Woodhaugh Rest Home, in Dunedin, is seeking permission to develop a 16-bed dementia unit and a hospital facility.

Cressida Healthcare general manager Colleen Stairmand, of Auckland, said the rest-home was seeking permission from the Ministry of Health for the dementia unit and a 16 to 18-bed hospital facility.

A new manager, who started in January, was "making a real difference" at the home, Mrs Stairmand said. There were no major problems at the home.

Southern DHB carried out a site visit in November, after complaints the home was not carrying adequate basic supplies.

The DHB gave the home the all-clear, but has been monitoring more closely since.

Mrs Stairmand said the dementia unit and hospital facility would increase the profitability of the 70-bed rest-home.

"The rest-home has some empty beds, so we were looking at ways that we could make it profitable and offer more services."

Southern DHB funding and finance general manager Robert Mackway-Jones said capacity outstripped demand in the residential care sector in the South at present. Demand for dementia and hospital care was tipped to grow, he said.

Hospital-level care had risen in the past three years, while residential dementia care had been "reasonably flat" in recent years.

Hospital bed use grew 4.5% in 2009-10, 4.1% in 2010-11, and 2.8% so far in 2011-12.

Rest-home demand was "flat and declining" and this trend would be exacerbated by the board's plans to develop new services to keep people at home for longer.

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Dementia unit permission sought