial intelligence and demography-oriented neighbourhood development would revolutionise the lives of older people in Germany,” says Carsten Brinkmann.

At first glance it looks like a cross between an exercise machine and a vacuum cleaner. It answers to the name “Marvin” and when asked, fetches a bottle of apple juice from the fridge, opens it and hands it to the older gentleman. It gets a plate down from the high cupboard shelf, picks up the fork that fell on the floor and is always ready to give a helping hand. The assistance robot was developed by the Institute for Artificial Intelligence at the Ravensburg-Weingarten University of Applied Sciences. Should the prototype go into series production, it could cost less than 10,000 euros – depending on the nursing care level, an investment that would pay off within the first year.

“Artificial intelligence, Ambient Assisted Living (AAL) and neighbourhood development geared to the ageing population could revolutionise the lives of the elderly and people in need of care,” explains Carsten Brinkmann, TERRANUS Supervisory Board Chairman. “And common sense already calls for us to think about completely new ways of providing care. Because at the latest when the generation of baby boomers has to be cared for, the rigid system of out-patient and in-patient care will collapse.”

Internet of Things: Smart solutions for an independent life

This doesn’t require looking far into the future. The Internet of Things (IoT), i.e. smart, networked devices, will very soon enable the elderly and those in need of care to lead a largely self-determined and independent life. Algorithms supported by sensors, cameras and microphones analyse movement patterns, measure body temperatures and interpret gestures and behaviour. They remind people to take their medication and stay hydrated, measure blood sugar levels and in the near future will be able to administer exact dosages of medication. They also detect critical situations and send this information directly to the doctor, nursing staff or relatives.

“Modern technology in the field of AAL will allow older people to remain independent for longer if we as a society succeed in building up a corresponding care system and infrastructure,” says Carsten Brinkmann. “This includes, for example, nursing offices in the heart of neighbourhoods, where both virtual and personal information flow together. Thanks to technological support, staff have time for human interaction, coordinate all services such as domestic help and caretakers, and are available to directly address the needs of and assist older people. In the best case, the offices are also a centre for cultural events and community experiences.” The latter is particularly important because the number of family members decreases significantly as the post-war generation gradually ages and needs care. This brings not only care, but also the growing isolation and loneliness of older people into the spotlight.

Backwards-looking: Housing construction lags behind technology

“In order to develop such structures and use the current state of technology, however, appropriate residential accommodations and age-appropriate housing construction are needed – and the pace here is slower than sluggish,” says Carsten Brinkmann. The Ifo Institute (Institute for Economic Research) in Munich estimates that up to 400,000 new dwellings would have to be built in Germany every year to meet the needs of all generations. If all goes well, only around 320,000 apartments will be built in 2018. “In light of demographics, a much larger proportion of this should be apartments suitable for the elderly. There is already a huge gap here – and the technological and infrastructural requirements of the near future are not even taken into account. In concrete terms, we are building apartments for the past instead of leveraging the technological possibilities for a more individual and independent lifestyle for the elderly.”

Questions? Get in touch with us!

Don’t be afraid of creativity!

Sticking to the beaten track and conventional ways of thinking hinder better healthcare service offers for people in need of care and thus let opportunities slip away. Legislative shackles are increasingly leading to a “one-class system”, exacerbating the loss of individuality.

“The systematic separation of out-patient and in-patient care is becoming a veritable paradigm for policy makers and cost-bearers, yet there are numerous concepts that would enable the development and realization of a wide range of trend-setting offers for care and living arrangements,” says Carsten Brinkmann, TERRANUS Supervisory Board Chairman.

This would require reducing bureaucracy and silo mentality while fostering a creative approach to modern forms of living with needs-based service portfolios and care services. This, in turn, would allow the elderly and people in need of care to decide for themselves when, where, and for how long they use what service and care offers. At the latest when the Baby Boomer generation requires care, the number of seniors with ample financial resources as well as the people who depend on long-term government support will increase considerably.

The uniform system in place puts everyone on the same stage regardless of their individual care level, personal preferences and predilections. The crux of the matter is that due to the negotiated care rates, operators cannot differentiate prices and offers. “Quality and care services are so heavily regulated by cost-bearers and policy makers that ultimately only a standard offer can be realized, without consideration of personal needs,” says Carsten Brinkmann.

Individuality instead of “one-class system”

In order to accommodate the different lifestyles and needs of customers, the “one-class system” would have to become more flexible. While maintaining statutory quality standards, providers and operators could more strongly diversify care offerings and prices, pursue innovative approaches and meet market needs. It would be a win-win situation for everyone, as more private capital would be in play, leading to the financial relief of people with low income and allowing more varied offers for residents with more resources.

Dramatic shortage of housing and care places

And these private resources are urgently needed in light of demographic developments, because the relation between the growing number of people in need of care and the decline in new age-appropriate housing and care infrastructure continues to become more skewed. Let’s take the example of nursing homes: for 18 years, on average 280 new facilities were created annually. In the last three years, this number dropped to a meager 150 even though the reduction of double rooms is leading to a further supply shortage of around ten percent. In addition, many older properties with poor equipment, lack of infrastructure or poor framework conditions must be replaced.

Take the example of age-appropriate housing. For years, the housing industry has failed to provide enough housing that is affordable and has a lay-out that meets market need. Although this applies to the entire population, it is even more acute for seniors, who have hardly any alternatives due to their age-related restrictions. In light of this shortage and lack of care infrastructure, an individual lifestyle in spite of age restrictions is out of the question.

Living and care á la carte

“With more freedom of design, new living, support and care structures would be created for all demands, from standard to comfort, comparable to the hotel sector,” says Carsten Brinkmann. “Customers could choose different forms of housing and care with flexible service concepts – both out-patient and in-patient. This would result in better financing, more offers and above all individual freedom to shape the future.”

Questions? Get in touch with us!

More competition, lower costs

When the number of competitors increases, prices drop: this correlation also applies to the healthcare market, as is shown in the current market study from healthcare property consultants TERRANUS. According to the report, a high nursing home density significantly decreases care charges and increases quality.

Pay 200 euros less, every single month: this is how much costs for nursing homes can vary between areas with dense and sparse care home markets, because competition is good for business. The same is true for the healthcare market – to the benefit of those in need of care and the payers. This is confirmed by the current TERRANUS market study now published in the RWI Leibniz Institute for Economic Research’s “Nursing Home Rating Report 2017”. The RWI scientists arrived at the same conclusion based on the Herfindahl-Hirschmann Index.

Example NRW: 7.5 percent more

An example from North Rhine-Westphalia: In the county of Soest, there is a very high care rate of 6.78 percent, meaning a good ratio between the number of care places and the share of the population over 65 years of age. And this pays off. A care place there costs an average of 9.14 euros less than in the Viersen area, which with 4 percent has a considerably lower degree of care. Nursing home residents thus pay around 7.5 percent more in this county. With monthly care costs of e.g. 3,000 euros, this adds up to a difference of 200 euros – every single month.

Competition ensures quality of facilities

Competition not only lowers costs, it also ensures better market offers. Those in need of care must have the choice between different facilities and forms of care – especially if demand rises dramatically in the future. The number of people in need of care will increase to 4.1 million by 2030, which is around one-third more than in 2015. In the event of a serious shortage of care places in a region, the facilities would hardly be in a competitive situation – the need to distinguish themselves with good management, modern concepts and low costs would then cease to exist.

Questions? Get in touch with us.

What is the trend in nursing home rents?

New product: For the first time, TERRANUS is publishing an investment cost index for nursing homes. “And thereby an excellent indicator for tracking changes in rent,” explains Markus Bienentreu. The index starts with the assessment of the state of Hamburg, and the other federal states will gradually follow.

Fast or slow, historically high or quite low – in the past, finding the right answer was a shot in the dark for investors and operators: but now, with its new investment cost index, TERRANUS introduces a reliable instrument for tracking changes in rental prices for nursing homes since 2010. This is a real milestone, as although there are numerous indices for each asset class, until now there has not been this kind of an overview for healthcare facilities. “With the TERRANUS Investment Cost Index we have now closed this gap and are thus able to offer investors and operators a fascinating comparison for each federal state,” explains Markus Bienentreu, Managing Director of TERRANUS.

Secret revealed: Investment cost index creates transparency

As trends in nursing home rents were previously not made public, investment costs serve as an excellent indicator. These are the component of general nursing charges which is used to refinance building and inventory costs. In concrete terms, this means that if the operating model for a facility is rental, the investment costs comprise the rent or lease, maintenance and repair, and the cost of procuring replacements. Thanks to this strong correlation between investment costs and rent, rent growth can be accurately deduced from changes in investment costs. The investment cost index is based on market data in the TERRANUS Care Atlas, which has collected and updated comprehensive KPIs for every residential nursing home in Germany since 2007.

Index confirms: Investment costs for nursing homes increasing slowly but surely since 2010

The index thus enables interesting comparisons and conclusions, as the first part of the investment cost index for the city state of Hamburg shows. Investment costs have been steadily rising in Hamburg since 2010, but lag behind the growth in consumer prices. Even more interesting is the comparison to the rental price index: “Since 2012, housing rents in Hamburg have been increasing more than rents for nursing homes; and even quite significantly since 2015,” says Markus Bienentreu. “This means that investors need to calculate rent increases for healthcare properties more conservatively. The TERRANUS Investment Cost Index serves as a reliable blueprint here.”

Well-founded: Index provides sound data for investment costs discussion

The new TERRANUS Index also provides important arguments for political debate on the amount of investment costs, which are highly regulated and subject to the cross-financing ban. The latter stipulates that other components of general nursing charges, such as nursing staff costs, accommodation and meals, cannot be used to finance the rents. If, however, growth in investment costs and thus rental income for nursing homes were to permanently fall behind the increase in consumer prices and apartment rents, the incentive for investors to invest would decrease compared to other asset classes.
The current rise in construction costs could make investing in nursing homes uninteresting. This creates a serious problem, as it is estimated that around 55 billion euros will need to be invested in new and replacement nursing home buildings by 2030.

Questions? Get in touch with us.

Analysis beats instinct

First analyse, then invest: whether the purchase, construction or operation of a healthcare property pays off or not depends on a lot of factors. What does local purchasing power and population growth look like? Are the quality of living conditions right and how high are operating costs compared to the competition?

Those who have in-depth knowledge and a good overview of all the facts can ultimately follow their instinct a bit. But only at the very end of a well-founded analysis. This conclusion that modern psychology comes to is more relevant to the healthcare market than almost any other sector. As attractive as investments in care home properties may sound, the numerous factors that play a role in a successful investment decision seem just as opaque.

These range from differences in the 16 German regions’ care home legislation and investment costs to local socio-economic factors as well as the room and function concept of the specific property. To provide a good overview of the many factors for a safe investment decision, TERRANUS has developed database-supported analysis tools. With the transparent evaluation and prioritisation of numerous factors, they identify strengths and weaknesses and enable a prognosis about future sustainability – for the purchase, construction and operation of a care facility.

Factor in variables

The operating figures of a healthcare property may allow an evaluation of the past and present, but they are not enough to forecast the future. For instance the dramatically changing population structure due to demographics, residents’ higher quality demands, the construction specifications that are different everywhere from Kiel to Munich as well as complex new regulations for the calculation of investment follow-up costs must be considered – all variables of future relevance for the success of the investment. In addition to this, legal uncertainty persists regarding the question of structural alterations as well as of refinancing.

Competitive intelligence

Even though the care facility market may be one of the large growth markets, it nevertheless requires a precise potentials analysis, also in direct comparison to the competition: Does the property look modern and livable, are shops and parks nearby, is public transport easily accessible, does it promise a good quality of life and infrastructure? In the future, it will more than ever be about the attractiveness of the property and its competitiveness.

Risk remains calculable – with the necessary dose of realism

To make the right decisions in this challenging environment, a detailed breakdown of the competitive situation brings a decisive advantage. This makes investments in the care home property market calculable – with the necessary dose of realism and flexibility concerning the legal framework and a very close look at the competition.

Questions? Get in touch with us.

Record Year 2016

2016 – a year of superlatives. Never before have more care properties in Germany changed hands. More than € 1.75 billion were turned over in portfolio deals alone. Markus Bienentreu explains why the data still leave a lot to be desired as far as precision goes.

2016 – a year of superlatives. Never before have more care properties in Germany changed hands. More than € 1.75 billion were turned over in portfolio deals alone. Markus Bienentreu, Managing Director at TERRANUS, explains why the data still leave a lot to be desired as far as precision goes.

€ 1.9 billion or € 2.2 billion or even € 2.5 billion? At the end of the year, estimates of the past-year’s transaction volumes for the care property market are sprouting like mushrooms – a phenomenon comparable to divining coffee grounds for Markus Bienentreu, Managing Director at TERRANUS. “From the large transactions we know transaction volumes added up to more than € 1.75 billion. But single sales between individual operator companies and church institutions often occur out of public view. To bandy precise figures around in this context suggests a precision that doesn’t exist in this market.”

€ 1.75 billion for large transactions

A total of € 995 million were paid for the portfolio acquisition of “Primonial RIM SA”, the purchases of “Deutsche Wohnen” totalled around € 420.5 million, and “E&G Funds & Asset-Management” turned over more than € 100 million. These large transactions alone comprise a transaction volume that pushes the sector into a previously unattained dimension.

Off-market movement

Apart from these large deals, a number of care properties also changed hands in off-market sales between individual operator companies, church institutions and private individuals. Based on normal market prices, total transaction volumes probably stack up to more than € 2.25 billion.

Interesting market also in 2017

“The care property market remains far too small-scale and opaque for a reliable calculation. But the trend is clear at the bottom line: care properties are being increasingly added to portfolios as an attractive asset class – and this trend is set to continue in 2017, as medium- and long-term prospects remain good,” notes Bienentreu.

No bargain, but attractive

But more than ever, detailed market knowledge is essential when seeking the income property, as multiples as high as 16 times one year’s rent have been paid for acquisitions in some cases. TERRANUS compiles the most important market data and a well-researched analysis of healthcare and care properties in its 2017 Sector Monitor, which can be ordered from the end of January 2017 from here.

Questions? Get in touch with us.

€ 28 billion for care homes!

Demographics bump into reality: Germany will have 3.4 million individuals in need of care by 2030. Around one third, in other words, more than one million people, will then need an inpatient care place. To cover rising demand, 250 new care homes comprising 80 places each will need to be built – every year!

Building of new care homes needs investors

“What this means specifically,” explains Markus Bienentreu, CEO at TERRANUS, “is that we need new investments averaging € 2 billion per year. Investment volumes will amount to a total of € 28 billion by the end of 2030.”

This does not include re-investments and replacement investments of at least a similar magnitude for already existing care places. “Just take a look at the figures,” says Markus Bienenetreu, CEO at TERRANUS, “and it’s clear we urgently need capital in Germany to secure an appropriate care structure.” He believes that investors stand at the ready, but that a rethink of the policy framework and the creation of a good investment climate are now needed.

And the number of people requiring care might also rise again significantly due to legislation in 2017, with Germany’s Second Bill to Strengthen Long-Term Care (PSG II) significantly simplifying the categorisation of individuals suffering from dementia. From 2017, such persons, as well as individuals suffering long-term mental illness and the mentally handicapped, will receive the same benefits as individuals needing care due to physical illness.

Questions? Get in touch with us.

“On the subjectivity of figures”

The demographic wave is rolling, and demand for healthcare properties is rising rapidly. Investing? Yes, but better and differently! An interview with Carsten Brinkmann, TERRANUS Supervisory Board Chairman.

Hard facts + solid figures = everything clear? No way! Simple equations present a unclear picture of the future of healthcare properties. In order to manage demographic change, we need open discussion and pragmatic action, without distraction from starry eyed social ideas: an interview with Carsten Brinkmann.

Mr. Brinkmann, by 2040 Germany will already have 24 million individuals over the age of 65. Is this a strong argument for healthcare properties?

Carsten Brinkmann: Age is a very subjective figure. In professional football, you’re already old by the age of 35, whereas in politics, Hillary Clinton wants to become US President at 69. Half of the younger readers of this blog stand a good chance of becoming 100 years old. We don’t really know what age will mean in the future. What is certain is that service and supply types are becoming more open, and demand for outpatient and inpatient care is rising significantly up to 2050. But the much more exciting question is, how do most of these 24 million individuals aged 65 and over wish to live?

What does this mean for future projects and for investors?

Carsten Brinkmann: A genuine rethink and a small (r)evolution. At its core, it’s about developing new and more flexible types of living for each phase of life. This is important, because it will have a positive effect on the quality of life of the future 65+ generation. Specifically it means:

coordinating integrated services in line with demand within a residential district,
expanding infrastructure for diversely networked services and apartments,
introducing budgets for which insured individuals are responsible themselves, rather than silo-thinking by individual cost bearers,
and to realise all of this on a cross-generation basis in line with demand, and not according to age.

Structured flexibly in this way, future living forms could be adapted highly efficiently to any demographic trend in the future – regardless of when we will now actually be regarded as old in the future.

Is it still worth investing in classic care homes, or is a bubble even forming?

Carsten Brinkmann: We continue to need inpatient care places for the very elderly. In the professional area, the purchase price multiple for good properties in good-quality locations has risen from 15.5 times to 16.5 times over the past five years. This corresponds to an increase of around 20 percent. Nevertheless, compared to many investment alternatives, healthcare properties continue to offer solid yields of around six percent. I don’t see a bubble forming currently, in view of further demand growth for care places – by contrast with multi-storey apartment buildings.

3 Questions to…

1. What opportunities does digitisation offer in nursing care?

2. To what extent is digital care desirable at all?

3. Are there other limits to the use of digital technology?

Questions? Get in touch with us!

Demography or digitisation: Which development has faster impact?

Care 4.0: Mitigating the enormous shortage of staff, doctors and caregivers

Any questions? Get in touch with us!

Internet of Things: Smart solutions for an independent life

Backwards-looking: Housing construction lags behind technology

Questions? Get in touch with us!

Individuality instead of “one-class system”

Dramatic shortage of housing and care places

Living and care á la carte

Questions? Get in touch with us!

Example NRW: 7.5 percent more

Competition ensures quality of facilities

Questions? Get in touch with us.

Secret revealed: Investment cost index creates transparency

Index confirms: Investment costs for nursing homes increasing slowly but surely since 2010

Well-founded: Index provides sound data for investment costs discussion

Questions? Get in touch with us.

Factor in variables

Competitive intelligence

Risk remains calculable – with the necessary dose of realism

Questions? Get in touch with us.

€ 1.75 billion for large transactions

Off-market movement

Interesting market also in 2017

No bargain, but attractive

Questions? Get in touch with us.

Building of new care homes needs investors

Questions? Get in touch with us.

Mr. Brinkmann, by 2040 Germany will already have 24 million individuals over the age of 65. Is this a strong argument for healthcare properties?

What does this mean for future projects and for investors?

Is it still worth investing in classic care homes, or is a bubble even forming?

Would you like to have a personal discussion with Carsten Brinkmann about investments in the future?