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The Nursing Home Market in 2007

The Nursing Home Market in 2007. 23 rd National Home and Community Based Services Waiver Conference Albuquerque, NM September 2007. Leslie Hendrickson Ph.D. Visiting Professor Rutgers Center for State Health Policy 609-213-0685 lhendrickson@ifh.rutgers.edu.

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The Nursing Home Market in 2007

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  1. The Nursing Home Market in 2007 23rd National Home and Community Based Services Waiver Conference Albuquerque, NM September 2007 Leslie Hendrickson Ph.D. Visiting Professor Rutgers Center for State Health Policy 609-213-0685 lhendrickson@ifh.rutgers.edu

  2. Kind and Amount of Long-Term Care Housing • In 2000, roughly 46,000 properties with 3,400,000 beds: • 50% assisted living • 34% nursing facilities • 7% independent living • 4% continuing care retirement centers

  3. Long Term Care Market • Number of certified beds, persons in certified beds and number of homes • Occupancy in long term care settings • Loan Volume • Look at Capitalization Rates

  4. Certified Beds, Residents and Homes 2000-2007

  5. Occupancy Rates

  6. Occupancy Rates in Long-term Care Settings

  7. Loan Volume

  8. Capitalization Rates • A capitalization rate (or "cap rate") is a measure of the ratio between the cash flow produced by an asset and its capital cost (the original price paid to own the asset). The rate is calculated in a simple fashion as follows: • Annual cash flow / Capital Cost = Capitalization Rate • The annual cash flow is called net operating income (NOI),. Generally, NOI is defined as income (earnings) before depreciation, taxes, and interest expenses.

  9. Annual Cash Flow • The annual cash flow is called net operating income (NOI) or EBITIDA. Generally, NOI is defined as income (earnings) before depreciation, and interest expenses.

  10. Long Term Care Cap Rates

  11. Why Build Long Term Care Housing? • High, 8-11%, cash on cash returns. 10% to 20% internal rates of return. • Known demand from aging population and little technology risk. • Independent of business cycle. • Good return, over 30%, on expansions and additions, e.g. adding a 30 bed assisted living unit to a 100 bed nursing home.

  12. Competition for Rehab. Income

  13. Competition for Rehab. $ • No end in sight of competition among rehab hospitals and nursing homes. • CMS Post Acute Payment Policies • Development of new assessment instrument

  14. Data Sources • OSCAR data from Health Services Research and Evaluation group of American Health Care Association (AHCA) retrieved from http://www.ahca.org/research/index.html

  15. Data Sources • Financial data from National Investment Center for Seniors Housing & Care Industry retrieved from http://www.nic.org/shop/shopdisplayproductsNIC.asp?id=7&cat=Research+Library

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