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 nursing home businesses. Below is a brief synopsis of the industry.
Description of Business
Establishments primarily engaged in providing in-patient nursing and rehabilitative services to patients who require continuous health care, but not hospital services. Care must be ordered by and remain under the direction of a physician. Included in this category are establishments certified to deliver skilled nursing care under the Medicare and Medicaid programs. This industry also includes mental retardation facilities and nursing care facilities.
General Industry Information
Due to several factors, the in-patient nursing industry is projected to continue its strong growth in coming years. Firstly, life expectancy is on the rise, increasing the expected share of elders in the population. Additional care services will be needed to treat the myriad of health care concerns that develop as a function of age. Secondly, advances in medical technology have brought about tremendous growth in rehabilitation services, which treat patients of all ages. Enhancements and new developments are anticipated to greatly expand this field in years to come.
The funding for in-patient nursing facilities is provided in large part through Medicaid. Other important sources of revenue for these care facilities are: Medicare, private Health Insurance plans, and private funds. Frequently, care centers will not accept patients with Medicare, as the program is associated with complex paperwork and reimbursement protocol.
In 2003, the number of patients enrolled in the Medicaid program numbered approximately 7.5 million (source: Centers for Medicare and Medicaid Services). Medicaid is administered by individual states, which establish guidelines of amounts and items reimbursable. Medicaid operates as a vendor payment program, with payments made directly to the providers. Not all treatments are prioritized equally by the state due to resource limitations, and certain types of fragile procedures (such as respiratory therapy) are not covered.
Approximately one-third of the nation’s skilled nursing facilities are operated by the government or non-profit agencies. Within the private nursing care industry, there are distinct business leaders. Beverly Healthcare is the largest, operating 354 nursing homes and 18 assisted living centers across the United States.
These facilities and businesses are generally broken down into the following categories (Source: New Lifestyles):
Apartments Apartments for seniors who are totally independent. Meal service, activity programs and services usually aren’t included.
CCRC Continuing Care Retirement Community. Full service communities offering a long term contract that provides for a continuum of care, including retirement, assisted living and nursing services, all on one campus.
Retirement Totally independent living with amenities such as meals, transportation and activities usually included in a monthly fee.
Assisted Living Multi-unit facilities that provide assistance with medications and daily activities such as bathing and dressing.
Residential usually single family homes licensed to provide assistance with medications, bathing and dressing.
Alzheimer’s Facilities offering specialized programs for residents suffering from Alzheimer’s Disease or other forms of memory loss. These programs can be offered by Residential, Assisted Living or Nursing facilities.
Nursing/Rehab Facilities licensed to provide skilled nursing services under the supervision of licensed nurses.
Congregate Care A congregate living health facility is licensed to provide nursing services in a residential care environment.
Home Care Includes both companies that provide licensed health care services in the home and companies that provide non-medical assistance with such tasks as bathing, dressing, meal preparation and transportation. Medicare and Medicaid provide financial assistance in some cases.
Hospice Hospice care may be provided in the home or a senior care facility. Services can include pain management and a variety of emotional, spiritual and physical support issues. Medicare and Medicaid provide financial assistance in some cases.
Day Care Various programs provide a range of geriatric day services, including social, nutrition, nursing, and rehabilitation. Not all programs provide all services.
Behavioral Health These are usually hospital-based programs that provide a range of geriatric psychiatric services in either an in-patient or outpatient basis. Medicare and Medicaid provide financial assistance in some cases.
Care Management Offer advisory services addressing a wide range of senior issues, such as selecting a senior residence, choosing inhome care providers, and various financial options. Typically care managers evaluate a senior’s situation with regard to health needs, housing choices and financial needs and then provide a recommended care plan.
Red Flags and Risks
During the acquisition phase, it would be wise to review all of the necessary licensing and certifications to operate a nursing care facility. In particular, a buyer should review the status of the business with Medicaid, and determine if the business is in compliance with program requirements. Delinquencies or noncompliance can affect reimbursement collection. 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, increasing the risk of a bad employee. Double check to see if permits are up to date on the facility.
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