Additional Fees Boost Assisted Living Profits – The New York Times

Assisted living centers have become an attractive retirement alternative for hundreds of thousands of baby boomers who can no longer live independently, promising a cheerful alternative to the institutional setting of a nursing home.

But their costs are so overwhelming that most Americans cannot afford them.

These highly profitable establishments often charge $5,000 or more per month and then add additional fees every step of the way. Resident bills and price lists from a dozen facilities provide insight into the fees: $12 for a blood pressure reading; $50 per injection (more for insulin); $93 per month for ordering medications from a pharmacy not used by the facility; $315 per month for daily assistance with an inhaler.

Facilities charge an additional fee to make it easier for residents to get to the shower, bathroom or dining room. delivering meals to their rooms; to check in staff for daily “reassurance” or simply to remind residents when it is time to eat or take their medication. Some even charge fees for routine billing of care costs to the resident’s health insurance company.

“They say, ‘Your mom forgot to take her medication one time, and now you have to add that on and we’ll bill you for it,’” said Lori Smetanka, executive director of the National Consumer Voice for Quality Long-Term Care, a nonprofit organization .

About 850,000 older Americans live in assisted living facilities, which have become one of the most lucrative parts of the long-term care industry for people age 65 and older. Investors, regional companies and international real estate funds have jumped in: According to an industry survey, half of the operators in the assisted living sector achieve a return of 20 percent or more than it costs to operate the locations. This is far more than the money made in most other healthcare sectors.

Rents are often rivaled or exceeded by fees for services, which are either bundled or charged à la carte. Overall prices have risen faster than inflation, and rent increases since the start of last year have been higher than at any time since at least 2007, according to the National Investment Center for Seniors Housing & Care, which provides data and other information.

There are now 31,000 assisted living facilities nationwide – twice as many as skilled nursing homes. Four out of five facilities are run for profit. Members of racial or ethnic minorities make up only a tenth of residents, although they make up a quarter of the population ages 65 and older in the United States.

A public opinion poll by KFF, the organization formerly known as the Kaiser Family Foundation, found that 83 percent of adults said it would be impossible or very difficult to pay $60,000 a year for an assisted living facility. Nearly half of respondents either lived in a nursing home or had a loved one who had unexpected additional charges for things they assumed were included in the price.

Assisted living is part of a broader affordability crisis in long-term care for the growing number of older Americans. Over the last decade, the market for long-term care insurance has virtually collapsed, covering only a tiny portion of older people. Home health workers who can help people stay safely in their homes are generally poorly paid and hard to find.

And even older people who can afford an assisted living facility often find that their savings are quickly depleted.

Unlike most nursing home residents, whose care is generally paid for by Medicaid, the federal program for the poor and disabled, residents of assisted living facilities or their families typically must cover the full cost. Most centers require those who can no longer pay to move out.

The industry says its pricing structures fund an increase in staffing that helps more frail residents and avoids burdening others with costs for services they don’t need.

If a resident develops dementia or other serious illnesses, prices rise sharply. At one facility in California, the monthly cost of packages for people with dementia or other cognitive problems rose from $1,325 for those who needed the least help to $4,625 as residents’ needs increased.

“This is profiteering at its worst,” said Mark Bonitz, who explored several locations in Minnesota for his mother, Elizabeth. “They have a fixed number of rooms,” he said. “The way you make most of your money is by getting so many add-ons.” Last year, he took his mother to a nonprofit center, where she lived until her death in July at age 96.

LaShuan Bethea, executive director of the National Center for Assisted Living, an industry association of owners and operators, said the industry relies on financial support from the government and private lenders to lower prices.

“Assisted living providers are ready and willing to offer more affordable options, particularly for a growing older population,” Ms. Bethea said. “But we need the support of politicians and other sectors.” She said providing affordable supported housing “requires a completely different business model”.

Others defend the extras as a way to appeal to the wave of retiring baby boomers. “People want choice,” said Beth Burnham Mace, special adviser to the National Investment Center for Seniors Housing & Care. “If you price more a la carte, you’re paying for what you actually want and need.”

Still, residents don’t always receive the increased attention they paid for. Class-action lawsuits have accused several assisted living chains of failing to increase staffing levels to meet residents’ needs or to provide billed services.

“We continue to receive many complaints about staffing shortages and services not being provided as promised,” said Aisha A. Elmquist, until recently the deputy ombudsman for long-term care in Minnesota. a government-funded lawyer. “Some residents have reported to us that they have called 911 to handle things like getting in and out.”

Florence Reiners, 94, loves life at Waters of Excelsior, an upscale assisted living facility in the Minneapolis suburb of Excelsior. The 115-unit building features a theater, library, hair salon and spacious dining room.

“The windows, the brightness and the people overall are very happy and very friendly,” said Ms. Reiners, a retired nursing assistant. Most importantly, she was just one floor away from her husband, Donald, 95, a retired Water Department employee who served in the military after World War II and suffers from severe dementia.

She resisted her children’s requests to move him to a cheaper facility for veterans.

Ms. Reiners is healthy enough to live on a floor where people can live independently. Therefore, her rent is $3,330 plus $275 for an alarm system. If she needs help, she is charged an exact amount, about $26.67 for the 31 minutes an aide spent helping her to the bathroom one evening.

Her husband’s specialized care at the facility cost much more, at $6,150 a month in addition to the $3,825 in rent.

Month after month, her savings dwindled, mostly from the sale of her home, and her monthly retirement income of $6,600 from Social Security and his municipal pension dwindled. Within three years, her assets and savings fell from about $550,000 to about $300,000.

Her children warned her that she would run out of money if her health deteriorated. “She almost cried because she didn’t want to leave her community,” said Anne Palm, one of her daughters.

In June, Ms. Reiners relented and they moved her husband to the VA home across town. His care costs $3,900 a month, 60 percent less than Waters. But Ms. Reiners is not allowed to live in the veterans home.

After almost 60 years together, she was devastated. When a receptionist asked her if she had any questions, she replied, “Can you get me a money tree so I don’t have to move it?”

Heidi Elliott, vice president of operations at Waters, said staff worked with them to carefully review potential residents’ financial assets and explained how costs can increase over time.

“Our senior housing counselors often ask, ‘After looking through this, Mr. Smith, how many years do you think Mom will be able to afford this?’” she said. “And sometimes we lose prospects because they realized, ‘You know what? No, we don’t have it.’”

According to surveys by insurance company Genworth, the average annual price of assisted living for residents has risen 31 percent faster than inflation, nearly doubling from 2004 to 2021, to $54,000. Monthly fees at memory care centers that specialize in people with dementia and other cognitive problems can exceed $10,000 in areas where real estate is expensive or residents’ needs are high.

Diane Lepsig, president of Bellevue-Eastside-based CarePatrol in suburban Seattle, which helps place people, said she has warned counselors that they should expect to pay at least $7,000 a month. “A million-dollar fortune really doesn’t last that long,” she said.

Prices rose even faster during the pandemic as wages and utility costs rose. Brookdale Senior Living, one of the nation’s largest owners and operators of assisted living facilities, reported to shareholders that rate increases this year were higher than usual. In its assisted living and memory care division, Brookdale’s revenue per occupied unit increased 9.4 percent in 2023 compared to 2022, primarily due to rent increases, financial reports show.

In a statement, Brookdale said it has worked with prospective residents and their families to explain the pricing and care options available: “These discussions begin in the initial phase of move-in, but also continue throughout the period of time you are in a community lives, especially when she needs change.”

Many assisted living facilities are owned by international real estate investment funds. Their shareholders expect the high returns typically achieved with real estate investments, rather than the more marginal profits of the heavily regulated healthcare sector. Even during the pandemic, earnings remained robust, financial filings show.

Ventas, a publicly traded real estate investment trust, reported revenue 24 percent above operating expenses in the third quarter of this year from its investments in 576 senior living properties, including those operated by Atria Senior Living and Sunrise Senior Living.

Ventas said the prices for its services are affordable. “In the markets in which we operate, it costs residents, on average, a comparable amount to live in our communities than if they had to stay in their own homes and replicate services,” said Molly McEvily, a spokeswoman.

During the same period, Welltower, another major real estate investment trust, reported an operating margin of 24 percent on its 883 senior housing properties, including those operated by Sunrise, Atria, Oakmont Management Group and Belmont Village. Welltower did not respond to requests for comment.

The median operating margin for assisted living facilities in 2021 was 23 percent if they offered memory care and 20 percent if they did not, according to David Schless, executive director of the American Seniors Housing Association, a trade group that surveys the industry each year .

Ms Bethea said these proceeds could be reinvested into the facilities’ services, technology and building upgrades. “That’s partly why assisted living also has high customer satisfaction,” she said.

Brandon Barnes, administrator of a family business that owns three small homes in Esko, Minnesota, said he and other small operators have been contacted by brokers for businesses, including one based in the Bahamas. “I don’t even know how they could get rid of them from such a great distance,” he said.

To consistently achieve such impressive returns, some assisted living facilities have developed sophisticated pricing methods. Each service is assigned points based on a minute-by-minute estimate of additional labor costs. When residents arrive, they are assessed on what services they need and the facility tallies the points. The number of points determines what level of performance you need; Facilities often have four or five levels of care, each with their own pricing.

Charles Barker, an 81-year-old retired psychiatrist with Alzheimer’s disease, moved to Oakmont of Pacific Beach, a memory care facility in San Diego, in November 2020. In the first estimate, he was assigned 135 points: 5 for food memories; 12 for shaving and grooming reminders; 18 for help choosing clothes twice a day; 36 for medication management; and 30 for the attention, stimulation and redirection he would require due to his dementia, according to a copy of his assessment provided to him by his daughter Celenie Singley.

Mr. Barker’s points fell into the second lowest of five service levels, with a fee of $2,340 on top of his $7,895 monthly rent.

Ms. Singley was disturbed by safety issues that she felt Oakmont didn’t consider as important as the points system. In a May 2021 letter to Courtney Siegel, the company’s chief executive, she complained that she had repeatedly found the facility’s doors, located on a busy street, unlocked – a failing in memory care centers where secured exits allow people with dementia to escape stop wandering away. “Even if it’s expensive, you really don’t know what you’re getting,” she said in an interview.

Ms. Singley, 50, moved her father to another nursing home. Oakmont did not respond to requests for comment.

Other residents and their families filed a class action lawsuit against Oakmont in 2017, saying the company, an assisted living and memory care provider based in Irvine, California, did not provide enough staff to meet residents’ needs as it identified them meet assessments.

Jane Burton-Whitaker, a plaintiff who moved to Oakmont of Mariner Point in Alameda, California, in 2016, paid $5,795 a month in rent and $270 a month for help with her urinary catheter, but staff sometimes emptied the bag only once a day when it required multiple changes, the lawsuit says.

She paid an additional $153 a month for exams of her “fragile” skin “up to three times a day, but on most days staff did not perform skin exams,” the lawsuit says. (Skin damage poses a danger to the elderly, leading to bedsores and infections.) Sometimes it took 45 minutes for staff to respond to her call button, so she left the facility in 2017 because she feared she wouldn’t get any attention otherwise medical emergency, the lawsuit says.

Oakmont paid $9 million in 2020 to settle the class action lawsuit and agreed to provide sufficient staffing without admitting fault.

Similar lawsuits have been filed against other assisted living companies. In 2021, Aegis Living, a company based in Bellevue, Washington, agreed to a $16 million settlement, claiming that its points system – which charged 64 cents per point per day – was “based solely on budget considerations and the desired profit based”. Margins.” Aegis did not admit any fault in the settlement and did not respond to requests for comment.

Jon Guckenberg’s rent for a single room in an assisted living cottage in rural Minnesota was $4,140 a month, plus a number of other costs.

The establishment, New Perspective Cloquet, charged him $500 to reserve a spot and a $2,000 “entrance fee” before he entered the space two years ago. Each month he also paid $1,080 for a care plan to help him manage his bipolar disorder and kidney problems, $750 for meals and another $750 to ensure he took his daily medications. Cable in his room cost an additional $50 per month.

A year after moving in, Mr. Guckenberg, 83, a retired pizzeria owner, had exhausted his savings and was enrolled in a state health insurance plan for the poor.

Doug Anderson, senior vice president at New Perspective, said in a statement that “the cost and complexity of providing care and housing for seniors has increased exponentially due to the pandemic and record high inflation.”

In some ways, Mr. Guckenberg was luckier than most people who run out of money for care. His residence accepts Medicaid to cover his health care services.

Most states have similar programs, but a resident must be frail enough to qualify for a nursing home before Medicaid will cover health care costs in an assisted living facility. However, enrollment is limited. In 37 states, people are on waiting lists for months or years.

“We recognize that the current system where residents use up their assets and then qualify for Medicaid to remain in their assisted living home is broken,” said Ms. Bethea of ​​the trade association. “Residents should not have to become impoverished to continue receiving assisted living.”

According to a nationwide survey of facilities, only 18 percent of residential care centers are willing to accept Medicaid payments, which tend to be lower than what they charge self-payers. And even places that accept Medicaid often limit coverage to a minority of their beds.

For people with a certain level of retirement income, Medicaid is not free. Nancy Pilger, Mr. Guckenberg’s guardian, said that of his monthly retirement income of $2,831, he was only able to keep about $200, with the rest going toward rent and some of his costs being covered by the government.

In September, Mr. Guckenberg moved into a nearby assisted living building run by a nonprofit organization. Ms. Pilger said his costs were the same. But for other residents who haven’t exhausted their assets, Mr. Guckenberg’s new home charges $12 per tray for in-room food delivery; $50 per month to bill an individual’s long-term care insurance; and $55 for a set of bed rails.

Even after Mr. Guckenberg left New Perspective, the company still had to hit him with another fee: a $200 late payment fee for money he said he still owed.

Jordan Rau is a senior reporter at KFF Health News, a company formerly known as the Kaiser Family Foundation.