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Article Author:

Paul D. Smith, Jr.

CPA, MSA

Specialty Snapshot: Nursing Homes and Long-Term Care Facilities

There are approximately 75,000 establishments across the U.S. with combined total revenues of approximately $185 billion. This sector covers many types of institutions including nursing homes, assisted living facilities, continuing care retirement communities, community-based residential facilities, residential care apartment complexes, adult family homes, inpatient substance abuse centers, and residential mental health centers just to name a few of the types of organizations that could be included. 

The average size of a nursing home across the U.S. is approximately 100 beds. The number of staff members per 100 beds varies; however, 50 to 60 seems to be the average seen. Approximately 45 percent of nursing homes are operated by not-for-profit organizations. 

Items to keep in mind regarding the current long-term care industry: 

1. The population of individuals who generally utilize the services provided by the long-term care/senior living space is going to expand over the next 20+ years by 50 percent or approximately 36 million more people entering this age segment of the population.
2. With approximately half or more of reimbursements for services coming from Medicare and Medicaid, the significant cuts pending with the recent Patient Protection and Affordable Care Act of 2010 (Healthcare Reform) ($500 billion over 10 years for nursing homes, hospitals, and providers), not to mention the Centers for Medicare and Medicaid Services' (CMS) recent announcement of an 11 percent cut in reimbursements this year, will have a negative overall impact on revenues.
3. Executives have been struggling and will continue to have to struggle to manage costs in this very people-intensive business.
4. Alzheimer’s care units continue to rapidly increase. Currently there are an estimated 5 million individuals diagnosed with this terrible illness. This number is expected to increase to 16 million by 2050. 

The industry continues to add additional services including additional therapies and rehabilitative-service options, wellness classes, food services, etc. These unbundled services generally provide residents more choices and improve the quality of life. These areas can also be a focus to add to revenues for the industry.

One final note: more long-term care insurance is being purchased by individuals, which would tend to support increased demand for services in this sector in the long term as well as a shift in payer mix from Medicare to private insurance long term.¹  

Benchmarking data