Nursing Home Industry Profits

What causes the staggering costs of nursing home care? Just as with the mass confusion about the cost of regular medical care, there are no easy answers. So many different factors play a role in the cost, and there are many unknown variables, that it is difficult to gain a general understanding of the dynamics. The one thing all New York residents know clearly, though, is that they often need to come up with six figures every single year (or more) to pay for the best quality NY long-term care.

Recently, however, there has been a growing chorus of voices who suggest that a big problem is simply the profit maximization strategies of the nursing home industry itself. Those making these claims often suggest that steps need to be taken to reign in the profit, ensure prices are fair, and guarantee that adequate resources are committed to guaranteeing reasonable care for residents at all time.

For example, last week The Street published a post which talked about recently changes in the industry and the growth of larger companies focusing solely on nursing home care. In other words, more and more facilities are being owned by fewer and fewer companies. Those large conglomerates are able to create standardized practices that apply to hundreds and thousands of facilities. Those practices are almost always gearing toward maximizing profits for the companies and shareholders.

Many community members may be unaware of the shit in recent years, because the nursing homes themselves have different names and are in the same place they have always been. But even though it is happening silently, many suggest that the concentration in the nursing home industry is a bad thing which is contributing to the rising cost of long-term care.

The Street article explores the rise of nursing homes as REITS — real estate investment trusts. These REITS are highly profitable, with senior housing REITs, like Ventas, Seniors Housing Properties Trust, and Health Care REIT, earning yields upwards of 11% in recent years. All of these profits have been dubbed “staggering.” Yet at the same time, these companies are the first in line complaining about any proposed Medicare or Medicaid cut, threatening rising costs and harm to vulnerable senior residents that will follow.

It is unfair to take one assessment as definitive proof that REITs or other industry arrangements are bad developments that will lead to worse care for residents. Yet, any assessment of the rising cost of this care and serious efforts to curb the rise must consider these changing developments seriously.

Contact Information