Long-Term Care Preferences Shape Nursing Home “Household” Model

When it comes to long-term care preferences, nursing homes are not at the top of many seniors’ lists, especially as most seniors prefer to stay in their homes for as long as possible.

A 2010 AARP Home and Community Preferences study found that nearly three quarters of survey respondents strongly desired to remain in their home environment. In recent years, there’s been a shift away from the institutional model of care offered at most nursing homes, to a more “resident-centered” one, and some see these new models as great business opportunities, especially as it targets a primarily private-pay audience.

“It’s new and innovative, and if you have this model, you’re going to be in high demand from the private pay audience who would rather choose you than a nursing home,” says Jim Janicki, a spokesperson for Riverside Health Systems, which is in the process of developing two “household” model nursing homes that can each house 20 residents.

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Between 1998 and 2008, the number of Americans living in nursing homes shrank 6.1% despite an 18.1% increase in the number of Americans aged 65-69, and an 8.7% rise in the number of those age 70 and older, according to U.S. Census Bureau statistics cited in a July 2011 Brown University study.

Because people are so diametrically opposed to nursing homes, the industry needs to figure out a way to change perception and attract residents, and Janicki says the household model can be attractive from a business perspective.

Home models offer lower overhead costs as they don’t require huge staffs per nursing home regulations. Instead, most have just two to four certified nursing assistants or licensed practical nurses, depending on the number of residents, with registered nurses and doctors either rotating between houses, or on call. This can lower operating costs, as research done on The Green House model of nursing homes (a very similar concept to Riverside Health Systems’ “household” model) shows.

“Several recent studies, each limited in scope but with mutually reinforcing findings, provide growing evidence that The Green House model’s operations are comparable in cost to traditional nursing home operations as well as nursing homes implementing other culture change practices,” says Rachel Scher, a marketing and resource specialist with NCB Capital Impact, a non-profit organization that provides grants and funding as it seeks to improve access to high-quality health and elder care.

“Capital costs for Green House homes are found to be equivalent or less than similar culture change models,” she continued. “Occupancy and private pay revenues are found to increase.”

However, the costs of building a facility that will only have anywhere from about eight to twenty residents may seem steep.

In Janicki’s case, Riverside Health Systems is replacing an existing 40-unit skilled nursing home that was due for an overhaul with two smaller facilities, and will be transitioning their residents to the new buildings.

“We’ll be able to pay for construction and have the fees that we receive from the residents actually help pay for operations and that service,” he says.

But not everyone will have the same opportunity.

“We know there’s a market there for it because we have 40 residents already living there who are private pay and Medicare. People who are building brand new facilities wouldn’t have the luxury to know whether or not they can sustain it,” Janicki acknowledged.

Since it’s operating on a much smaller scale, the model’s sustainability remains to be seen.

“I believe it is [sustainable], because our model, for the Residential Care Facility (RCFE), or ALFs, we provide this type of care—at costs that are comparable to a nursing home, even less expensive,” says George Mozes, who owns and operates a 12-bed RCFE in California. “It’s a smaller place, so it’s less money. There’s a considerable difference in the cost of running it.”

RCFEs resemble assisted living facilities in terms of resident acuity, but similar to “resident-centered” nursing homes, they offer a fraction of the number of beds, although Mozes said some go up to 20 beds.

This type of facility has been around for about 20 years, but it’s a new development for the concept to spread to nursing home care, he says.

“It’s new in terms of application to the nursing home industry, which has never had this kind of approach to de-institutionalize their operations,” Mozes says. “It’s new. It’s a good one. It will work in that industry, because it worked in our industry.”

While Mozes says RCFEs can actually be less expensive for residents because of the lower overhead costs, most household models will probably be more expensive for residents than an institutional skilled nursing facility.

It’s a concern for some that people won’t be able to afford this style of care, but Janicki says it’s important to research the markets where a model might be built. And, at the end of the day, skilled nursing is a necessity for many people as they get older, and providing a more attractive model could be good for the entire senior living industry.

“The more of these homes there are, I think the better name will benefit both the nursing home industry as well as the assisted living industry,” Mozes says.

Written by Alyssa Gerace