Get ready for the rise of the nursing industry
Published: 05 Nov. 2024, 19:19
Updated: 06 Nov. 2024, 16:02
The author is CEO of VIG Partners.
Among OECD countries, Korea’s aging speed is the fastest. Korea became an aging society 24 years ago after the proportion of the elderly aged 65 or older exceeded 7 percent of the population in 2000. After 18 years, the country became an aged society, where the elderly make up more than 14 percent of the population. In 2025, Korea is expected to enter a super-aged society with more than 20 percent of the population aged over 65. The pace is even faster than Japan, which entered each phase in 1970, 1994 and 2005.
That’s why the industry for senior citizens is bound to attract attention. Among them, many companies and investors are already eyeing the nursing service sector. When 30 percent of the total population becomes elderly by 2035 — and 40 percent by 2050 — the families as well as the seniors themselves will desperately need nursing services.
Nursing services are largely divided into four business areas: home care that provides simple medical care and daily needs by visiting homes; nursing homes that provide daily life support and medical services after moving in; “senior towns” where active seniors live together; and nursing hospitals where elderly people with senile and chronic diseases are hospitalized for treatment.
Among them, home care, nursing homes and nursing hospitals rely heavily on insurance benefits subsidized by the government under the Long-Term Care Insurance Act introduced in 2008. As of last year, the entire nursing service market is estimated to be worth about 16 trillion won ($11.6 billion), most of which is created by home care and nursing homes. In the future, as nursing is expanded and reorganized under the Long-Term Care Act, the market size is expected to continue to grow as the number of eligible people continues to increase — and as insurance fees and benefits increase.
The problem is that most of the nursing services are still run by private or small businesses. Recently, regulations have been eased to allow insurance companies to provide home care services, but there are not many specialized companies with capital and manpower. Some platform companies — such as CareDoc, Caring and Care Nation — received investments and are growing, but their sales are still only tens of billions of won.
On the other hand, leading Japanese companies such as Nichii and Sompo Care have already become large enough to record sales in trillions of won. In the case of Nichii, it was acquired by global private equity fund Bain Capital in 2020 and then was resold to Japan Life Insurance in April for about 2 trillion won. Nursing services in Japan are recognized as a stable and attractive investment target to be the subject of a massive acquisition by private equity funds or insurance companies.
Since the government began to ease related regulations by benchmarking Japan, related companies will be able to go down the path of expansion and specialization as in the case of Japan.
with the Korea JoongAng Daily
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