Will Nursing Homes Survive The Implementation Of Programs Designed To Prevent Institutionalized Care?

There is no question that the nursing home industry has been battered by bankruptcies and receiverships in recent years, sometimes resulting in the closing of the home. Many factors have impacted the financial viability of nursing homes, not the least of which is the fact that nursing homes depend on Medicare and Medicaid for most of their revenues. Another factor has been the inability of many nursing homes to fill beds because of overbedding. The excess capacity is problematic because it further reduces a nursing home's revenues when its financial stability is already teetering. To what extent it will continue to be a factor is difficult to predict.

According to data released by the U.S. Census Bureau on Sept. 27, 2007, the percentage of elderly living in nursing homes has steadily declined since 1990. In 1990, 10.2 percent of Americans age 75 or older lived in nursing homes. That number had dropped to 8.1 percent by 2000, and by 2006, only about 7.4 percent were living in nursing homes.

There appears to be two schools of thought as to whether the demand for nursing homes will continue to decrease or if a reversal is on the horizon. Arguably, as 79 million baby boomers enter their 60s, there will be an increased need for beds in nursing homes, essentially creating an unlimited consumer demand for nursing homes. Moreover, people are simply living longer. At the turn of the twentieth century, an American's life expectancy was 46 years.[1] According to Wikipedia, today's Americans are living to an average to 78 years. By 2030, the number of citizens over age 85 will double and by 2050, 40 percent of the population will be older than 50.[2] With numbers like that, it would seem that the ability of nursing homes to survive and profit would be without question.

However, while the senior population is increasing in size and living longer, there are many factors that may negate the anticipated increase in demand for nursing home care. For one, today's seniors are different from the generation before them. The image of a feeble and fragile senior is being replaced with one that is healthier and more active, which means seniors to live independently for a longer period. Even for those who are not healthy enough or cannot afford to continue to live on their own, programs are being put in place nationwide to enable older Americans to live independently, minimizing or eliminating the need for placement in a nursing home.

Numerous alternatives to nursing home care are being developed by both state and national government, but the Money Follows the Person (MFP) Act[3] will likely prove to be the greatest impetus for reducing the need for nursing home care. With the MFP's enactment, funding was made available in the form of grants that have enabled states to put programs into place designed to increase the percentage of persons receiving long-term care in the community vs. long-term care in institutions. These programs are intended to enable seniors and individuals with disabilities to remain in their homes or assisted-living facilities, have shorter stays if nursing home care is required and even enable a return to the community where leaving a nursing facility could not have been accomplished without such a program.

To date, 30 states and the District of Columbia have been awarded MFP grants. Participating states include Arkansas, California, Connecticut, Delaware, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Texas, Virginia, Washington and Wisconsin.

In addition, numerous states have implemented aggressive programs that allow residents age 65 years or older to receive services that enable them to continue to live independently. For example, Vermont implemented the Choices for Care Program in October 2005 that allows all state's eligible seniors to choose among nursing homes, residential care facilities and their own homes for care. Connecticut, in an effort to provide elderly persons in need of long-term care with the ability to remain in the community and avoid or delay entrance into a nursing home, has implemented the Connecticut Home Care Program for Elders, to allow them to remain in their homes or assisted-living facilities. Both the Vermont and Connecticut programs provide medical and non-medical support services to seniors in the form of visiting nurse services, home-health aides, chore assistance, adult day care, home-delivered meals, companion services, transportation, emergency response systems and other services necessary to support independent living. Other states that have implemented similar aggressive home-care programs include Minnesota, Colorado, Texas, Illinois and Minnesota.

Additionally, according to the American Association of Homes and Services for the Aging (AAHSA), more older adults currently live in federally subsidized housing than in nursing homes. To enable those older adults who are, or will become, frail, disabled or chronically ill to continue to stay in their homes, AAHSA and the Institution for the Future of Agency Services are developing strategies to enable many seniors to avoid nursing homes and stay independent. Such strategies include medical house call programs, home-sharing programs, coordinating with community agencies for a co-location of supportive services in proximity to the housing property and volunteer services.[4]

The stated goal of the federal and state governments in introducing these programs is to reduce the overall need for nursing homes and the commensurate financial burden on Medicare and Medicaid. If these programs will do as intended remains to be seen. Because many of these programs are new, the overall effect on nursing homes is yet to be determined. For example, although the MFP was passed several years ago, the process of applying for the grants and enacting legislation at the state level has taken time. No real statistics exist to determine the long-term effect the programs will have on nursing home census. Certainly, in an industry whose financial difficulties are affected by more than the normal economic pressures, the programs are a factor that nursing homes will need to address when formulating strategies to maintain or return to financial stability.