Service Diversification Evident in U.S. Long Term Care Market

Service Diversification Evident in U.S. Long Term Care Market

Home care and assisted living - alternatives to nursing home care - are projected to add over six times the amount of annual revenue that nursing homes will add to the total U.S. long term care market by 2018. While demographic aging in the United States will buoy all service segments in the long term care market, growth will not be evenly spread amongst service providers. Including nursing homes, home care, hospice care and assisted living, the long term care market caters to the spectrum of needs of its overwhelmingly senior clients. A number of factors continue to promote the usage of assisted living and home care services over nursing home care in the United States, though these alternative forms of care must still overcome challenges relating to payment.

Nursing homes still carry the stigma of substandard care resulting from several high-profile cases and the real industry challenges of ensuring high quality care under significant cost pressures and personnel shortages. The institution remains integral to senior long-term care as it is uniquely suited to provide assistance to residents in activities of daily living (ADL) as well as intensive and routine medical care. Medicare and Medicaid cover roughly 40% of nursing home payments and despite the significant fiscal pressures on state Medicaid programs, they must continue to support nursing homes with some fiscal alleviation from recouping expenditures from seniors’ assets or federal benefits.

States and private payers are also looking to home care and assisted living to achieve cost savings in senior long-term care. In certain circumstances, home care limited to routine, short visits related to medical care or instrumental activities of daily living (IADLs) can ensure senior health at much lower costs than a nursing home, which carries added facility, personnel, and other overhead costs. Outside payers for home care - insurance or public programs - still require carefully defined limits to services as hourly billing can quickly mount to unsustainable spending levels. Home care client monitoring with fewer personnel visits is possible through the use of patient monitoring technologies that allow for remote monitoring and initiation of intervention based on real-time or regularly sent diagnostic data.

Among the three long-term care segments discussed here, assisted living services are projected to be the fastest-growing market in the United States. After home care, assisted living aligns most with U.S. senior lifestyle preferences. Assisted living preserves elements of an independent lifestyle while incorporating meal, social and recreational services and providing core medical assistance services. Assisted living care is overwhelmingly funded (~90%) through private payments - private funds, long-term care insurance and out-of-pocket payments. The relatively higher, on average, net worth of the currently retiring generation is expected to support growth in the assisted living market.

For thorough analysis of the U.S. long term care market, please consult Kalorama Information’s 2014 market study: The Market for Long Term Care.