Attempts by nursing home operators to stay relevant and profitable in the constantly changing world of health care, received a boost from the Federal Housing Administration (FHA) last year.
The FHA stepped up to insure 458 mortgage loans worth roughly $3 billion during the fiscal year that ended Sept. 30, 2012. Those loans represented a 46 percent jump from the previous year.
This was a major turnaround in financing for nursing homes, which traditionally rely on loans from private banks because they involve far less bureaucracy. Private banks hold about 80 percent of the outstanding loans on nursing homes.
Some Signs Favorable
However, the FHA had to step in because those banks have been reluctant to make loans lately. The banks have expressed concern about occupancy rates at nursing homes, despite the most recent statistics that show occupancy and rent growing in 2012, albeit by very small margins. Charts from the National Investment Center show occupancy grew three-tenths of a percent in the fourth quarter of 2012, and rent was up 2.2 percent.
Most of the FHA-approved loans were used to refinance existing mortgages for an industry that is under siege from many sides. Businesses, especially banks, are still unsure how the new Affordable Care Act, popularly known as ObamaCare, will affect nursing homes.
Many nursing home residents rely on Medicaid to make their monthly payments. Currently, Medicaid pays for those who meet financial eligibility standards, though at a lower rate than those paying privately. There is some concern that Medicaid and its sister program, Medicare, will suffer budget cuts with the introduction of the Affordable Care Act, and thus affect the monthly income of nursing homes.
Competition Gaining Ground
Another factor weighing on the nursing home industry is competition from home health care and assisted living care providers.
A study by AARP concluded that home health care was less expensive than nursing homes. The AARP study claimed that paying privately for nursing home averaged 252 percent of the median household income for people 65 and older.
Home health care, on the other hand, averaged 88 percent of median household income. Other variables involved for those staying at home include paying housing, utilities, insurance, food and medications.