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Major Cities Turn to Suburbs and Nearby Provinces for Elderly Care

With the aging population of tier one cities requiring a huge surge in the number of residential care facilities, the lower land costs in suburban areas and neighbouring provinces are seen as providing a cost-effective solution for this growing problem.

Photo: Mainland residential elderly care: Demand set to severely outstrip supply.
Mainland residential elderly care: Demand set to severely outstrip supply.
Photo: Mainland residential elderly care: Demand set to severely outstrip supply.
Mainland residential elderly care: Demand set to severely outstrip supply.

As with many developed nations, China is seeing a change to its population demographic. Better health care and improved diet have seen many mainlanders live far longer than previous generations. Inevitably, this is placing a considerable strain on healthcare providers, with a lack of residential care home spaces proving an escalating problem.

This is a particular issue in the tier one cities, where high population numbers and rising land costs make developing appropriate care facilities an unreasonable proposition. In Beijing, however, moves are now afoot to tackle this by establishing care homes in suburban districts, as well as in those neighbouring provinces that have a demonstrably lower cost base.

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% 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% 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 Old Age Pensioners (OAPs) 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.

Photo: China’s changing age demographic.
China's changing age demographic.
Photo: China’s changing age demographic.
China's changing age demographic.

Beijing, however, is not the only city to face the challenge of an increasingly aged population. According to a study by the China National Working Commission on Ageing (CNWCA), more than 400 million (30%) of the total population of the mainland will be aged 60 or above by 2050. Inevitably, then, the provision of elderly care will be a major challenge for China's healthcare services in the 21st century.

At present, there are three main forms of elderly care available on the mainland – homecare, institutional care and community care. At present, homecare is 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.

In the case of community care, its development has been relatively slow, largely because of the lack of perceived demand. According to staff at one urban day-care centre in Beijing, it only has, on average, two patients a day. As a result, it is the institutional nursing homes that are now expected to play an increasingly important role in the provision of elderly care. As the number of the elderly increases, though, the available institutional elderly care places will inevitably fall far short of demand.

According to the CNWCA, there was a total of 5.85 million elderly care spaces (beds) available across the mainland in 2015. This is equivalent to 27 spaces per 1,000 of those aged 60 or above, well below the 40 per 1,000 available in the US. Removing the more upmarket elderly homes – those beyond the means of the majority of families – from the equation, the remaining low- to mid-range institutions are now positioned to service 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 claim to have no vacancies. Furthermore, one elderly home in a non-prime location said it had in excess of 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.

Beijing Suburbs and the Tianjin-Hebei Areas

Despite the need for elderly care homes in Beijing, there is little space in the central region for any such developments. Instead, it is the city's suburbs and the neighbouring provinces that are the most likely locations for any new facilities.

According to a Mr Hu, the manager of one elderly care home in Beijing, the cost of setting up such facilities is hugely dependent on local property prices. With its spiralling land costs, the Beijing central area is clearly an unsuitable location for any 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 sq metre, while in the central area it can exceed RMB50,000 per sq metre.

Photo: In short supply: Beijing care homes.
In short supply: Beijing care homes.
Photo: In short supply: Beijing care homes.
In short supply: Beijing care homes.

High property prices obviously inflate the cost of running an elderly home, which, in turn, push up fees. In line with this, residents of one city centre Beijing care home are said to be charged between RMB4,200 and RMB12,200 a month. In light of this, it is probable that care homes based in the suburbs could charge lower fees, but still remain highly profitable.

In the case of Hu's centrally-located care home, the cost per sq metre is approximately RMB26,800 and his minimum monthly fee is RMB2,980. At a second facility, an hour away from central Beijing, the property price is only some RMB8,500 per sq metre, while his monthly fees range between RMB950 and RMB2,700.

Aside from the Beijing suburbs, a number of 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. As well as property prices, though, 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, there are plans to extend medical bill and elderly home subsidies for Beijing residents to include facilities in Tianjin and Hebei by the end of September 2016.

The lack of out-of-town medical insurance cover caused by hukou restrictions has been a focus for major reforms across the mainland in recent years. The progress highlighted above represents a big step forward and forms part of the on-going Beijing-Tianjin-Hebei Integration process.

Rising Popularity of Chain Operated Model

Currently, many elderly people are shifting the focus of their care from treatment to prevention. As this form of care is also one of the priorities of China's 13th Five-Year Plan, it is believed that facilities and services catering for this requirement will find ready support.

Photo: Tailored care: Menu options for elderly residents.
Tailored care: Menu options for elderly residents.
Photo: Tailored care: Menu options for elderly residents.
Tailored care: Menu options for elderly residents.

Visits to a number of private elderly homes in central Beijing found that the level of medical-cum-general care services available were of varying quality. In one care home located in the Beijing West district, a full range of facilities – including a medical room, a nursing station, a pharmacy and a resident doctor on 24 hour call – were all available. In addition, this particular home had just passed the required assessment and become 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 the need to visit external hospital facilities.

By contrast, a number of other elderly care homes have no medical facilities, obliging residents to attend nearby hospitals for any required treatment. Should better-resourced facilities be established in the area, then the latter style of care home would inevitably struggle to compete.

At present, very few of the mainland's elderly care homes are part of a multi-site chain operation. In the case of Hu, for instance, although the two elderly homes in his charge operate under the same branding, they are not managed on a chain basis, with all the benefit of shared resources and common operating standards that that entails. This, however, is a mode of operation he intends to move towards in the future.

It is now believed that the Beijing Municipal Government will seek to upgrade operational standards across the industry through the promotion of chain-style operations in elderly homes throughout the region. It is believed that such a mode of operation will allow the best-managed facilities to flourish and to be easily identifiable by prospective residents and their families.

Cheng Gong, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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