paying for assisted living

When Will Health Insurers Pay for Someone’s Stay at an Assisted Living Community?

Assisted living communities have served an important role in the US’s health care continuum—often they have been the next stop for older people who have been discharged from a hospital or a skilled nursing facility. Assisted living communities assist their residents with medication management and activities of daily living. With such an important role serving seniors, why don’t insurers pay these providers to keep their constituents safe?

Apart from long-term care insurance, it is not common for health insurers to pay assisted living communities because many insurers and providers operate on a fee-for-service basis. That means providers charge the insurers for each procedure/line item. Under this payment structure, preventative care, like what is provided in assisted living communities is over looked by the insurers–much like your insurer now probably doesn’t pay for your vitamins or exercise classes.

The Center for Medicare and Medicaid Services(“CMS”) in tandem with private insurers, are experimenting with a fee-for-value payment model. Through this model, a cohort of providers are paid a flat fee to manage the health of the insurance company’s constituents. In this model, the group of providers can earn more money by reducing the health care costs of the insured population.

As this new fee-for-value system rolls out, assisted living communities will have an opportunity to take payments from insurance companies as a way to reduce the cost of managing the health care costs of their constituents, most notably through lowering readmission rates into hospitals.

If assisted living communities become part of the formal health care continuum, many will have to change the way they do business. Now, a lot of assisted living communities operate as hospitality companies with a sliver of supplemental care. That’s because these communities must woo consumers in to their communities and we believe they do that through enhancing their hospitality features over care capabilities. The way we understand consumers is they generally require a minimum level of care and then focus on choosing a community with the nicest hospitality features that they can afford.

Under a system by which an insurance company pays an assisted living community, a community must show it knows how to manage a population of people effectively. To do this, assisted living communities may have to improve their health care capabilities. A few notable aspects that Dr. Kevin O’Neil pointed out in his interview with Senior Housing News is senior living communities must work on systems to help prevent falls and manage the medications of its residents better1. That means communities may need to have software systems in place to track metrics about their residents, to train their staff to spot people who are a fall risk, and to hire more staff to manage the communities’ residents better.

Two things need to happen for assisted living communities to take payments from insurers: (1) assisted living communities need to focus more on providing health care; and (2) insurers and providers need to organize under a fee-for-value system. When those two aspects occur in a given market, then you will see assisted living communities take payments from insurers as a result of caring for the insurers’ constituents.


Assisted Living Funding

Senior Care Operators Need More Assistance In Light of COVID-19

Senior living operators including independent living and assisted living communities have shown declining occupancy rates due to COVID-19. In the second quarter of 2020, senior living occupancy rates dipped to 84.9%, down from 87.7% in the first quarter and down from 87.8% in the second quarter of 2019 (this reporting was the lowest since the second quarter of 2011)1,2. According to the National Investment Center for Seniors Housing & Care, assisted living communities’ occupancy rates have declined faster than independent living communities’.

We speculate that several factors are leading to declines in occupancy. Firstly, seniors are hesitant to move into communities which they feel will put themselves or others at an increased risk of contracting or spreading COVID-19. Secondly, and in our opinion most notably, more people are working from home, which may mean they have more time to care for their aging loved ones. The latter point seems to bear more weight, because not only are senior living communities’ volumes down during this time; home care providers’ volumes are down as well3. In other words, an industry which serves people in the comfort of their own homes is not getting the business that senior living communities seem to be missing. However, we need to know more before we can definitively say that home care is not picking up the slack from senior living occupancy levels. Yes, home care volumes are down, but are they down because seniors and their families are not hiring caregivers at the same rate? Or, are volumes down because hospital volumes are also down and hence home care companies are getting fewer referrals from hospitals?

Whatever the reason that homecare and senior living volumes are down, the fact of the matter is, they are down. While these types of business serve our senior population, they are having a harder time doing so as their budgets are squeezed and costs have increased because they must provide COVID-19 precautionary care. These businesses have likely been able to apply for grants and loans through the Small Business Administration; however, they have not yet received any additional funding to help cover the expenses of testing and managing COVID-19 responsibly like nursing homes have. Currently, the Senate is working on a bill to help with such expenses through the passing of the Health, Economic Assistance, Liability Protection, and Schools Act (“Heals”). According to LeadingAge, the package does not do enough to help aging service providers, particularly as it relates to the distribution of PPE and covering some of the additional costs health care providers must incur from managing COVID-19 safely. If you are interested, you may read more about LeadingAge’s synopsis here.

It’s important that Congress appropriate funds to senior living providers because in the past decade senior living communities have stepped in and filled a void that nursing homes have not been able to, which is provide a lower-cost setting of care for people who do not have skilled medical needs. Senior living is part of the US’s health care system, and in order for this country to protect itself from COVID-19, senior living communities also need the same defenses as hospitals and skilled nursing facilities. Congress needs to step up and not shortchange these providers.