In the last few days the US Census Bureau released a report titled 65+ in the United States: 2010 (the link will download a free pdf of the 192 page report) . . . yes I know it is 2014, but the issue date is June, 2014. The single most important data point: The number of individuals residing in nursing homes has decreased by 20%.
Pivoting With the Data
Very early in the history of Senior Housing Forum I responded to an article that predicted an impending shortage of nursing home beds. My belief was that they had it all wrong. As I have watched the senior living market space I am more convicted than ever ware in the early states of a long declining slide for the skilled nursing industry. I am convinced that in the next 5-7 years we will see the number of skilled nursing beds and buildings decrease by another 1/3. Here is why:
- More Alternatives - There are better options for many people than have ever existed. Home care is more widely available, medical model assisted living communities are proliferating and hospice care makes it much easier for people to die at home.
- Most Skilled Nursing Communities Are Unpleasant Places - Last year, about this time, I published an article which included this line “nursing homes suck”. This year I am more politically correct. For a variety of reasons, including funding, skilled nursing communities are just plain not great places to live.
- Money, Money, Money pt. 1 – In an effort to control costs the government is continuing to encourage more home based services for seniors. People are generally happier living at home and the cost is substantially less than what skilled nursing costs.
- Money, Money Money pt. 2 - The Assisted Living Medicaid program will continue grow grow because it saves about 1/3 of the cost of skilled nursing and provides a higher quality of life.
The New Paradigm
Here is what I think we will see:
- Affiliated Post Acute Rehab Facilities - These facilities will serve post-acute residents (mostly seniors) who need significant amounts of rehab services. 90-100 day stays will be rare with most lengths of stay in the 2-3 week range. We already see some chains moving in this direction.
- All Managed Care – Sooner rather than later every single senior will have their care paid for through a managed care program. This will be true for both Medicare and custodial Medicaid. Containing costs will be critical. The facilities that will win will be those close to hospitals and that can demonstrate high quality outcomes (which will primarily mean low readmission rates for all diagnosis).
- Serious Case Management - As payer sources move around the chess board, figuring out how to make money and keep costs down, one of the things that will happen is that physicians and case managers will want to have all of their patients/residents in just a few skilled nursing communities. They will also want low readmission rates.
They will strongly encourage post-acute patients, including custodial patients, to choose a few select skilled nursing buildings that have close geographical proximity and have high quality outcomes. Ultimately there are some skilled nursing facilities that should not be caring for residents and so this consolidation will be a good thing. Forward looking Skilled Nursing Operators will ultimately benefit from these changes because they will have higher occupancy rates. Residents will benefit because the will get to choose between higher quality options. Steve Moran
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