Posts Tagged ‘assisted housing’

Assisted-Living Facilities Prove To Be Financial Winners


The latest darlings of Wall Street seem like an unlikely industry. According to an article in the Wall Street Journal last week, one of the hottest new financial developments is companies which run assisted-living centers.

In the past year, several companies in the assisted-living business have “gone public,” offering stock for the first time. Now, according to the Wall Street Journal article, early results indicate that the businesses have done very well for themselves.

Among the companies singled out by the Journal as recent winners is the Forum Group, which has seen a 47.2% increase in its share price so far this year. Another standout is Emeritus, which has increased by 67.7% in the same time period.

Why is this industry singled out for such gains? Analysts suggest that there are several reasons for the recent growth in the industry, and that those same reasons predict continued growth. Increasingly, assisted living centers are used as alternatives to nursing home care, at a significantly lower cost.

Average national costs in assisted living centers tend to run in the $55-to-$60-per-day range, while nursing home costs are typically $80 to $90 per day. Given strained government and personal budgets, those savings not only look attractive today, but are likely to be even more attractive in the future.

Most states also make building assisted living centers easier than nursing homes. While certificates of need may restrict the number of new nursing home beds, there may not be such limitations on assisted living facilities. And nationally, most assisted living facilities reach 95% occupancy within 15 months of opening.

Nursing home beds are not increasing as rapidly as assisted-care facilities. Furthermore, the available nursing home beds are increasingly occupied by acute-care patients who have been eased out of hospitals by managed care, DRGs and other trends in health care. These trends have helped fuel the growth in the assisted-living industry.

Most of the principal players in the development of assisted living centers are small, recent start-ups. As a result, they have not yet proven to be very profitable businesses. Most of their income for the near future will be expended on start-up and construction costs, so they may not collectively be profitable for some time to come.

Still, even though the companies have not yet made substantial profits, investors have. In addition to The Forum Group and Emeritus, the Wall Street Journal article singled out Sterling House (which posted a 75.4% gain in share prices so far this year), Assisted Living Concepts (with a 39% gain in price) and ARV Assisted Living (38.3%). One company, Just Like Home, actually posted an 11.1% decrease in share price so far this year.

Arizona White House Conference on Aging


The Arizona White House Conference on Aging held in Phoenix last month dealt with issues facing the full White House Conference on Aging when it meets in May. Arizona’s delegation dealt with several issues expected to dominate the national aging agenda.

Long Term Care

Everyone knows that the proportion of elderly citizens is expected to grow dramatically in the next two decades. What many do not appreciate is that the greatest growth is projected for the “old old”; those over age 85. Currently one-quarter of all women (but only one-seventh of men) over age 85 live in nursing homes. Those who turn 65 in any given year have about a 40% chance of spending some portion of the rest of their lives in a nursing home. About 10% of those will spend five or more years there.

Another tremendous segment of the population requires long-term care, but receives care at home. About 70% of all long-term care of the elderly is provided solely by family and friends, without institutionalization.

For those who can be cared for at home, the cost of assistance may be prohibitive. Simply bringing an aide into the home three times a week for meal preparation and light housekeeping can easily cost in the range of about $600 per month. Since about 20% of Arizona’s elderly live at or near the federal poverty level, even such small assistance may be unaffordable.

For those placed in nursing homes in Arizona, the cost of care will typically vary from $30,000 to $40,000 per year. Many seniors expect Medicare to pay some portion of that cost; in fact, Medicare pays only about 3% of the total nursing home bill in this country. Private long-term care insurance (still a relative rarity) and Veteran’s benefits account for another percent or two each; the remaining portion of long-term care costs are paid roughly equally by Medicaid and patient’s private savings and income.

Although nursing homes care for less than one-fifth of those requiring long-term care, they are responsible for more than half of the cost of care. Seniors are reluctant to enter the nursing home, and much prefer to be cared for (and die) in their homes.

Cost effective alternatives to institutionalization exist, especially in urban areas. Adult day care, respite care, hospice and assisted housing programs can keep many nursing home candidates in less expensive settings and more comfortable. Unfortunately, such programs are too rare and are seldom funded by public dollars. Paradoxically, it becomes less expensive for most patients to move into the nursing home and qualify for Medicaid (ALTCS in Arizona) than to secure care at home or in a more home-like setting.

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