Skilled Nursing vs. Nursing Homes vs. Extended Care vs. Assisted Living vs. Independent Living

For all intents and purposes, these are all convenient marketing terms created by the seniors industry to make aging and its accompanying health issues more palatable to families. What is sometimes lost in all this is that they are all congregate living lifestyles.

Nursing Homes used to be the darling of the industry because it used to make investors a lot of money: not from the services provided but rather from the sharp appreciation of the real estate.  Not the business for the faint of heart, nursing homes can be injurious to the operator. The staffing nightmares, combined with the extraordinary high liability insurance that has to be carried, makes this business model less desirable than in the past. Couple that with little-appreciating real estate values and less reimbursement from government and a host of other reasons, the Nursing Home business is not desirable and considerably less profitable than in the past.

Recently NHC (one of the country's largest providers of high acuity skilled nursing) pulled out of Florida because of all the litigation problems (medical mistakes), in addition to the above mentioned issues.

High Acuity Care involving Skilled Nursing comes with pitfalls of its own. At the very least, it calls for a Supervising Nurse and full- time RNs on the floor, ranging in cost of about $5,000 a month. You would have to charge residents about $6,000 a month. This would all be private pay. Again, liability would be an issue, but to a lesser extent than Nursing Home Care. Profits would be diluted.

Assisted Living with Extended Care and Memory Care are trauma driven, and require administering services that pose very little chance of mistakes and lessens the likelihood of litigation.  No full-time RNs needed. Built on a tiered system of resident evaluations (say categories 1-5) residents receive the level of care commensurate with their needs.  The sale of their home or funds from family pay for care.  Assisted Living is a proven product with consistently good returns--no wild fluctuations attributable to recessions and catastrophes. IRRs of 20% and higher are the norm. Steady returns for a cash-flow oriented business. The revenues and profits increase as the residents' needs increase. And they do. Again, this is a self-pay approach to congregate living.  In rare cases does this business model accept Medicaid payments.  Current budget cuts to the program make it even more unlikely that the program will exist at all.

Independent Living and aging in place is a lifestyle choice and not driven by trauma.  Given the choice of choosing a more restrictive environment like assisted living and a nursing home, over 85% of adult children and their parents would opt for a lifestyle of health and independence in the comfort of their home. Typically, the sale of ones’ home is enough to buy a resident 4-6 years of lifestyle in an IL (same in an AL). Other sources of cash: pensions and family. These residents typically need and want relief from housekeeping, meal preparation and transportation, etc. Families, most of all, want to make sure loved ones stay safe and have the flexibility, if and when needed, to consider other less desirable options.

Life is about fulfillment. With it comes the shared responsibility (by government, academia, science, business and families) to continue to strive to redefine aging and provide families with solutions that will allow us to retain our dignity and independence for as long as possible.



Andy Berger

Andy Berger is the president of Senior Wellness Specialists, a lifestyle and healthcare services company offering Universal Design and Senior Concierge services for all stages of life.