Impact of property on psychology of providers

I first started working with H&SC Providers 25 years ago. At the time I was a Building Engineer specialising in Design and Project Management. One of my first projects was to mange the upgrade of a residential nursing home for over 65’s to a care home for younger adults with mild to moderate learning disabilities.

I can still recall the overwhelming sadness I felt as I surveyed the empty property. The remnants of lives that lay abandoned in the rooms: hospital style bed curtains that tracked around beds in rooms where two or three people had lived. The laundry room with oversized pigeonholes on which the resident’s names were scrawled, some still with items of grey clothing folded into them. Nightclothes, half sets of dentures, walking sticks – all discarded carelessly as though their owners had been whisked away overnight to a fate unknown. Most of all – the stale atmosphere of a building that had housed people rather than been a home for them.

Bringing that building to life gave me a chance to be part of a vision that sought to eradicate those days. This would be a home, not a warehouse. The rooms were to be single occupancy. Light would be brought in along with fresh air. The vision of the owner was singularly focussed on creating something befitting the needs of its new occupiers.

Shortly afterwards I moved into Provider Management, briefly as a Director of Estates then as Business and Commercial Director. The start of a 21-year journey in Health and Social Care (so far….).

Over this time, I have retained my interest in property and architecture. I am particularly intrigued by the impact that buildings have on their occupants, especially within this sector.

Property is the major capital investment for providers. It is a tangible fixed asset. You can see it, touch it, identify with it. There is though, a draw back to this. It can become too significant. By this I don’t mean to imply that it isn’t important – but that there can be a tendency to feel that the job has been done simply because we have a good, well located, beautifully appointed building. One of the things I changed in the early days of leading the development of a provider was the language it used in its marketing literature. The references were to the quality of the building. The en-suite bathrooms (back in the day when this was an emerging concept rather than the norm); the size of the bedrooms. Was this all that we had to say? Surely at the start of the 21st century we should expect these things? What about the service? What about the care? Was this how we wished to define ourselves?

Buildings don’t change of their own accord other than to age and decay. When first acquired and appointed, there is a sigh of relief once the capital spending has stopped, and the income stream can commence. The job is done and there is no need to revisit it other than routine maintenance.

An interesting consequence of what is predominantly an hotel-based service is a disproportionate focus on fixed assets. Making the Estate the primary identifier for the service provision (some providers still identify themselves by reference to property rather than service) shifts culture into an intractable position whereby change is considered only in line with the repairing timeline of buildings. This is a psychological factor that leads to drift in service/market alignment. Unless there is a driving element within the Management Team forcing a contemporaneous reflective view of the Service (as distinct from the property) then this drift is silent and dangerous. It is possible for a provider to maintain stable occupancy levels beyond the point after they cease to be fully aligned with a developing market: length of stay increases; familiarity in relationships with Commissioners seeking reliability. It only takes one factor to change (say a new competitor or a Commissioning review) and attrition commences. At this point a common response is to improve the building, renovate. All too often the truth is difficult to perceive from within – that the service has slowly moved away from current trends, policy requirements, standards.

It is for this reason that we do not see high occupancy levels as a reliable indication of a sustainable service. When reviewing we would always want to investigate in more detail before we reported back to an Investor, Lender or Management Team. As with many things in highly specialised sectors, the truth often requires extracting from the headline data.

Whilst the acquisition and presentation of good quality property is a clear indicator of intent and commitment, it is the quality and contemporary relevance of Service that really matters when it comes to considering the profile of a Provider. If that statement needed any reinforcement it can be found quite simply in the mechanism for valuing businesses in this Sector: multiples of 10x EBITDA and above are not uncommon, far exceeding the base asset value. What is the premium for? It can only be the service provision.

Independent externally generated reviews offer an insight that is not possible to achieve from within. If you would like to discuss this or any other matter which you think we may be able to assist with, we would love to hear from you.

Please contact Graham, Alex or Kerry, contact details are in our Introductory Brochure which can be found at