Cutting Costs of Post-Acute Care for Americans Over 65

The long-term care, post-acute care, and nursing home business is a very difficult business to be in. There is a constantly growing demand for such services, yet these businesses often struggle to remain profitable and even go out of business because of budget shortfalls. In 2018 52 million Americans were over the age of 65, and by 2060 that figure will nearly double to 95 million people. More than half of them will need some sort of long-term or skilled nursing care in their lifetimes, and one in seven will need it for more than five years. How can these facilities cut costs without sacrificing patient care to remain open to serve the public?

Post-Acute Care

In the last two decades, half of hospital-based facilities closed their doors, while 16% of certified nursing homes closed and 10% of rural nursing homes closed or merged. The main culprits are medicaid reimbursement rates being lower than the actual cost of care, waste, and overspending. Most companies can’t do anything about the medicaid reimbursement issue, but waste and overspending are areas where significant improvements can be made.

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The post-acute care ecosystem includes assisted living, adult daycare, in-home care, independent living, and nursing homes. Some of the reasons these facilities have escalating costs include:

  • Rising labor costs because of shortages in skilled caregivers, which leads to higher wages to retain talent and more overtime for the limited staff
  • Changing needs mean that skilled caregivers need to be trained and retrained to meet needs of increasing diagnosis of dementia and other ailments
  • A shift of post-acute care from hospitals to facilities, where facilities now need to employ more specialized care staff and spend more on supplies

Post-acute care costs to skyrocket?

Group purchasing has long been one of the methods these facilities use to cut costs, but as both costs and demand skyrocket this is just one of many strategies that will need to be employed. Tracking and managing expenses to ensure the best spending practices are being used and that supplies are only ordered when they are absolutely necessary will be the new forefront of cost controls in managed care facilities.

There’s not much time left to figure this problem out as more Americans live longer and need more end-of-life care. Costs will continue to skyrocket as more demand is placed on the system, and facilities need to work on reducing costs before it is too late. Learn more about the business of post-acute care below.

Post-Acute Care



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver