A Sustainable Framework for Long-Term Care Development: Emphasizing Public Private Partnerships and Risk Allocation

A recent headline in the Toronto Star starkly highlights the pressing issue of senior long-term care (LTC) housing in Canada: “Parkview Manor to be shut down, marking ninth Ontario long-term-care facility closure in three years.” 

This trend underscores an alarming reality—Canada’s aging LTC infrastructure and the challenges of private ownership are colliding with the growing costs of meeting contemporary standards to leave our seniors without adequate care. 

As Canada’s elderly population reaches unprecedented levels, the urgency to address these challenges intensifies. 

As of April 2023, nearly eight million Canadians were aged 65 or older, accounting for roughly 19% of the population. The Conference Board of Canada forecasts that 200,000 new LTC beds will be required by 2035 to meet this demographic’s growing needs. 

Our collective call to action is to significantly ramp up LTC housing development, and to do so quickly, given the size of this population and care requirements.  

Addressing this crisis demands innovative financing models and a scalable approach to development.

 

Enter the potential of Public-Private Partnerships (PPPs). While not new, we have a better understanding of how to apply it with careful consideration to risk allocation so that all stakeholders benefit.  

The Case for PPPs in LTC Development

Building LTC facilities is an expensive proposition. Each one must account for mobility issues with wider doors and hallways, wheelchair ramps and elevators, safety considerations including handrails, non-slip flooring and emergency response systems, as well as healthcare spaces for rehabilitation and personal examination with technology for communication, healthcare monitoring and other reasons. 

We must find ways to offset costs by attracting private capital, and PPPs, particularly scaled-down PPPs with budgets in the tens of billions rather than hundreds of billions, offer a unique opportunity to accomplish this outcome. 

While traditional PPPs are often associated with large-scale infrastructure projects such as highways or airports, the principles can be adapted to LTC. This would enable localized and tailored approaches to LTC housing development, blending public oversight with private-sector innovation while sharing the responsibilities of financing, building, and operations to deliver timely and optimal results.

The government of Quebec’s Maison des aînés et alternative program is an excellent example of what can happen when the public sector shoulders too much of any one responsibility.  

To be clear, the Quebec government deserves a lot of credit for tackling its LTC shortage with urgency by proposing a project build across 46 different communities with 2,600 new places for seniors, while also renovating 2,500 spots in existing LTC facilities.

However, in an effort to meet its aggressive targets, the Quebec government fully financed this program, which came back to haunt them when the cost per room ballooned by more than 100%. 

This is exactly what PPPs and effective risk allocation can help guard against.

PPPs’ Scalability and Financial Sustainability Hinge on Effective Risk Allocation

In the context of LTC development, this involves a nuanced understanding of the risks associated with design and construction, operations, finances, regulation and compliance, as well as occupancy, and placing responsibility in the hands of entities that are better equipped to guarantee preferred outcomes (Figure 1). 

The private sector brings considerable strengths in design and construction. Unleashing its expertise to develop LTC facilities so that health and wellness are packaged together with integrated healthcare technology would elevate care delivery. 

The private sector has also demonstrated it is a superior operator, and prioritizing return on investment in senior care is fundamental to its longer-term sustainability. 

Here, performance-based payouts can ensure accountability and help reduce financial pressure on private developers (that meet timely construction milestones) while incentivizing higher resident satisfaction, care, and staff ratios through agreed-upon quality scores. It is also possible to use co-management models where the public sector retains oversight of critical care metrics while delegating auxiliary services (e.g., housekeeping) to private partners.

Meanwhile, the public sector has its own areas of expertise, and it’s in the public’s interest that the government oversees regulatory and compliance risks so that LTC facilities adhere to evolving healthcare safety standards. 

We’ve seen what happens when profit is prioritized over care. While it is a grim reminder, the COVID-19 outbreak had an outsized impact on LTC facilities where infection and mortality rates soared. According to Statistics Canada, at the onset of COVID in early March 2021, nursing and seniors’ homes accounted for the greatest proportion of outbreak-related cases and deaths at roughly 7% and more than 50%, respectively. This is exactly why the government should enforce standards of care. 

And yet, collaborative environments improve partnerships. Regular joint reviews and constructive feedback from all stakeholders create opportunities to proactively address compliance challenges while reducing disputes.  

Of course, some risk should be shared equally, particularly to encourage private capital investment. Innovative funding mechanisms, including availability payments made based on the performance of infrastructure or government-backed revenue guarantees, create predictable and stable cash flows. 

Occupancy is another area where risk allocation can be spread out, with governments providing minimum occupancy guarantees to mitigate revenue shortfalls for private operators. Incorporating adaptive-use clauses would also allow facilities to repurpose unused capacity for complementary services, such as adult day programs, to offset fluctuations in demand.

By embracing innovative frameworks, governments can attract private capital while ensuring equitable access to high-quality LTC services. 

How PPPs Can Make Canada a Leader in Senior Care: 

Canada is highly regarded as an international leader in PPPs, and we should strive for the same reputation in providing senior care. This is a noble stretch goal that PPPs can help us reach through an enhanced offering. 

So much more can be done from a technological perspective to support seniors through the entire care continuum. Integrated digital health records, telemedicine and Internet of Things-based monitoring systems would introduce incredible efficiencies seen in other industries while drastically improving the quality of care LTC residents receive. We could also use predictive analytics to forecast demand trends, helping private operators adjust capacity and deploy resources dynamically.

There are other ways to introduce innovation. Incorporating green building practices and sustainable construction methods with energy-efficient designs reduces operational costs and minimizes environmental impacts. Here, the government can play a role by offering green incentives such as tax breaks or grants to encourage eco-friendly practices among private developers. 

And we can’t forget about the public itself—that’s who PPPs are designed to serve. Stakeholder engagement through community involvement throughout the project lifecycle builds trust and addresses local needs. Creating transparent feedback mechanisms empowers the end-user; residents and their families can be part of the solution and contribute their own ideas on how to improve LTC facilities to best meet the needs of their occupants. 

PPPs represent a transformative approach to addressing Canada’s long-term care crisis. By emphasizing innovative risk allocation and collaborative frameworks, we can deliver scalable, sustainable, and high-quality solutions that meet the growing needs of our aging population.