Cataclysm in the retirement home sector. The article published Monday in Le Monde which highlights excerpts from Victor Castanet’s book, Les Fossoyeurs, and aims only Orpea, set fire to the powder. The author denounces in particular the serious dysfunctions in the clinic of Neuilly-sur-Seine, one of the most upscale in France, leading to acts of mistreatment of dependent people. It is the entire Orpea system that is called into question, against the backdrop, according to the author, of a policy of cost reduction intended to improve the profitability of the group leading to situations of rationing as well as dubious accounting practices, which will remain to be proven. Victor Castanet collected 250 testimonies revealing multiple abuses. He also evokes the group’s political links, in particular the close relations that the founder, Doctor Marian, would have maintained with Xavier Bertrand, Minister of Health at the time. Another attack, that of Mediapart, denouncing fictitious jobs.
Orpea, which denies all the charges, immediately chose the legal route and will initiate a defamation complaint procedure. In its defence, the company retorts that the latest satisfaction survey of residents and families, carried out by an independent external body, shows an average recommendation rate of 95%. In addition, Orpea specifies that the sector is highly regulated and controlled by the public authorities. In a letter sent to the author of the book, Xavier Bertrand also rejected the accusations.
POLITICAL FILE
After the media surge generated by the book, the company is now in the sights of the government. The Minister of Solidarity and Health, Olivier Véran, issued a press release on Tuesday, saying that he might go to court on certain subjects. On Wednesday, the Minister Delegate for Autonomy, Brigitte Bourguignon, summoned the Director General of Orpea France, Jean-Christophe Romersi, to shed light on the “serious facts” mentioned in Les Fossoyeurs. “An independent inspection of social affairs will be launched on the entire Orpea group,” said the government spokesperson. It is no coincidence that the book comes out a few months before the presidential election, its aim probably being to alert politicians to the burning subject of the reform of old age, which has still not taken place. Indeed, this sector of the very difficult management of the end of life suffers from a shortage of nursing staff, a difficulty in recruiting and a high turnover, given a very delicate profession. “The basic problem is that there is abuse in all establishments and in home services in France. And, this systemic abuse, it is known to all. There are official reports denouncing it. The problem is that, as it is the public authorities who are at the origin, nothing moves. If this book can help make things happen, then it will be a good thing, ”responded Pascal Champvert, president of the Association of directors serving the elderly (AD-PA) in an interview given to France Info.
Orpea, which has 116,000 beds (clinics and nursing homes) worldwide, including nearly 50,000 in France, takes care of heavily dependent people in its nursing homes, with nearly 40% Alzheimer residents. In total, 250,000 patients and residents are welcomed each year in its establishments.
However, the private nursing home sector does not represent more than 20% of the total dependency care market in France, 80% being “non-profit”, in the hands of public establishments or associations which do not always have the medical structures adapted for long-term care. “We must not forget that, for fifteen years, the State no longer has the means to finance the sector of old age”, observes Stephan Dubosq, analyst at Kirao AM. “The public authorities were satisfied to find private operators who invested in creating new structures or taking over battered establishments that did not have the capacity to bring themselves up to standard. This explains why so many authorizations have been granted to them by the ARS [agences régionales de santé] between 2000 and 2010. Without this, the shortage of places would have been much greater. To finance future needs, a much greater pension reform would be needed with an allowance and taxes dedicated to financing old age, but this is unlikely given its cost. The example of Germany, where public funding takes into account the state of dependency of patients, is a path to follow. »
REFORM OF THE GREAT AGES
The State is indeed faced with a major challenge: the aging of the population. The number of 75-84 year olds will record an unprecedented growth of 49% between 2020 and 2030, to reach 6 million, and, according to DREES, 108,000 new places in nursing homes will be needed in the next ten years, more than double the rate. current creations. Faced with this growing demand, the appropriate reception capacities (the level of dependency increasing with the age of entry into establishment, which is increasingly high) are largely insufficient. Politicians are also involved in the entire sector, including with private groups, dependent on allocations decided by the State to remunerate their nursing staff and finance their medical equipment.
The Ehpad realize their margin on the hotel and catering part. But it is the use of public money by Orpea (see below) that is denounced.
REJECTED SECTOR
The action of the European leader in retirement homes, alongside Korian, fell 52% in four sessions, after being suspended from trading on Monday. Taking into account the risks on these very sensitive activities has led many analysts to apply a strong discount on the PER (price ratio to net earnings per share) of groups in the sector. Korian, who had been attacked for abuse three years ago on the show Correspondent, fell 31% between Monday and Thursday, while LNA Health, much smaller in size, held up better (-12%). France representing approximately 50% of the activity of Orpea and Korian, some analysts have reduced their growth prospects in France, given this reputational risk.
SCRAP VALUE
Orpea’s brand image is more than tarnished. However, it is unlikely that its occupancy rate will be affected. Indeed, the waiting lists are long, and there are no alternatives. The establishments are very well placed, and the territorial network important. Maintaining dependent people at home involves heavy and very costly logistics.
The value entered a dizzying downward spiral, attacked by hedge funds. The very laconic press release from Orpea is far from having convinced investors, who were surprised that the group was not more prepared, while the journalist’s investigation lasted three years. The board of directors announced on Wednesday that it had commissioned two leading audit firms to conduct an independent assessment to shed light on the serious allegations made against it. However, the damage is done. The media lynching has put the group, which has not yet been able to defend itself, to the ground. ” At current prices, the valuation of Orpea no longer makes much sense. The ratio of enterprise value to EBITDA (corrected for real estate) is less than 5, whereas a group like Colisée, number four in France, was bought out by private equity funds on the basis transaction multiples of almost 16 times. The company could become the ideal prey of a takeover bid by venture capitalists “says Stephan Dubosq. The capital is not blocked, only 20% (cumulatively) is held by two major shareholders: the first Canadian pension fund (CPPIB) and Peugeot Invest (formerly FFP).
At this stage, an exit from the Stock Exchange, which would satisfy those who believe that this type of activity, from an ethical point of view, has nothing to do with it, is not excluded.