(Bloomberg) -- Just days after surviving a confidence vote sparked by an uproar over neglect at private elderly care homes, Finnish Prime Minister Juha Sipila told private-equity investors that quality has to come before profits in the care industry.
“High valuations of private care companies relative to profits mean high expectations for future earnings, leading to a push to boost profitability,” Sipila said in Helsinki on Tuesday. If efforts to raise margins comes from “cutting services and the quality of care, then they are on the wrong track,” he said.
A fast aging population and the anticipation of a bigger role for private providers have boosted Finland’s care-home industry in recent years, attracting the interest of private-equity investors. After waves of consolidation, the biggest operators include Mehilainen Oy, controlled by CVC Capital Partners, Esperi Care Oy, owned by Intermediate Capital Group and Ilmarinen Mutual Pension Insurance Co., as well as Attendo AB.
Esperi Care had one of its care homes closed by authorities in January and Attendo’s care home in the town of Alavus was put under public management last week after six residents died in less than a month.
“If I was in charge of outsourcing elderly care at the local level, I would first check the company’s values and that it pays its taxes to Finland,” Sipila said. “I would also review the owners and speak with them to find out whether they plan to abide by those values in the long term.”
Sipila, a millionaire entrepreneur who entered politics just eight years ago, faces an uphill battle to convince the electorate his government is taking health care seriously. His Center Party is at a six-year low in polls just weeks before a general election on April 14 and his three-party coalition is slated to become the latest in a string of cabinets failing to pass a reform of social services and health care (it’s still being debated in parliament with opposition among lawmakers mounting.)
Some investors are also taking note. Co-operative S-Bank, which owns asset manager FIM, blacklisted Attendo shares in its funds “for the time being.”
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