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Adult Day Care

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 eldercare/adult day care businesses. Below is a brief synopsis of the industry.

Description of Business

Establishments primarily engaged in the provision of residential, social and personal care for the aged, where medical care is not a major element.

General Industry Information

These facilities are commonly referred to as continuing-care retirement communities (CCRCs). This industry has a positive outlook, given that America’s fastest growing population segment is the elderly community. As of the recent census, there were nearly 14,000 elder care facilities that were distinguished from nursing facilities. The primary distinction between the two types of residential facilities is the lack of constant medical supervision for the former. Hence, there is little to no medical insurance revenue associated with these retirement centers.

Significant functions of this industry include facilities management, employee management, and service management. As residential facilities, elder care centers must be specially suited towards senior living. Employees may check patients’ pulse rates, temperatures, and respiration rates; help with simple prescribed exercises; keep patients’ rooms neat; and help patients move to bed, bath, dress, and groom. Maintaining a qualified and reputable staff is central to this personal services business. Other significant operation within the business is managing the facility’s enrollment. Deposits are often required of residents, along with the established monthly fees.

These centers may assist seniors by providing meal preparation, offering assistance with physical care and house keeping. There are many operators in this industry that are non-profit, which are nevertheless a direct form of competition.

Dominant leaders in the CCRC business include Sunrise Assisted living, Inc. and American Retirement Corp. As of December 31, 2004, Sunrise Senior Living operated 380 communities, of which 367 communities were in the United States. American Retirement Corp was a distant second, operating 67 senior living communities in 14 states as of March 2005.

Red Flags and Risks

During the acquisition phase, it would be wise to review all of the necessary licensing and certifications for the facility. It is common to sell the underlying real property in combination with the business. Deferred maintenance should be considered carefully. The employees should be given a thorough review, to avert any potential damage to patients. Allegations of corruption and abuse by employees plagued the industry during the 1990s. Furthermore, the turnover of non-nursing positions is high in this business, increasing the risk of encountering a bad employee. Buyers would be wise to review all employee files and evaluations. A good indicator of future revenues is the current list of tenants with their term expiration information and monthly rent payments. This list, combined with the facility’s typical retention rate and a list of future residents (i.e. those who have paid a deposit) should adequately reflect revenues for the immediate future.

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