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Trends shaping the nursing home environment.

Perhaps it is an exaggeration to describe it as a camel squeezing through the eye of a needle. But the nursing home market certainly looks pinched in an analysis published recently by Irving Levin Associates, a Stamford, CT marketing analysis firm.

The report analyzes the nursing home acquisition market as it has evolved over the past five years. That may seem a relatively brief period in the overall scheme of things, but it in fact encompasses two distinct economic eras -- the pre-1987 "boom" years, and the post-1987 almost "bust." The fulcrum year of 1987 saw two key events: a peaking of nursing home prices at 33,000 a bed, a level that has never been achieved since; and a turnaround in the growth of the huge Beverly Enterprises, which that year for the first time sold more nursing home beds than it purchased.

That was taken by industry observers to be a very bad sign. But there were others, as the air began its late 1980s seep out of the Reagan era economic balloon. Entrepreneurs and hospitals who thought they saw a good thing in the demographics of an aging society found it increasingly difficult to obtain investment capital, the Levin report notes. Tax-exempt bonds, the preferred currency in nursing home transactions, were becoming harder to get, thanks to mismanagement by the Department of Housing and Urban Development and ever-intensified scrutiny by the Internal Revenue Service. Another factor was burgeoning of minimum wage (or slightly better) jobs in various fields, drawing from the traditional staffing pool of nursing assistants and therefore pressuring wages upward. High-priced (some would say overpriced) real estate was further driving perspective buyers away. Finally, state budgets, a principal supporter of nursing homes via Medicaid, were eroding, as more and more constituents felt "taxed to the max."

Does all this mean the market is dying? Not really. The Levin Associates report notes, for example, that last year saw a small sign of a turnaround: even though nursing home sales were down from the year before, the average price per bed increased (slightly) for the first time in years. This indicates, according to the report, that quality nursing homes are commanding a bit of a premium. As in much of the rest of the U.S. economy, "quality" seems to be becoming more than an advertising buzzword.

Nor can there be any denying that America's changing demographics are forcing an ultimately significant growth of the nursing home industry. Not having facilities available for the millions of Americans who will need them will be politically unthinkable someday, if it isn't already.

Still, the Levin analysis pinpoints a very real, and painful, anomaly in our current health care system: As the need for decent, civilized long-term care grows, the wherewithal to provide it is withering. This was illustrated classically by a recent New York Times editorial recounting the story of a Connecticut nursing home's planned "Sweetheart Ball." Its residents were engaged in raffles and crafts sales that would apparently defer only part of the cost of this major activity. Many of the state's legislators responded by urging a cut in state support for nursing homes, stripping them down to the "bare essentials" for care. Said the Times, "Stripped down, the state's nursing homes will, with varying degrees of proficiency, reduce |care' to meeting patients' medical needs. But the quality of their daily lives, something that's as important at 80 as at 18, will go quickly down the drain."

Does this seem to be an unlikely scenario for the nursing homes of the 90s? Maybe. Maybe not.

The point seems to be that some specific push is needed to jump start the nursing home market's growth to achieve a pace commensurate with the needs. The Levin report concludes, with modest optimism, that the demographics and a growth in the private long-term care insurance market will fuel the new growth. Others suggest that what may be needed is what the sociologists call a "paradigm shift" -- a change in society's basic perception of nursing homes' purpose and functions. Once society accepts the need for quality long-term care, a new and bigger "boom" will ensue. (An ancillary observation is that, for those interested in establishing "ground floor" positions in the nursing home market, now just might be the time.)

Will the boom occur and, if so, when? Stay tuned. But for now, those sounds you hear may indeed, come to think of it, be those of a camel trying to squeeze through a needle's eye.
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Publication:Nursing Homes
Date:Mar 1, 1992
Words:751
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