Last week I challenged the Kaiser Family Foundation article that predicted an impending critical shortage of nursing home beds (You can read that article HERE). My premise was not that there is no problem, but rather that they don’t get what the real problem is. This week I want to explore with you my perspective on where the real dangers lie.

1. The system we have just evolved, there was no real planning involved.

It was created by entrepreneurs who saw an opportunity to make a profit, not-for-profits who saw a need, and regulators who reacted to some real, some potential and some imagined problems by developing regulations they hoped would protect seniors. The system continues to evolve to this day and all of the players are all heavily invested in the system staying more or less the way it is. In addition, there are hundreds of vendor companies that sell products or services to the care communities who have a vested interest in the system staying more or less the way it is. This makes it very very difficult to make meaningful change.

2. What is built is determined by reimbursement rates.

This means that, because substantial revenues can be generated from Medicare, more Medicare beds will be built. Conversely, because Medicaid rates are low, few Medicaid beds will be built.

3. The primary driver for the level of services and types of treatments that residents receive is NOT the resident’s needs.

What is delivered is primarily determined by the amount of money that can be derived from the treatments. Perhaps the most illuminating display of this was the recent 11% Medicare cut. There has not been a single organization or individual who suggested that outcomes would be impacted or seniors hurt. The outcry was only about the loss of dollars.

4. While the compensation system is well understood by providers it is stupid.

During the time residents are receiving Medicare benefits, the payments essentially always represent an excessive profit. However, this excessive profit is needed because the reimbursement received for the majority of Medicaid residents is inadequate, with private pay falling someplace in the middle.

5. The regulatory system is not effective in doing what it is supposed to do.

This is not to say there should be no regulation but it should be reasonable and relevant. The truth is that no matter how strong the regulations are, there are some terrible immoral people providing care to seniors and they do not care about the rules or the residents, only the money. What ends up happening is that complying with regulatory requirements, or at least documenting that you are complying, becomes more important than the best interests of the residents. Sometimes the goals intersect and sometime they don’t. In addition, these regulations add billions of dollars of cost to the system, costs that do not improve resident care at all.

6.  The critical shortage in senior housing will be in the area of affordable middle income independent living and assisted living. 

This again comes back to the idea that cash drives what is and is not built. Next week I will offer some solutions.

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Finally: If you know anyone who is looking at emergency call systems I would appreciate the opportunity to talk with them about Vigil Health Solutions.