Nursing Homes and Assisted Living
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Industry Overview
The US nursing homes and assisted living industry includes about 75,000 establishments (single-location companies and branches of multi-location companies) with combined annual revenue of about $165 billion. Major companies include Sunrise Senior Living, Kindred Healthcare, Golden Horizons (owned by GGNSC Holdings), and SunBridge Healthcare.
Competitive Landscape
Demand for nursing care is linked to the demographics of the US population. The profitability of individual nursing facilities depends on efficient operations, as revenue per patient is largely controlled by the big government insurance programs, Medicare, and Medicaid. Large companies have some economies of scale in administration and purchasing, but small operators can compete effectively by offering better service. The industry is highly labor-intensive: annual revenue per worker is about $55,000.
Products, Operations & Technology
The industry includes skilled nursing facilities for recovery from acute or chronic medical conditions, mental health and substance abuse facilities, and various types of community care and assisted living arrangements. A wide array of healthcare and dependent-care services are provided including 24-hour nursing care; help with daily living tasks such as bathing, eating, and dressing; housekeeping; food service; and leisure activities.
Nursing homes represent 25 percent of the total number of nursing and residential care facilities; residential mental health and substance abuse centers, 40 percent; community care centers, 25 percent; and other care facilities, 10 percent. Large firms may operate hundreds of domestic and foreign nursing facilities, either company-owned or leased.
Nursing homes typically care for patients recovering from major medical procedures and older patients with chronic disabilities and deteriorating mental and physical capacities. Facilities provide nursing care, physical therapy, meals, recreational activities, personal services, and assistance with activities of daily living (ADL). Bed occupancy rates are typically between 80 and 85 percent.
Community care facilities include community-based residential facilities and adult family homes where small groups of individuals live and receive care, assisted living complexes where aides help residents with some daily activities, and residential care apartment complexes (RCAC) that provide independent apartments and some nursing care. Occupancy rates for assisted living facilities are typically between 90 and 95 percent.
Nursing care facilities often contract services from other healthcare providers to broaden their range of services without incurring added labor and equipment costs. Providers include pharmacies, medical directors, hospice care services, and a variety of physician specialists including dentists, podiatrists, therapists, psychiatrists, and opthamologists. Large facilities and chains are more likely to contract with outside healthcare providers than are small independent facilities.
Technology includes computers, electronic medical records, medical equipment, and security and fire systems. Due to the industry's low profitability and reliance on government or community funding, many facilities struggle to afford technology upgrades such as new computer systems and specialized medical equipment. Adoption of electronic medical records has also been slow, due to the high labor and funding investment required to convert patient records from paper to electronic files. Due to recent fires at nursing homes, regulators are requiring facilities to install fire alarms and sprinkler systems, which can be expensive depending on the construction of the facility.
