hendrickson presentation on nursing home market in 2007

8/7/2019 Hendrickson presentation on nursing home market in 2007

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The Nursing Home Market inThe Nursing Home Market in

2007200723rd National Home and Community

Based Services Waiver Conference

Albuquerque, NM September 2007

Leslie Hendrickson Ph.D.Leslie Hendrickson Ph.D.

Visiting ProfessorVisiting Professor

Rutgers Center for StateRutgers Center for State

Health PolicyHealth Policy609609--213213--06850685

[email protected]@ifh.rutgers.edu


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Kind and Amount of LongKind and Amount of Long--TermTerm

Care HousingCare 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


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Long Term Care MarketLong 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


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Certified Beds, Residents andCertified Beds, Residents and

Homes 2000Homes 2000--20072007

Beds, Residents and Number of Nursing Homes

2000-2007

1,250,000

1,300,000

1,350,000

1,400,000

1,450,000

1,500,000

1,550,000

1,600,000

1,650,000

1,700,000

1,750,000

2000 2001 2002 2003 2004 2005 2006 2007

15,200

15,400

15,600

15,800

16,000

16,200

16,400

16,600

16,800

17,000

Certified Beds

Residents

Nursing Homes


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Occupancy RatesOccupancy Rates

Nu s n e Occupany Rates

5 %

%

5 %

%

5 %

4 5

Occupany Rates


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Occupancy Rates inOccupancy Rates in

LongLong--term Care Settingsterm Care Settings

Long-term Care Occupancy Rates -

6

eanO

ccupancyRate

s

In epen ent Living

ssiste Living

S i e ursing

CCRCs


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Loan VolumeLoan Volume

Loan Volume

$n

llon

n e en en L n

e L n

lle u n


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Capitalization RatesCapitalization Rates

A capitalization rate (or "cap rate") is a

measure of the ratio between the cash flowproduced 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


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Annual Cash FlowAnnual 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.


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Long Term Care Cap RatesLong Term Care Cap Rates

Cap ta at on Rates n Long Term Care

ett ngs 000 00

00

10 00

1 00

000

001

00

00

00

00

00

00

CapR

ate

n epen ent L ng

ss ste L ng

e rs ng

CCRCs


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Why Build Long Term CareWhy Build Long Term Care

Housing?Housing? High, 8-11%, cash on cash returns. 10% to

20% internal rates of return.

Known demand from aging population andlittle technology risk.

Independent of business cycle.

Good return, over 30%, on expansions andadditions, e.g. adding a 30 bed assisted

living unit to a 100 bed nursing home.


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Competition for Rehab. ncomeCompetition for Rehab. ncome

.

2..

.

.

1 .

12.1 .

Dec.

2 1

J ne

2

J ne

2

J ne

2

J ne

2

J ne

2

ED C RE UR G E

e icare


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Competition for Rehab.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


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States

ifference

between

ecember 2002

and une 2007 in

umber of F

BedsWisconsin -15.70

Minnesota -12.04%

Rhode sland -10.99%

Indiana -9.64%

Vermont -8.92%

South akota -8.12%

Massachusetts -7.00%

Pennsyl ania -6.47%

Idaho -6.44%


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ata Sourcesata Sources OSCAR data from Health Services

Research and Evaluation group of

American Health Care Association(AHCA) retrieved from

http://www.ahca.org/research/index.ht

ml


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ata Sourcesata Sources Financial data from National

Investment Center for Seniors

Housing & Care Industry retrievedfrom

http://www.nic.org/shop/shopdisplayproductsNIC.asp?id=7&cat=Researc

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hendrickson presentation on nursing home market in 2007

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