This opinion piece was originally published on the NZ Herald on 30 January 2013.
As a shareholder in Ryman Healthcare, I'd like to respond to Sue Kedgley's opinion piece regarding wage levels in the retirement sector.
She has implied Ryman Healthcare's excellent profitability is a reason why wages in the retirement sector are low for caregivers, and that shareholders should ask about improving wages in this sector.
Ryman is my largest investment. I have thoroughly researched the companies in this sector and have concluded Ryman Healthcare is absolutely the best of breed. It has shown a level of staff excellence, workplace stability, quality of workmanship and superior care at all levels of the business.
Had she asked Ryman, Ms Kedgley would have been told they proudly pay above average caregiver wages in the sector.
I know this because I asked this question of Ryman's management when Diane Crossan's excellent report into the retirement sector was released last year.
Not only do Ryman pay above average wage rates, they also have a staff participation scheme for shareholding in Ryman, and they encourage further training and education for staff, some of whom have no formal qualifications beyond the most basic school certification.
Ryman succeeds because it's a great business all round, but mainly because of its proven formula of constructing its apartment and village complexes in-house, building to large scale (their villages are larger compared to other operators) as well as gaining profit on the re-sale of units. Wages and fees for caregiving are a smaller part of the cashflow for retirement village operators.
This is why bigger operators are mostly growing, and why a number of smaller rest-home operators are struggling. These smaller operators are 60 per cent-plus of the retirement sector market and thus the majority of employment in aged care giving.
There have been some recent incidences of industrial unrest in the retirement sector on caregiver pay, but these have come from larger retirement village operators that are privately owned. In the case of Oceania in early 2012, there was a dispute over how much of the DHB subsidy was being passed on to its workers, who at the time appeared to be paid less than those workers in other companies like Ryman.
Because smaller aged care service providers are not expanding, it is the bigger operators now growing the sector. They can:
•More easily meet the significant compliance required by local district health boards and the Ministry of Health
•Afford the latest equipment and tools for modern aged healthcare, including mobility tools and building designs for mobility-affected residents
•Provide modern, friendly premises and specialist care for those with dementia or higher levels of impairment
Ms Kedgley's opinion piece implied Ryman Healthcare, as NZ's biggest listed retirement operator, were not holding their end up when dealing with its staff. In fact, the opposite is true.
There is a real issue with wage levels for caregivers in the aged healthcare sector, and in truth, it will require a response from both retirement providers and the DHBs who provide funding. However, all village operators are not equal, and Ryman remains unequalled as the best company in this sector. They deserve their Deloitte award as New Zealand's best company for 2012.
Aaron Bhatnagar is a professional investor with a significant focus on retirement village operators and the healthcare sector. He is a former councillor and chairman of economic development and infrastructure at the former Auckland City Council.
This mini blog contains infrequent public commentary by Aaron Bhatnagar mostly on business, but also political and philanthropic matters of importance to him.