Reprinted from Aging Today, July-August 1998
Study for Federal Health Agency
ASSISTED LIVING TRENDS, DEVELOPMENT BARRIERS REVEALED
"We are in the midst of a revolution about this continuum [of care] as the whole healthcare world is changing," said one respondent in a revealing new survey of experts in the assisted living industry. "The debate between the social model and the healthcare services model is getting tighter," said another about the field's growing competitiveness. The remarks underscore the fundamental change that the emergence of assisted living represents as the long-term care industry struggles to supersede a current public policy and reimbursement bias that favors medical and skilled nursing institutionalization.
These two respondents were among 29 architects, builders, developers and consultants in assisted living in 21 states interviewed in late 1996 by The Lewin Group Inc., as part of the U.S. Department of Health and Human Services' ongoing National Study of Assisted Living. The 32-page report was published last December and is posted on the Internet at: http://aspe.os.dhhs.gov/daltcp/reports/indepth.htm ; copies are also available by contacting Robert Clark: bclark@osaspe.dhhs.gov. The report concluded that:
- Local and state policymakers will face increasingly difficult decisions with respect to the design, regulation and financing of assisted living, particularly regarding the extent to which it should provide medical services to frail elders.
- The assisted living industry is growing rapidly, and some markets (e.g., the high end in many areas) may already be saturated.
- The assisted living concept, widely discussed but inconsistently defined, is proving more difficult to execute well than many developers had thought; industry shakeouts are anticipated.
- Although a number of developers are working on ways to make assisted living more affordable, this is proving to be a substantial challenge.
- Rising levels of illness among residents, seen as average resident age has increased from the 70s to 80s, will have a major impact on the design and fundamental concept of assisted living in the future.
- There was little agreement among those interviewed regarding how government policies should balance concerns of appropriate consumer protection versus overregulation of this emerging market.
BARRIERS AT EVERY TURN
Respondents saw barriers to overcome at every turn in the development of this new level of care. Among their concerns were that:
- The conventional model of Medicaid reimbursement "will kill assisted living," and that new means of payment are needed--especially vouchers that elders and their families can spend as they desire, thus giving assisted living facilities a competitive edge against nursing homes.
- Requirements by several states prohibit assisted living facilities from providing full services to clients. Rules in some states, for example, bar them from caring for those with Alzheimer's disease at even its early stages.
- Local building and fire codes for nursing homes are commonly applied wholesale to assisted living facilities and frequently impede their development. In one cited example, requirements that fire indicators in resident rooms be monitored at a nursing station should not apply--since assisted living facilities do not have nursing stations.
'A BIG MISTAKE'
In addition, experts in the study explored perceptions about industry trends. Worry about overbuilding and the proliferation of publicly traded assisted living operations caused one respondent to declare that going public as a way of gaining access to capital is "a big mistake," especially for small companies, which "should be accountable to the clients and the families, not to a private board."
The growing influence of managed care on assisted living was another important development noted by survey respondents. For example, one reported that "larger providers will go into the metro areas with three to six facilities in order to capture a large portion of the urban market [and] better position themselves to be recipients of managed care contracts."
Respondents observed that the increasing age and frailty of assisted living residents generated unexpected "cost creep"--fast-rising healthcare and service expenses not anticipated by real estate developers hoping for large investment returns. One developer, whose firm "slowed down" expansion plans because of this pehonomenon, commented, "The operators had not made the appropriate preparations for the problems of some residents, especially in cases of dementia. The options they faced were kicking these residents out or integrating them with the healthier resident population."
The report raises tough questions that state policy makers will have to answer as assisted living includes increasing numbers of subsidized Medicaid beneficiaries: "To what extent will states accept some of the risk in caring for the frail elderly in an environment that has less- stringent life safety requirements and lower staff ratios and staff training requirements? Will the states respond to the consumer-driven nature of this industry and support resident preferences for autonomy and 'dignity of risk'? Will states accept the notion that assisted living residents can age in place in facilities with operators who seem willing to provide more medical services over time, or will states definitively classify assisted living by certain [illness or disability] acuity levels or nursing care limits?"
MEDICAID
On serving elders dependent on Medicaid, providers were divided. Newer entrants in the field and nonprofits were the most positive. Others saw reduced profit margins. According to the report, "As one developer explained, he expected 40% or more gross operating margins for private-pay-only buildings and 20% to 30% margins for Medicaid buildings. This respondent argued that even though it was affordable for his company to serve the Medicaid population, his company was holding out for better reimbursement rates. Another developer said he would be more willing to consider accepting Medicaid residents if the federal government offered tax breaks or tax credits."
--Paul Kleyman
American Society on Aging
833 Market St., Suite 511
San Francisco, CA 94103
www.asaging.org
info@asa.asaging.org