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Transcript of 1 The Nursing Home Market in 2007 23 rd National Home and Community Based Services Waiver Conference...
1
The Nursing Home Market in The Nursing Home Market in 2007 2007
23rd National Home and Community Based Services Waiver Conference Albuquerque, NM September 2007
Leslie Hendrickson Ph.D.Leslie Hendrickson Ph.D.Visiting Professor Visiting Professor
Rutgers Center for State Rutgers Center for State Health PolicyHealth Policy609-213-0685609-213-0685
[email protected]@ifh.rutgers.edu
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Kind and Amount of Long-Term Kind and Amount of Long-Term Care HousingCare Housing
In 2000, roughly 46,000 properties with 3,400,000 beds:
50% assisted living34% nursing facilities7% independent living4% continuing care retirement
centers
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Long Term Care MarketLong Term Care Market
Number of certified beds, persons in certified beds and number of homes
Occupancy in long term care settings
Loan Volume
Look at Capitalization Rates
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Certified Beds, Residents and Certified Beds, Residents and Homes 2000-2007Homes 2000-2007
Beds, Residents and Number of Nursing Homes 2000-2007
1,250,000
1,300,000
1,350,000
1,400,000
1,450,000
1,500,000
1,550,000
1,600,000
1,650,000
1,700,000
1,750,000
2000 2001 2002 2003 2004 2005 2006 2007
15,200
15,400
15,600
15,800
16,000
16,200
16,400
16,600
16,800
17,000
Certified Beds
Residents
Nursing Homes
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Occupancy RatesOccupancy Rates
Nursing Home Occupany Rates 2000 - 2007
87.50%
88.00%
88.50%
89.00%
89.50%
2000 2001 2002 2003 2004 2005 2006 2007
Occupany Rates
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Occupancy Rates in Occupancy Rates in Long-term Care SettingsLong-term Care Settings
Long-term Care Occupancy Rates 1999-2007
75.00
80.00
85.00
90.00
95.00
2000
2001
2002
2003
2004
2005
2006
2007
Mea
n O
ccup
ancy
Rat
es
Independent Living
Assisted Living
Skilled Nursing
CCRCs
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Loan VolumeLoan Volume
Loan Volume 2001-2006
-5,000
10,00015,00020,00025,00030,000
2001 2002 2003 2004 2005 2006
$ in
Mill
ions Independent Living
Assisted Living
Skilled Nursing
CCRCs
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Capitalization Rates Capitalization Rates
A capitalization rate (or "cap rate") is a measure of the ratio between the cash flow produced by an asset and its capital cost (the original price paid to own the asset). The rate is calculated in a simple fashion as follows:Annual cash flow / Capital Cost = Capitalization Rate
The annual cash flow is called net operating income (NOI),. Generally, NOI is defined as income (earnings) before depreciation, taxes, and interest expenses.
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Annual Cash FlowAnnual Cash Flow
The annual cash flow is called net operating income (NOI) or EBITIDA. Generally, NOI is defined as income (earnings) before depreciation, and interest expenses.
10
Long Term Care Cap RatesLong Term Care Cap Rates
Capitalization Rates In Long Term Care Settings 2000-2007
-
5.00
10.00
15.00
2000
2001
2002
2003
2004
2005
2006
2007
Cap
Rat
e % Independent Living
Assisted Living
Skilled Nursing
CCRCs
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Why Build Long Term Care Why Build Long Term Care Housing?Housing?
High, 8-11%, cash on cash returns. 10% to 20% internal rates of return.
Known demand from aging population and little technology risk.
Independent of business cycle. Good return, over 30%, on expansions and
additions, e.g. adding a 30 bed assisted living unit to a 100 bed nursing home.
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Competition for Rehab. IncomeCompetition for Rehab. Income
0.00%2.00%4.00%6.00%8.00%
10.00%12.00%14.00%
Dec.2001
June2003
June2004
June2005
June2006
June2007
MEDICARE % IN NURSING HOMES
Medicare %
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Competition for Rehab. $Competition for Rehab. $
No end in sight of competition among rehab hospitals and nursing homes.
CMS Post Acute Payment PoliciesDevelopment of new assessment
instrument
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States
% Difference between
December 2002 and June 2007 in Number of NF
Beds Wisconsin -15.70%
Minnesota -12.04%
Rhode Island -10.99%
Indiana -9.64%
Vermont -8.92%
South Dakota -8.12%
Massachusetts -7.00%
Pennsylvania -6.47%
Idaho -6.44%
Louisiana -6.31%
Maine -6.06%
Washington -5.99%
Kansas -5.60%
Iowa -4.67%
Connecticut -4.48%
Montana -4.05%
Oklahoma -4.03%
District of Columbia -3.19%
West Virginia -2.76%
Nebraska -2.71%
Illinois -2.60%
Alaska -2.55%
Michigan -2.39%
Tennessee -2.27%
United States -1.34%
North Dakota -1.32%
Wyoming -1.20%
Oregon -1.05%
Ohio -0.98%
Florida -0.84%
California -0.38%
Arkansas -0.17%
Arizona -0.09%
Missouri -0.02%
New Mexico 0.62%
New Jersey 0.63%
Georgia 0.66%
New Hampshire 0.98%
Colorado 1.30%
Alabama 2.58%
Kentucky 2.70%
New York 2.86%
South Carolina 3.21%
Utah 3.49%
Maryland 3.96%
Hawaii 4.27%
Mississippi 5.04%
Delaware 5.17%
North Carolina 5.90%
Virginia 6.33%
Nevada 10.00%
Texas 10.04%
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Data SourcesData Sources
OSCAR data from Health Services Research and Evaluation group of American Health Care Association (AHCA) retrieved from
http://www.ahca.org/research/index.html
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Data SourcesData Sources
Financial data from National Investment Center for Seniors Housing & Care Industry retrieved from
http://www.nic.org/shop/shopdisplayproductsNIC.asp?id=7&cat=Research+Library