Premature obituaries about nursing homes unfair, off the mark

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John O'Connor
John O'Connor

Attend an industry event these days and you're sure to hear doom-and-gloom forecasts for the skilled care sector.

Among the more dire prognostications:

The sector is not moving fast enough to address healthcare reform's new realities.

Iffy Medicare and Medicaid payments will always ensure a hand-to-mouth existence.

Many smaller operators will need to sell off before they fade away.

Better senior living options will bury skilled care.

I could go on, but the point is made. Simply put, LTC is not getting a lot of TLC. Based on the various predictions of the Nostradami, it would be easy to conclude the sector is nearing its death rattle. It might also be wrong. The reality is that the prices nursing homes are commanding from customers and purchasers have never been higher, as two recent reports reveal.

Consider: The median annual cost of a private nursing home room in the United States now tops $87,000, according to the latest annual survey from insurance company Genworth.  This marks a 4.4% increase from a year ago.

“While the cost of care among all care providers has steadily increased, the cost of facility-based providers has grown at a much greater rate than that for home care,” the report noted. In fact, the annual increase for skilled care has averaged 4.3% over the past five years.

The median price for a semi-private nursing home room increased by 2.62% last year, reaching $77,380, according to the report. However, it should be noted that there are some wild deviations.

Alaska once again ranked as the most expensive state for nursing care. The median annual cost of a private room was $240,900. That actually marked a $15,000 downturn from the prior year. Oklahoma, the state with the least costly skilled care, experienced a slight increase in median cost of a private room, which went up to $57,488.

This is the 11th year Genworth has compiled a cost of care survey. The company says it is based on information from more than 43,300 providers nationwide.

At the same time, the average price buyers paid for skilled nursing facilities rose to a record $73,300 per bed last year, according to the The 2014 Senior Care Acquisition Report. The previous record, set in 2010, was $62,500 per bed, and the 2013 average price per bed represents a 21% increase over the prior year's average price, the report noted.

The odd juxtaposition of forecasts and facts is reminiscent of what Mark Twain allegedly wrote after seeing his obituary in a newspaper. To paraphrase: Reports of the sector's death have been greatly exaggerated.

It's fair to ask: If times are so bad, why are nursing homes apparently doing so well? Could it be that the field is actually — dare we say it — not quite yet on the proverbial road to perdition?

It would appear that when it comes to rating the sector's fiscal outlook, we are left with two very different options. One is to listen to the naysayers. The other is to read the facts.

 

John O'Connor is Editorial Director at McKnight's.

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Daily Editors' Notes

McKnight's Daily Editor's Notes features commentary on the latest in long-term care news. Entries are written by Editorial Director John O'Connor on Monday and Friday; Staff Writer Tim Mullaney on Tuesday, Editor James M. Berklan on Wednesday and Senior Editor Elizabeth Newman on Thursday.

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