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Hong Kong Housing Society’s Senior Care Facility and Business

Modelwww.AsiaHealthcareBlog.comwww.RubiconStrategyGroup.com

+Overview Hong Kong Housing Society (HKHS)

History of the Organization HKHS’ Mission and Mandate Role of the Hong Kong Government (past, present, future)

Structure of Senior-Care Market in Hong Kong Role of the Family as Caregiver Available Residential and In-Home Care Options Role of Government and Private Insurance as Payer

HKHS’ Solution Facility Structure (Services, Amenities, Infrastructure) Payment Options (Financing, Qualification Standards) Role of Government (Land Incentives, Eldercare Regulation)

What HKHS Plans to do Differently How Their Next Two Facilities will be Different How They Want to Shift Their Relationship with the Hong Kong Government

+Hong Kong Housing SocietyHistory of the OrganizationMission & MandateRole of the Hong Kong Government (Past, Present and Future)

+Hong Kong Housing Society History of the Organization

Started in 1948. Play a role renovating existing properties,

rebuilding distressed properties, or providing housing for people who have lost housing due to reclamation.

As of today, have built over 67,000 individual housing units.

Today, in addition to managing their own properties, they provide commercial property owners with housing management services and retail leasing as well.

Mission & Mandate Help create housing initially for low-

income families. As housing in Hong Kong become more

expensive, mission migrated to address housing needs of middle-income families also.

Role of the Government Past: Government funded the HKHS. Present: Government offers incentives

and some remediation, but little direct support.

Future: Government may continue to offer incentives, but HKHS sees its reliance in government support dwindling.

+Structure of the Senior Care Market in Hong KongRole of the Family as the CaregiverAvailable Residential and In-Home Care OptionsRole of Government and Private Insurance as PayerPublic versus Private Residential Senior-CareKey Similarities & Dissimilarities Between Hong Kong & China

+The Family

Role of the Family as Caregiver 74.1% of the elderly population live w/ family1. 17% of elderly over 60 are receiving social security2. 55% of elderly over 65 are also receiving old age

allowance3. Even with elderly parents who have dementia, families are

reluctant to turn over caregiving services to outsiders.4

Studies of ex-pat Chinese and Hong Kong communities in Boston, Vancouver and Toronto show that cultural barriers to third-party care giving continue to lower; however, strong concepts of familial piety still govern how Hong Kong families view senior care.51Report no. 27: Life, Health and Financial Conditions of Elderly Persons and Middle-Aged Persons – Census and Statistics Department 2000.

2”Elderly Services in Hong Kong” – The Hong Kong Council of Social Service.3Ibid.4”Caregivers’ Informational Needs on Dementia and Dementia Care”, Asian Journal of Gerontology & Geriatrics, Vol 2, No 2, August 2007.5Intergenerational Family Support for Chinese Older Adults, International Journal of Social Welfare, Volume 20, Supplement 1, October 2011.

+The Market

Hong Kong Government

Provided Community Care & Support Services

District Elderly Community Centers

& Neighborhood Elderly Centers

Social Centers for the Elderly

Residential Care Services (RCH)

Services for active and healthy seniors: education, social development, career support, outreach, networking, basic counseling, meals, referrals to service providers, etc.

More involved services which provide the option of either center-based services or some minimal in-home care.

RCH can be subsidized (what HKG government calls “subvented”), or some combination of public/private. These are more involved services than social centers.

NOTE: After this stage, the HKG government does provide limited assessment-based subsidized long-term care.

As a HKG senior moves further to the right, services get more involved to reflect growing healthcare needs and typically diminished ability to pay for these services themselves.

+Available Residential & In-Home Care Options

17% 3%

15%

65%

Number of Facilities

RCH HybridsRCH Non-SubsidisedEBSPrivate

RCH Hybrids are combinations of subsidized (public and NGO), self-financing, contract, contract-based, etc.

RCH Non-Subsidized receive no government assistance but are not self-financing. These are NGOs.

EBS (also called EBPS for Enhanced Bought Place Scheme) are facilities purchased by the HKG Social Welfare Department.

Private facilities are individually run, for-profit senior housing operators.

NOTE: Data compiled from four databases provided by the HKG Social Welfare Department; 2 (the RCH components) updated 9/30/2011and 2 (EBS and Private) updated 11/30/2011.

+Available Residential & In-Home Care Options

0%2%

48%

34%

16%

RCH Openings

HostelHomeCare & AttentionCare & Attention Plus Continuum of CareNursing Home

These are only openings for RCH categorized senior care facilities.

The “Hostel” and “Home” categories can essentially be overlooked (2% of the total); categories not of practical analytical value.

“Care & Attention” – basic in-home services ranging from social visitation to basic medical care.

“Care & Attention Plus Continuum of Care” – more involved medical care up to hospice.

NOTE: Data compiled from four databases provided by the HKG Social Welfare Department; 2 (the RCH components) updated 9/30/2011and 2 (EBS and Private) updated 11/30/2011.

+Available Residential & In-Home Care Options

Number of Facilities (% of

Total)

Number of Openings (% of

Total)

RCH Hybrids 147 (16.5%) 17,739 (17.8%)

RCH Non-Subsidized 29 (3.3%) 1,304 (1.3%)

EBS 136 (15.3%) 21,698 (21.8%)

Private 578 (64.9%) 58,744 (59%)

Total: 890 99,485

Estimates are that there are 19,000 on the waiting list currently for the RCH Hybridized senior care.1

NOTE: Data compiled from four databases provided by the HKG Social Welfare Department; 2 (the RCH components) updated 9/30/2011 and 2 (EBS and Private) updated 11/30/2011.

1”Who Pays for Long Term Care in Hong Kong”, Laurence Wing Him Ho, Chief Executive, Hong Kong Policy Research Institute.

+In Case You Are Curious

Number of Seniors 65+

Percentage of Population

2009 913,000 13.01%

2025 1,766,000 24.01%

2050 2,427,000 39.32%

How that stacks up against the need in Hong Kong …

Suggests Hong Kong has services in place for about 11% of seniors.

Current dependency ratio is 168:1000 (seniors over 65 : workers).

Projections are by 2023 this will rise to 282:1000, by 2033 to 428:1000.

+A Word About EBS

EA1 EA2

Per Capita Net Floor Area 9.5 m2 8 m2

Home Manager 1 1

Registered Nurse 2 0

Physiotherapist 0.5 0

Health Worker 2 4

Care Worker 8 8

Ancillary Worker 8 6

Total 21.5 19

The “Enhanced Bought Place Scheme” was the outgrowth of a majorpolicy review by the Hong Kong government where they attempted todevelop solutions to the shortage of senior care facilities. With the EBS,the government purchases an existing privately owned senior care operationand upgrades them (there are two standards as shown below: EA1 offers morecare than EA2). The government saves CapEx by renovating an existing facility.

Note: Source data from Hong Kong Social Welfare Department and “Who Pays for Long Term Care in Hong Kong”, by Laurence Wing Him Ho, Chief Executive, Hong Kong Policy Research Institute.

+Payer – Government & Insurance

How seniors in Hong Kong pay for services: 12% who are 60+ are still working in some part-time

capacity. 80% are living off of savings. 17% receive social security allowance. 55% over 65 receive additional old age allowance. Private insurance plays a very small role. New efforts by the Health & Wealth Bureau are

recommending a required 2% contribution of salary to Health Protection Account for use in retirement.

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HKHS’ SolutionFacility Structure (Services, Amenities, Infrastructure)Payment Options (Financing, Qualification Standards)Role of Government (Land Incentives, Eldercare Regulations)

+HKHS’ Solution – Facility Structure

Cheerful Court Jolly PlaceLocation No. 55 Choi Ha Road, Ngau Tau Kok,

KowloonNo. 2 Pui Shing Lane, Tseung Kwan O

Number of Units

One Bedroom Flat 254 162

Studio Flat 79 81

Total: 333 243

Floor Area (sqm)

One Bedroom Flat 35 37

Studio Flat 23 25

Carparks Private Cars 48 14

Motorcycles 0 5

Hospice Beds 57 40

Club Facilities Restaurant, Convenience Store, Coffee Bar, Hair Salon, Music Room, Chinese Medicine Store, Library & Hobby Room, Indoor Swimming Pool, Hydropool, Garden, Fitness / Rehab Room, Dancing Room

Lounge, Restaurant, Hobby Room, Multi-Purpose Hall, Garden, Games, Gymnasium, Reading Room

+HKHS’ Solution – Facility Structure

These pictures were taken during a site visit at Cheerful Court in November 2011. They showthe one-bedroom flat in their model configuration. Kitchen to the LEFT, Dining Area to RIGHT.As pictured, this unit would sell for approximately $600,000 HKD.

+HKHS’ Solution – Facility Structure

These pictures were taken during a site visit at Cheerful Court in November 2011. They showthe one-bedroom flat in their model configuration. Living Room to the LEFT, Bedroom to the RIGHT.

+HKHS’ Solution – Payment Options HKHS is one of the other major policy initiatives that came from the Hong Kong

municipal government’s review of senior housing and the chronic shortage.

With HKHS, the government chose to offer land incentives for development versus additional subsidization of those seniors who wanted to move to either Cheerful Court or Jolly Garden.

Consequently, HKHS has some financial criteria that potential candidates must meet in order to move to one of these residences: Residents must have net assets between $1-5m HKD. If less than this, the income of the children can be used to qualify. In this eventuality, the children’s income must total $29,000 HKD/month.

Services for in-home care range from: Minimum of the basic management fee of $1,260 HKD/month plus a $300

HKD/person/month for basic care services. A la carte services (social visits to in-home hospice) range from $10,000-$30,000

HKD/month. Families can provide their own in-home care through a maid or other domestic help.

+HKHS’ Solution – Payment Options

Some additional points: Rights of ownership are not inheritable. Projected turnover was 10% when they opened; actual

turnover has been 4% (project is only 7 years old, so this could adjust in time).

10% of the population has some sort of dementia. 90%+ is over 70 years of age. Average age currently is between 72-73. Homes feature panic buttons, two-way locks, non-slip tiles,

stabilizer bars throughout home, etc.

+HKHS Solution – Role of Government The Hong Kong government

agreed to sell these two plots of land to the developer for $1 each.

HKHS has a 10-year management contract w/ the government.

As of year 7, they are not yet profitable because in order to take advantage of the $1 land purchase price, they had to agree to service pricing schemes that have been too aggressive.

The Hong Kong government has 2,167 accredited assessors that can assess the needs of seniors who are receiving public money.

$1

+What HKHS Plans to do DifferentlyHow Their Next Two Facilities will be DifferentHow They Want to Shift Their Relationship with the Government

+What HKHS Plans to do Differently HKHS has two new facilities in the works:

Tanner Hill (600 units) and Tin Shui Wai (1,000 units).

These will be purchased w/o government subsidies.

Consequently, the Hong Kong government cannot set prices (for either the flat or the services offered).

The HKHS has not been happy w/ the role of the government and believes they may not be able to operate profitably unless the government reimbursement model changes.

These two new facilities will double the income and net-asset requirements in order for a senior to qualify.

HKHS is moving away from what the Hong Kong government intended as a solution for middle-class seniors to a higher-end offering.

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ConclusionsThe four lessons from HKHS’ experience

+The Four Lessons from HKHS’ Experience

The role of government was not helpful.

A middle-income solution is still needed.

Longer lifespans mean longer ROI horizon.

Even in Hong Kong, the need for soft-skills (nursing) is high.

Each of these begs the question of whether the elder care market in China is ready to explode or whether more development work is necessary before the Chinese market can be ready. Perhaps the bigger market opportunity in China is not housing, but training the trainers?

+Contact Information

Benjamin Shobert

Founder, Managing Director

Rubicon Strategy Group, LLC

Two Union Square

601 Union Street, Suite 4200

Seattle, WA 98101

Phone: 206-652-3572

Fax: 206-652-3205

Mobile: 317-777-2926

Email: bshobert@rubiconstrategygroup.com

URL: www.CrossTheRubiconBlog.com or www.AsiaHealthcareBlog.com