Term Paper on "Assisted Living"

Term Paper 10 pages (3184 words) Sources: 1+

[EXCERPT] . . . .

Assisted Living

An Analysis of Current and Future Trends in Assisted Living Facilities in the United States

A substantial numbers of older adults will experience a decline in independence and an increased reliance on caregivers; in fact, today, of those people aged 80 or older, fully 25% will eventually become institutionalized because of needing assistance with day-to-day activities (Westburg, 2003). Assisted-living facilities offer a relatively new way to care for seniors who can't manage on their own. A cross between an apartment building with services and a nursing home, these facilities offer residential units, which sometimes include a kitchen, housekeeping services, meals, transportation to doctors and activities, and various levels of personal assistance -- all for a monthly rental fee. The promotional literature for assisted-living facilities emphasize the independence, support, and communal activities for their frail and disabled elderly residents (Lieberman, 2000).

Review and Discussion.

Background and Overview. America is growing older and there are going to be some difficult challenges ahead. As medical technology helps those with chronic illnesses live longer, these elders will require additional care, either at home or in some type of assisted-living facility (Genovese, 1997). While definitions vary from state to state (the table at Appendix A provides a comparison of commonly used terms), by and large, assisted living facilities differ from other types of supportive housing options in certain ways. Assisted living facilities tend to be larger; more expensive, and specifically designed to house the frail elderly or persons with disabilities, with an emphasis on independence and privacy (Mollica 2001). The majority of such facilities provide their clientele with private rooms or apartments together with large common areas for activities and meals. According to Mollica (2001), "Assisted living and other forms of supportive housing are specifically designed for those who need extra help in their day-to-day lives but who do not require the 24-hour skilled nursing care found in traditional nursing homes" (p. 1). These facilities provide elderly residents with the freedom of living independently of relatives, but also offer assistance with tasks that are physically difficult, such as food preparation and cleaning. The combination of independence and convenience has made assisted living facilities extremely popular (Goodman & Steadman 2002).

Trends in Growth of Assisted Living Facilities. The trends are clear and there can be no doubt about then expanding market for senior residential communities of all types, particularly assisted living facilities. During the period 1988 to 2000, the population who are 75 years of age and older increased by a full 33% (Goodman & Steadman 2002). Yet, the 107-percent increase experienced during this same period in residential-care facility employees also reflects other social changes as well. During the period 1988 to 2000, assisted living facilities became increasingly popular among the oldest demographic groups. In 1998, an estimated 75% of all construction for seniors consisted of assisted living units (Goodman & Steadman 2002).

According to the Census Bureau projections cited by this author, the number of people younger than 50 will decline between 1990 and 2020, while the 50-plus population will grow by 76% (Horvitz 1990). Two of the main factors driving the increases in healthcare are the development of new medical procedures, which require additional personnel to perform them, and an increasing proportion of elderly individuals (Goodman & Steadman 2002). In fact, today, the 85-plus group, which numbers 3.6 million, is already 29 times larger than it was in 1990. The need for senior housing is further reflected in the fact that 6.5 million Americans require help with daily tasks; their number is expected to double during the next 20 years (Horvitz 1990). According to Horvitz (1997), "The biggest trend in the senior-housing sector is assisted care. More than one million Americans live in 30,000 assisted-living communities, some of which specialize in certain populations -- Alzheimer's patients, for example" (p. 38). Major hotel chains such as Marriott have also established assisted-living communities across the country by using their names to gain clientele, occasionally at the expense of lesser-known companies (Horvitz 1997).

In 2002, expenditures for healthcare facilities remained the fourth largest component of nonresidential construction by the value of construction starts. The $16 billion in healthcare construction during 2002 was exceeded only by education ($42 billion), store/shopping center ($19 billion), and office ($18 billion) construction. Even given the declines that occurred during 2003 and 2004, this industry remained the fourth largest sector by value (The Steady Pulse of Healthcare Construction, 2003).

Performing ALFs and Average Occupancy Rates. Assisted-living facilities (ALFs) represent the most rapidly growing type of residential care for elderly individuals in the United States. Fueled by the explosive growth of the elderly population and by the demand or cost-effective alternatives to nursing home care, the assisted-living industry is experiencing an annual growth rate of 15% to 20%, and some recent estimates indicate that over 600,000 elderly people reside in assisted-living communities (Cummins 2002). Assisted-living facilities are not new, but emerged in the United States during the late 1980s in response to shifts in demographics and economics. "The assisted-living industry has emerged so rapidly that the states licensing assisted living facilities and the businesses developing these facilities have not reached consensus on a precise definition" (Cummins 2002, p. 293). A consensus has evolved, though, that assisted living represent a special type of housing that is not necessarily licensed as a nursing home; such assisted living facilities generally offer supportive and health care services (scheduled and unscheduled) for residents who require some level of assistance with their daily activities. As a result, assisted living facilities now represent fully 75% of all new housing construction for elderly people, as discussed further below (Cummins 2002).

According to industry analysts, Sunrise Assisted Living, Inc. is one of the nation's largest providers of assisted living facilities; growth as a reflection of investment in construction costs as of the end of 2003 are provided for the top three providers of assisted living facilities in Table 1 and Figure 1 below.

Table 1. Construction Values for Top Three Providers of Assisted Living Facilities as of 2003 (Millions $):

1. Berks Heim Nursing $35.0

2. Livingston County Skilled Nursing Facility $31.0

3. Retsil Skilled Nursing Facility $31.0

Figure 1. Construction Values for Top Three Providers of Assisted Living Facilities as of 2003 (Millions $):

Source: The Steady Pulse of Healthcare Construction, 2003.]

Profitability. Facilities that provide assisted living arrangement have been in existence for a long time, but only in recent years have they been widely operated as profit-making establishments. In the 1970s, nonprofit groups commonly maintained residential care facilities. Now for-profit companies operate an estimated 90% of assisted living establishments (Johnson 1998). A legal framework that accommodates seniors' desires to live in assisted living facilities is also taking shape. As of June 2000, 38 States were already reimbursing costs of assisted living or board and care through Medicaid or had approval to do so, and other States were in various stages of implementing similar funding structures. Through the reimbursement of living costs, the governments indirectly increased demand for assisted living complexes (Goodman & Steadman 2002).

According to Horvitz (1997), "Assisted living has captured the fancy of the consumer and Wall Street" (p. 40). A recent survey by the American Senior Housing Association (ASHA) determined that major developers started construction on about 35,000 assisted-living units in 1996; conversions of hospital and nursing-home facilities account for thousands more. The impressive stock performance of the 16 assisted -care companies that have gone public has done nothing to dampen expectations that this trend will continue. Analysts expect the $12 billion industry to double by the year 2000 (Horvitz 1997).

Investors on Wall Street are lining up more readily for backing assisted living than others, though, for two key reasons: 1) a lack of awareness, and 2) a lack of resources. Many people first learn about assisted care through word of mouth. According to the president of the National Association for Senior Living Industries (NASLI), Margaret Wylde, about 33% of the residents currently invested in assisted-living units had never visited the community before they moved into it; despite these constraints, surveys indicated that assisted-living residents expressed somewhat greater satisfaction with their lifestyles than their senior counterparts who remained at home (Horvitz 1997).

Unfortunately for many older people, a fundamental constraint remains in the face of these growing trends towards assisted living facilities: they are not cheap. "The people who express most interest in relocating to an assisted-living community are those least able to afford it, earning on average less than $20,000 a year" (Horvitz 1997, p. 40). A typical assisted-housing unit may easily cost more than $2,000 or $3,000 a month (or more, depending on the region the country); in fact, only 27% of those who expect they might need long-term care services say they could come up with the money to pay for them (Horvitz 1997). Although some states have begun to seek waivers to allow Medicaid to pay for assisted living, the government generally restricts coverage to stays in nursing homes --… READ MORE

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