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Convalescent Hospital

We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of convalescent hospital businesses. Below is a brief synopsis of the industry.

Description of Business

Establishments that specialize in the continuous care and treatment of elderly patients who have difficulties taking care of themselves.

General Industry Information

In the mid-2000s, $100 billion was spent on nursing home care annually. Skilled nursing care facilities, which were for-profit, non-profit, or government owned, serve the nation’s fastest growing population segment, which are those 65 years and older. In the 2000s, 36 million people over the age of 65 resided in the United States, which represented a little over 12 percent of the total U.S. population, a number that was expected to increase to 20 percent of the population by 2020, with 6.6 million people residing in nursing homes by 2050. The American Health Care Association reported in 2006 that 15,800 facilities had 1.5 million residents, with another 240,000 beds available.

Men who were 65 were expected to live an additional 16.3 years and women were expected to live an additional 19.2 years. Life expectancy was projected to continue to rise, with life expectancy at age 65 reaching an additional 17 and 20 years for men and women, respectively, by 2020. In other words by 2020, a 65-year-old man could be expected to live to the age of 82 and a woman could be expected to live to the age of 85. For those over the age of 65, there is a 41 percent chance of spending an average of 2.5 years in a skilled nursing facility. A one-year stay in a nursing home can cost between $30,000 and $80,000.

Essentially, these figures reveal the scope and populations served by the skilled care nursing industry. Years of innovative reallocation of resources expanded options for long-term care. However, few match the optimum level of skilled nursing care provided for populations with chronic and multiple disabilities. Skilled nursing care, similar to the concept of custodial or convalescent care, represents a long-term vehicle for meeting the comprehensive medical, personal, and social service needs of chronically disabled persons. A Center for Medicare and Medicaid Services (CMS) report stated that, at 22 percent, the most common reason the elderly enter a residential facility is circulatory problems. Injuries and respiratory diseases account for 14 percent and 11 percent of admissions, respectively.

Skilled nursing care services differ in terms of the levels of services provided, patient admission criteria, staffing, and reimbursement mechanisms. Each aspect of the skilled nursing care environment reflects the high level of intensive care. Overall, non-profit, independent facilities consistently gave the best care. All skilled care facilities provide continuous 24-hour care that is prescribed, directed, and executed under the supervision of a medical doctor. Professional performance and supervision by licensed personnel also apply to the provision of ancillary services such as physical therapy and other such prescribed services.

One of the trends affecting health care is integration, or integrated delivery systems, whereby patients are tracked over time, spanning all levels of care and fostering alliances among the various care givers.

Red Flags and Risks

Nursing home regulations, the need for new managers, higher care standards, managed care contracts, and rising insurance costs are some of the challenges facing the industry. Longer life spans, coupled with the trend toward smaller families with fewer children to share responsibilities for the aged, will mean a greater need for medical health companies. As a result, the nursing home and long-term care industry will continue to grow, but it is unlikely that it will be able to keep pace with the growing demand for quality skilled nursing care. Funding will also be a dilemma as reduced or stagnated government spending is a widespread concern. In 2007, Medicare payments for nursing homes were set to rise over 3 percent.

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