SOURCE: Kalorama Information

Kalorama Information

May 19, 2010 11:17 ET

Economy, Healthcare Reform Could Limit Growth of Nursing Home Industry

NEW YORK, NY--(Marketwire - May 19, 2010) -  The recently enacted healthcare reform legislation and the recent economic downturn are among the factors that will slow growth in the nursing home market, according to a new report from independent healthcare market research publisher Kalorama Information. While the $104 billion nursing home market will grow, the report estimates it will increase by just 3% this year as opposed to the 5% predicted by Kalorama prior to the recession a few years ago. These findings are included in their report on the industry, "Long Term Care Market: Nursing Homes, Home Care, Hospice Care, and Assisted Living."

"There are three main forms of payment for nursing homes -- Medicaid, Medicare and equity loans," said Bruce Carlson, publisher of Kalorama Information. "All are under pressure with the economic situation and healthcare reform." 

With the average nursing home costing over $75,000 per year, some patients resort to equity loans or home sale proceeds to cover the costs, a funding source that has been put under strain by the decline in the housing market. But more than half of nursing home costs are paid by Medicaid or Medicare. This funding will change with the Patient Protection and Affordable Care Act that was signed into law on March 23. The law cuts more than $500 billion in planned Medicare payments to nursing homes, hospitals, hospices and other providers over the next 10 years. But the law also requires the HHS Secretary to submit a report on the appropriateness of establishing a health care-acquired condition (HCAC) policy related to nursing homes, and it creates financial incentives for states to shift Medicaid beneficiaries out of nursing homes and into home and community based services (HCBS) by providing Federal Medical Assistance Percentage increases to states to rebalance their spending between nursing homes and HCBS by October 2015. Kalorama thinks these measures will lead to funding cuts.

"These two changes don't represent direct cuts, but they strongly suggest cuts," Carlson said. "An HCAC policy could potentially decrease payments, while encouraging Medicaid patients to receive home care will likely mean fewer paid patients for nursing home providers."

In 2009, approximately $104 billion was spent on nursing home care in the United States, up from $86.4 billion in 2005, according to the report. Only about 28% of this is paid out of pocket by patients, while over half is paid by Medicaid or Medicare. ManorCare, Beverly Enterprises and Sun Healthcare are leading competitors in this market. Kalorama Information does expect some improvement for these companies and others in the market over the long term as home prices improve and long-term care insurance becomes more common.

Kalorama Information's report, "Long Term Care Market: Nursing Homes, Home Care, Hospice Care, and Assisted Living," provides markets, forecasts, competitive analysis and trend information for the long term care market. The report is available from Kalorama Information at: http://www.kaloramainformation.com/redirect.asp?progid=79118&productid=2578516.

About Kalorama Information
Kalorama Information supplies the latest in independent market research in the life sciences, as well as a full range of custom research services. We routinely assist the media with healthcare topics. Follow us on Twitter (http://www.twitter.com/KaloramaInfo) and LinkedIn (http://www.linkedin.com/groups?gid=2177845&trk=hb_side_g).

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