Alastair Duncan is the Strategic Industrial Leader for the Service and Food Workers Union and a long time CAFCA member.

“Oceania tis for thee...War is peace - Ignorance is Strength - Freedom is Slavery...” George Orwell “1984”

“Our vision: To be the market leader .... in a way that exceeds the expectation of our residents, staff and shareholders... (Oceania Website 2011)

Oceania

The news that UK-controlled rest home operator BUPA* had qualified to be a finalist for the 2010 Rodger Award for the Worst Transnational Corporation Operating in Aotearoa/New Zealand drew a few sideways glances this year. BUPA, like every other rest home operator, is essentially a private operator drawing public monies but what made the nomination so interesting was a widespread view that there was a much more deserving candidate. Oceania. Sadly Oceania’s nomination was too late. Fortunately Watchdog is an “equal opportunity” detractor so here’s the latest on the nomination that never was. *BUPA was the runner up in the 2010 Roger Award. See the Roger Award Judges’ Report, which accompanies this issue, for the reasons why. It is also online at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Roger/Roger2010.pdf. Ed.

Once upon a time old folks went to one of two places. The local public hospital or the local church home. The care was pretty good, if you overlooked the creaking floors, the shared loos and the picture of an almost pubescent Queen Elizabeth hanging over a tired pot plant. But that was once upon a time. Today aged care is one of “the” growth industries in New Zealand. Betty Windsor has been replaced by a corporate logo, the pot plants are now shiny and prolific they count for carbon credits and the ensuite is opposite the spa. And as Maire Leadbeater reported in Watchdog 125 (December 2010; “Who Should Look After Older People Who Need Residential Care? A Charitable Trust? A Merchant Bank Or Private Equity Corporation? The State?” http://www.converge.org.nz/watchdog/25/09.htm) increasingly rest homes are more likely to be run by private equity operators rather than the local nuns.

With 59 facilities nationwide the biggest of the bunch is Oceania. Formed in 2008 from the merger of Eldercare and Qualcare, who themselves had gobbled up the homes formerly run by the Presbyterian Church and the Salvation Army, Oceania boasts 3,600 hospital and rest home beds, has 994 residents living in its retirement villages, and employs over 3,000 staff. (1). The vast majority of rest home and hospital residents have their accommodation fees paid by the taxpayer. Fees vary dependent on the level of care and the funding package from the local District Health Board (DHB) but typically cost around $1,000 a week per resident.

Theoretically that’s a ratio of one staff member to every resident and even factoring out what John Key might dub “back office” it should make Oceania “the” place to be. But behind the PR and smart suits an increasingly hard fought war is raging. A war that pits low paid, health care assistants, working women whose pay averages just $14.36 an hour against the power of the Australian-owned Macquarie corporate empire. Chief Executive Officer Geoff Hipkins, whose salary is not disclosed, has branded Oceania as “the market leader in the provision of care and lifestyle options,” a goal he wants to achieve by 2013.

But with two years to run Oceania seems to be struggling to achieve that goal. In November 2010 the business press announced “Oceania Group returns to profit”. “Auckland-based Oceania, which has 59 villages, made a profit of $16.2 million in the 12 months ended May 31, from a year-earlier loss of $169.9 million a year earlier...” (2). To be fair, the report continues by noting that Oceania “wrote off” $23.5 million from its good will and still had debts worth $554 million, of which $239.9 million was due before May 2011. Much of that debt came from the money that changed hands when Oceania was set up in 2008. Oceania shelled out $380.2 million to buy up the Qualcare group while Macquarie stumped up $63.5 million to buy up Eldercare.

And what does that mean? It means that Oceania may not be cash rich but it sure has a ton of equity with 59 facilities around the country positioned to maximise an increasingly aged New Zealand population with projection of the beds needed rising from 32,000 in 2011 to as many as 52,000 by 2025 (3) Which, of course, is why Oceania and BUPA, and all the other “offshore” operators, are here in the first place. We’re rich (comparatively), we won’t be shipping the old folks overseas and whichever Government runs Treasury is going to pick up most of the tab.

Biggest Doesn’t Necessarily Mean Best

In 2010 Oceania closed the venerable Norman Kirk Home in Upper Hutt and sold two Taranaki homes as going concerns to Russian investors. As a result of the February 2011 Christchurch earthquake two of Oceania’s Christchurch homes, Windermere and Woodchester, were closed and are not expected to reopen. For the workforce it means possible redundancy; for Oceania it means an insurance claim and a return from possible land sales as happened at the Norman Kirk site in 2010. At the same time Oceania, like other operators, is struggling to secure the occupancy it needs to make the required “return on investment” (ROI). Not, of course, that Oceania will disclose what the ROI is. Oceania did however participate in the 2010 review of the sector run by international accountancy firm Grant Thornton. The Thornton report assessed a “fair return for an efficient and effective provider in the sector to be between 11.3% and 12.9% after tax” (4). The report goes on to note that enhanced professional services in the community have not been shown to reduce costs. “This is primarily because the cost savings that can be achieved are often offset by increased longevity” (sic!) (5)

Given that the business is “care” Thornton usefully provides an analysis of earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) at $5,068 per rest home resident, $9,647 per hospital resident and $4,200 per dementia care resident. Oceania’s return is somewhere in that mix, though to be fair the chain has, like others suffered from declining referrals from DHBs and an increasingly high acuity level of new admissions. Having over-extended the empire it’s the workers who are expected to pay the bill. In July 2010, Oceania, in common with every other operator, received a 1.73% increase in DHB funding. Though the DHB funding is not explicitly tagged for wages it none the less is used by almost every provider to meet the “operating costs” of the business. And the largest operating cost is the wages.

Increase In Funding Not Passed On To Workers

Oceania took the money, but unlike its competitor BUPA, Oceania failed to pass on the increase to the staff - the very people Oceania’s Website lauds for “providing superior care and companionship to our residents every day of the year”. Not of course that those staff are so dear to Oceania that it wants to retain all of them. In 2010 Oceania decided to contract out its food services in Hawkes Bay. So now, the food that the residents receive will be prepared, served and the staff managed by an outsider. And, no surprises here, rather than look to a local provider Oceania awarded the contact to UK-controlled Medirest, a trading arm of the transnational Compass Group. Compass, a Fortune 500 member reported a 36% increase in share yield in 2010 on top of a 10% increase in profit – all in the midst of a worldwide recession.

The decision to contact out food services attracted a lot of attention in the industry. Meal time is one of the key times in the caring day and an integral part of the care plan for the elderly. Having a third party provide the service runs counter to industry best practice. Non-union chain Ryman has made it clear they do not support contracting out food services. For Hawkes Bay staff it means they no longer have the protection of the union collective agreement and must now try and negotiate on their own - isolated from other staff in the same building. In 2010 Compass took over the catering operation at Sprott House in Karori, Wellington. Many months later the staff are still trying to settle a collective agreement that protects just five people! (6)

Two unions represent the 3,000 plus workforce at Oceania: the NZ Nurses Organisation (NZNO) and the Service and Food Workers Union Nga Ringa Tota (SFWU). Between them, union density - the percentage of workers who actually join up - is around 30%. Union density in the private sector is typically 9% but in health is closer to 80%. That low union density not only plays into management’s hands when it comes to information about just where the funding comes from. In January 2011 the SFWU surveyed the largely non-union Heretaunga Home in Upper Hutt. Only 32% of staff knew their wages were funded by the DHBs, 20% thought their pay came from Oceania and 32% didn’t know where it came from. The same survey in well unionised homes showed twice as many staff knew the funding model.

The Wrong End Of The Spectrum

For many months NZNO and SFWU have been trying to settle a new collective agreement. But what started as a dispute about “pass on” has now escalated into a conflict over one of the core issues in the sector, training. Before the takeover, staff in what are now Oceania facilities largely progressed up the pay scale through service steps. The longer you were on the job the more familiar and productive you became. Oceania didn’t like that approach and insisted on a qualifications-based framework which was agreed to four years ago. But despite rolling out glossy charts and promises too few staff progressed up the scales leaving hundreds languishing just a few cents above the minimum wage. Training and its partner, safe staffing, are at the core of the union approach and NZNO and SFWU encouraged Oceania to work with the Government funding Industry Training Organisation (ITO) Careerforce, to correct the problem. ITOs, the poor relations to other tertiary providers, are desperate for more engagement with major employers but instead of working with Careerforce Oceania contracted Greymouth-based Tai Poutini Polytechnic to develop an “Oceania only” fast track qualification. Union delegate Paula O’Reilly says staff work hard to focus on the residents but it’s tough when they see management walking away from a qualifications framework and promoting a second rate proposal that has no national credibility (7). When the unions asked for information on the new qualification Oceania, which has only agreed to “consult” on the matter, held back. Only after an Official Information Act request started to flush out the details did Oceania begin to engage on a more open basis.

As the two unions balloted members for a series of national strikes a final round of bargaining took place in March 2011. The rooms may not have been smoke filled but the tensions were high. In the end it was the employer who moved and agreed to pass on most, but not all, of the money offering 1.5% from earlier in the year. For someone on $15 hour it means a pay rise of 23 cents an hour! It’s nearly a year since Oceania failed to “pass on” the July 2010 funding and the next funding round is already underway. In recent years both NZNO and SFWU have worked to focus on the need to lift the amount of money the sector receives in the hope that, even when it goes to private equity companies, that safe staffing levels, proper training and decent wages will eventuate.

The battle with Oceania has focussed the discussion - but at the wrong end of the spectrum. When an offshore bunch of bankers holds back public money from low waged caregivers then something is very, very wrong. And when the Government, captured by the belief that “private is better” allows it to happen time and time again then something needs to change...

Endnotes
(1) Oceania Website
(2) Paul McBeth, www.stuff.co.nz, 23/11/10
(3) “Rest home bed demand is expect to almost double in the next 20 years”, Grant Thornton Report, 2010
(4) Thornton p9
(5) Thornton p11
(6) While the Employment Relations Act gives catering staff who are outsourced the right to retain their current conditions the collective agreement is only transferred on an individual rights basis requiring a whole new bargaining process if the collective agreement is to be protected.
(7) Paula O’Reilly, Our Voice, December 2010