For 10 years, Beverly Enterprises has operated retirement and assisted-living facilities in Japan through a joint venture with a Japanese partner. The American company's nine facilities cater largely to a limited clientele of well-heeled and able-bodied Japanese.
But a new law that will pump billions of new public dollars into Japan's long-term-care system promises to change the way Beverly Japan does business. It will greatly expand the population the company serves and bring new competitors into the market. It will also create opportunities that at least one new U.S. entrant, Seattle-based Emeritus Assisted Living, is poised to exploit through its own joint venture with a Japanese firm.
Japan should be a model market for long-term care. Its population is aging rapidly: In 1995, 14% of Japan's 130 million citizens were over 65. By 2025 that proportion is expected to shoot to 27%, compared with a projected 18.5% for the U.S.
Its citizens are also largely avid savers, so many older people have the resources to pay privately for long-term care.
Despite favorable demographic and economic factors, however, there has never been much of a market for private-sector long-term care. Traditionally, Japanese families have cared for their elderly relatives at home. Older people who need more care generally check into a publicly financed nursing home or a long-term hospital, where national health insurance picks up the tab.
Insurance will change everything. In April 2000, a new national long-term-care insurance program is expected to change all that. Tax contributions and premiums paid by residents aged 40 years and older will raise an estimated $40 billion annually. State-certified agents will evaluate the medical needs of elderly residents and award benefits of $570 to $2,850 per month to pay for home care, adult day care or facility-based nursing care for an estimated 3 million people.
New rules allow private companies to tap this public funding, dispatching home helpers to needy residents and billing the government directly for their services.
Beverly Japan, a joint venture between the Fort Smith, Ark.-based nursing home company and Tokyo-based Shimizu Corp., a construction company, is eyeing this new revenue stream. Its facilities combine retirement living with low-intensity nursing services.
One such facility is Beverly Court Chigasaki, in coastal Chigasaki City, about an hour's train ride southwest of Tokyo. Open since 1989 and containing 54 units, Beverly Court Chigasaki houses residents whose ages have increased from an average of 68.5 in 1989 to an average of 76.1 today.
As the Japanese age, Chigasaki and other facilities are seeing increased demand for nursing care, and administrators are counting on the new insurance system to pay some of the costs.
Beverly Japan will also try to tap the new market for home helpers by establishing home-care agencies at its facilities. A pilot home-care project was launched at Chigasaki last year.
Like assisted-living facilities in the U.S., the Chigasaki facility looks much like a hotel, with double sliding doors opening into a lobby graced with a reception desk and plush chairs. Amenities include a hair salon and a pool. It also offers a few non-American features, such as prominently placed ashtrays in the lobby and a tea ceremony room downstairs.
The facility makes few visible concessions to the frailty of the elderly residents. Waist-high rails run the length of each hallway, and nurses upstairs meet routine-care needs.
The apartments don't have kitchens, so most residents eat at least one meal a day at an in-house restaurant, decorated in peach and rose. At lunch, diners choose between a noodle dish-cold in the summer, hot in the winter-and rice with soup, fish and vegetables. Residents pay for only the meals they eat, with three meals per day running about $500 per month.
Activity sheets distributed to each resident and posted in the halls detail a packed schedule of events, including fitness classes, video screenings and special events.
All this convenience isn't cheap. At Chigasaki, the typical single resident from 60 to 75 years old pays $520,000 in one-time entrance fees; new residents older than 75 pay $392,000. The facility returns a portion of that fee when the resident moves out, depending on the length of stay, up to 85% after 15 years. Residents also pay a monthly fee of $1,000 to $1,200 for the unit.
Since the initial fee is supposed to cover care provided to residents as they age at a facility, the new long-term-care insurance poses a problem. Residents say they shouldn't have to pay twice for care, once through the entrance fee and a second time through the new mandatory insurance premiums.
Japan's Ministry of Health and Welfare told Beverly Japan that accepting payment for care from the government in addition to the initial fee would constitute improper dual billing. And some residents have asked the company to return part of the initial fee.
The company is in discussions with the government and residents about how to resolve the issue. Beverly Japan's ability to tap the new insurance program will depend on its success in these negotiations. If Beverly Japan has to reimburse residents for even a small part of the entrance fees, the cost could run into hundreds of millions of dollars.
Challenges and opportunities. Jack MacDonald, vice president of Beverly Enterprises' international division, admits the new law poses challenges, but he says it also offers opportunities. The company is considering plans to develop nursing homes and specialty units for Alzheimer's patients, in addition to the home health program at Chigasaki.
"At this time I characterize our efforts as still being in the incubator stage. We think there are opportunities internationally, but we're evaluating them," MacDonald says. Beverly is also developing facilities through a joint venture in Chile.
For another Japanese-U.S. joint venture, though, the timing of the new law couldn't be better. The company, formed by Osaka-based Sanyo Electric Co. and Seattle-based Emeritus, is building a 125-unit assisted-living facility in the town of Kurashiki, a prime tourist destination and favorite retirement spot for wealthy Japanese. Emeritus operates about 145 assisted-living facilities in the U.S. and Canada.
Emeritus Chief Financial Officer Kelly Price says the $28.6 million Kurashiki project was a bid to get in on Japan's promising demographics. A joint venture with Sanyo Electric provided name recognition and market knowledge.
"In Japan a lot of (elderly) people do have money (to spend on retirement living), but they have no place to go," says Ken Haga, president of the venture. "We are trying to provide a place where those people can live."
Emeritus hopes to develop 10 more facilities in Japan in the next five years, Haga said.
Sanyo Emeritus was formed in 1995 and broke ground in December 1998, a few months after the Japanese parliament passed the new long-term-care insurance law. Accordingly, San-Oaks Kurashiki is designed as a seniors' independent living complex with nursing care add-ons that conform to the law.
Sanyo-Emeritus agents will evaluate the health of residents when they enter the facility and regularly throughout their stay. The facility will provide care to residents who need it and bill the government directly. San-Oaks-based home helpers won't have to travel to do their jobs, reducing the cost of providing the care. But under the new law they'll be paid the same as helpers who travel to their clients' homes. The company gets to keep the difference.
San-Oaks Kurashiki, featuring a large nursing-care room and a high-tech bath that doubles as an exercise pool, charges premium monthly rent-from $2,500 for the smallest units to $3,500 for the largest. But instead of a hefty entrance fee, residents pay six months' rent as a deposit.
Haga said residents are putting deposits on units in the eight-story building at expected rates, although more customers than expected are choosing the rooms with tatami mats and space for a foldaway futon. Most of the units have beds.
The new law gives access to home help to all Japanese, regardless of income, but only the rich will be able to pay the rental fees charged by facilities such as San-Oaks. The question is how many will want to.
Price says getting wealthy Japanese used to the idea of renting a home is the biggest marketing challenge.
"It will be a major cultural change for them. They are used to owning the place where they live," Price says.