A Systems Development Guide for Rural Assisted Living Facilities

Transcription

1 A Systems Development Guide for Rural Assisted Living Facilities Rural Development, Oklahoma Cooperative Extension Service Oklahoma State University, Stillwater Oklahoma Office of Rural Health Oklahoma State University, Oklahoma City The Rural Hospital Performance Improvement (RHPI) Project supported the development of this tool and is funded by the Office of Rural Health Policy, HRSA, DHHS through a contract with Mountain States Group, and a subcontract to Oklahoma State University. March 2003

2 A Systems Development Guide for Rural Assisted Living Facilities R. David Shelton Cheryl St. Clair Gerald A. Doeksen Rural Development, Oklahoma Cooperative Extension Service Oklahoma State University, Stillwater Val Schott Oklahoma Office of Rural Health Oklahoma State University, Oklahoma City The Rural Hospital Performance Improvement (RHPI) Project supported the development of this tool and is funded by the Office of Rural Health Policy, HRSA, DHHS through a contract with Mountain States Group, and a subcontract to Oklahoma State University. March 2003

3 A Systems Development Guide for Rural Assisted Living Facilities Introduction and Objectives There is growing concern for the task of taking care of our nations elderly. Americans are aging; in fact, the average live expectancy at birth in 1900 for a male was 46.3 years and for a female was 48.3 years. In 1990, this had increased to 72.0 for men and 78.9 for women (U.S. Census Bureau). Many factors contribute to the increase in life expectancy: lower infant mortality rates, more sophisticated medications, advancements in medical diagnosis and treatments, technological advancements, etc. Not only has there been an increase in life expectancy with the Baby Boomer generation s approach to the golden years, the percent of elderly population in the United States is only expected to increase. According to the U.S. Census Bureau in 1970, there were 19,979,807 Americans aged 65 and older (Table 1, Column 2). These Americans made up 9.8% of the country s total population (Table 1, Column 3). In 2000, the number of Americans 65 years of age and older increased to 12.4% of the total population (Table 1, Column 3). U.S. Census Bureau Projections show that the number of elderly will continually increase each year to the year In the year 2030 the number of people 65 years and older is estimated to be 70,319,000 or 20.0% (Table 1, Column 3). Column 4 of Table 1 represents the rate of increase for the elderly population from the previous decade. Although the rate decreases in some decades, overall the elderly population continues to increase. The projections show the nation s elderly population increasing considerably to over 30% in 2020 and This holds true for the state examples as well. The states of Oklahoma and Mississippi were picked as examples for this report; however, this data may be gathered 1

4 Table 1 Elderly Population Trends Year (1) (2) (3) (4) Census Total % of Total % Increase Total Population Population of Population Population 65 Years + 65 Years + 65 Years + United States ,302,031 19,979, % ,545,805 25,549, % 27.9% ,709,873 31,241, % 22.3% ,421,906 34,991, % 12.0% Projections ,862,000 39,715, % 13.5% ,927,000 53,733, % 35.3% ,070,000 70,319, % 30.9% Oklahoma ,559, , % ,025, , % 25.9% ,145, , % 12.5% ,450, , % 7.7% Mississippi ,216, , % ,521, , % 30.8% ,573, , % 10.4% ,844, , % 7.8% SOURCE: U.S. Census Bureau, 1970, 1980, 1990, 2000, and U.S. Census Bureau Projections, 2010, 2020,

5 for any state in the country. Oklahoma and Mississippi s elderly population is still growing (Table 1, Columns 2 and 4), even though the percentage of the elderly population seems to have leveled off in Table 1, Column 3. Oklahoma s population 65 years and over increased from 298,689 in 1970, or 11.7% of the state s total population, to 455,486, or 13.2% of the state s population in Mississippi s elderly population increased from 221,139 in 1970 (10.0% of the state s total population) to 344,204 in 2000 (12.1% of the state s total population). Not only is the elderly population growing, the number of elderly persons needing assistance with activities of daily living (ADLs) is growing. In 1995 the Administration on Aging stated that six percent of persons 65 years of age and older reported having problems with at least two ADLs. In 1995, this 6% was over 1.8 million elderly persons needing assistance with two or more ADLs. If the 6% is applied to the 2000 U.S. Census, then approximately 2.1 million persons 65 years of age and older need assistance with at least two ADLs. The U.S. Census also states that in % of people age 65 and older claimed to have some sort of disability. This presents a growing problem with how to address the daily assistance many elderly require. In recent years there has been a trend for elderly populations to increase or migrate to rural areas. This can be attributed to the combination of elderly seeking rural areas to retire and younger population seeking better employment in larger cities. In 1997, 18% of the rural population was elderly compared to 15% of the urban population (U.S. Census). The concern for elderly care is even more significant in America s rural areas because there are often fewer services provided. Typically seniors needing 3

6 assistance with daily activities in rural areas must rely on family support, procure private at home services, or utilize the services of a nursing home facility. Until recently there were not many options for people 65 years of age and older needing assistance with daily living activities. A nursing home facility was the only option for elderly people who required even minimal assistance. Nursing homes are expensive and most people require government assistance, by way of Medicaid, in order to afford such accommodations. This means that people usually spend down their life savings and are ultimately left without further options. These limited options are gradually changing with the introduction of new services available across the nation. There is a growing theme nationally for seniors to have more choices available to them. Recently, there has been introduced a new level of care that was previously unavailable to the elderly population. This level of care has created an assisted living center category designed to fill the gap for elderly persons requiring assistance on a level somewhere between independent residential homes to the very dependent 24-hour nursing home facilities. This guidebook is designed to assist individuals and rural communities considering assisted living facilities as a viable option in providing additional elderly healthcare services. The goal of this guidebook is to provide information as to the purpose and operation of assisted living facilities. More specifically, the objectives are to: 1. Define Assisted Living Facilities and their role in elderly living options; 2. Estimate potential participants for an Assisted Living Facility; 3. Discuss capital and operating costs of the facility; 4

7 4. Demonstrate methods to estimate total costs and revenue; 5. Briefly describe the licensing and regulation standards for Assisted Living Facilities. Defining Assisted Living Facilities Before an assisted living facility can be defined, it is best to have a clear understanding of all long-term care services available in most states. Table 2 illustrates housing options that are now available for seniors. Common definitions for these housing options may vary from state to state but the general concepts remain the same. One of the first options for elderly starting to need assistance with ADLs might be to hire someone to provide assistance in the home. This could be provided as a private nursing service or through a home health agency. These options can be expensive and availability may be limited in rural areas. Financial resources limit the utilization of these services. Another option available for the elderly is the utilization of a residential care home. A residential care home means any establishment or institution that offers or provides residential accommodations, food services, and supportive assistance to any of its residents. Residents shall be ambulatory and essentially capable of managing their own affairs and do not routinely require skilled nursing care or intermediate care. This option s main benefit to the elderly is the elimination of chores associated with the upkeep of their own residence. Residential care is typically private pay without any state or federal supplemental assistance. Again, this may restrict the elderly from utilizing this option. 5

8 Table 2 Elderly Housing Options Dependent Living Nursing Home Facility Assisted Living Facility (Medical Model Assisted Living Facility (Social Model) Continuum of Care Facility Adult Day Services Live with Family Members Senior Residential Care Housing Independent Living Own Residency In-home Assistive Care 6

9 Some elderly are forced to make the difficult decision to move in with younger family members to receive needed assistance. This might be the only option available for some families with limited financial resources. Adult day services are available to function as a respite (relief) service to provide safe, secure, therapeutic, and relatively low cost places for impaired family members while caregivers work, go to school, shop, or simply have some time for themselves to recover from the demands of being a caregiver. In some states Medicaid does cover a portion of adult day services; this is based on availability of funds and is usually on a sliding fee scale based on income. There are few, if any, other financial programs to assist with this type of care; the majority of the financial burden usually rests on the elderly person or their family caregivers. A continuum of care facility is an option that provides nursing facility services and either one or both assisted living center services and/or adult day services. This is a licensing designation available in some states allowing a facility to legally offer a much wider range of services for varying levels of assistance needed. A continuum of care facility is a more recent development in elderly housing options. This facility is more common in urban areas; however, there is a transition being made to rural areas as more and more resources become available. More and more communities are realizing the benefits of being able to offer and provide a combination of many different levels of services. An assisted living center is defined as any home or establishment offering, coordinating, or providing services to people who by choice or functional impairments need assistance with personal care or nursing supervision; may need intermittent or 7

10 unscheduled nursing care; may need medication assistance; and may need assistance with transfer and/or ambulation. The Assisted Living Federation of America defines assisted living as a residential setting that offers choices in personal care and health related services. Assisted living facilities fill the gap for seniors needing some assistance with ADLs but not requiring around the clock nursing care. These facilities offer a range of care for elderly requiring only minimal assistance to those that require a higher level of assistance, without the need for 24-hour nursing care. Typically there is little financial assistance available for this option; therefore, the elderly usually pay 100% from private resources. Further discussion is included under the Costs section of the guidebook. The most common option is a nursing home facility. A nursing home facility provides the highest level of support and assistance. A nursing home provides skilled nursing 24 hours a day for individuals that need medical attention for a variety of reasons. Nursing home residents usually receive assistance from the Medicaid entitlement program. By illustrating the transition from independent residential living to dependent housing (Table 2), one can see the vital role an assisted living facility can fulfill in the continuance of care available for the elderly. Assisted living facilities are a relatively new concept in elderly care and are illustrating an interim option prior to full nursing home care. Assisted living facilities are proving to be less costly than full nursing home care. It is anticipated that the financial mechanisms for funding elderly care alternatives may be revised in the near future to include the utilization of assisted living facilities. The definition of assisted living facilities is ambiguous enough to allow for consumer choice; care plans and room settings can be adjusted to meet each resident s 8

11 needs and capabilities. As people age, they might not have to move when they begin to need more care or assistance. The consumer can choose a facility that offers services to meet current and future needs for personal care or skilled nursing care. Instead of being limited to residential or nursing home facility designs, consumers are able to choose a living arrangement that meets their expectations for independence, privacy, and a varying level of care. By design, the definition of assisted living facilities allows for a wide range of services that may or may not be made available to clients depending on a particular facility s preference. In fact, nationally there is a debate on whether or not to set up federal regulations regarding assisted living facilities. Most advocates for assisted living facilities do not want to get the federal government involved, basically out of concern that a more confining definition would have to be adopted. This would mean assisted living facilities would be forced to define a more strict level of care and assistance to be offered by all facilities across the nation. Currently most states have adopted their own guidelines and licensing requirements for assisted living facilities and have created similar definitions regarding these facilities that allow for a wide range of assistance and amenities. Assisted living allows frail seniors, who are unable to stay at home but do not need 24-hour skilled nursing care, to move into a residential setting with services designed to meet their needs. Residents can create an individualized care program that changes as their needs change, allowing older Americans to age in place. Most assisted living provides residents with private apartments rather than the more institutionalized settings commonly offered at most nursing home facilities due to the higher level of care 9

12 required by residents. Care and services are delivered with an emphasis on maintaining an individual s independence, dignity, and privacy. Residents can receive assistance with activities of daily living (ADL s), such as grooming, dressing, and bathing. Residents often receive assistance with ambulation and incontinence as necessary. Generally residents receive three meals a day with snacks, housekeeping, linen services, and 24- hour staff assistance. Assistance may also be considered for residents requiring special dietary needs. However, assisted living facilities normally do not provide 24-hour nursing care. Transportation and other amenities are often optional. A typical resident is a woman in her eighties and is either widowed or single. Residents may suffer from Alzheimer s disease or related dementias as well as physical disabilities. Residents must be ambulatory and be able to manage their own affairs. A unit may vary in size from one room to an apartment. Services provided in assisted living facilities may include: Three meals a day served in a common dining area; Housekeeping services; Transportation; Assistance with eating, bathing, dressing, toileting and walking; Access to health and medical services; 24-hour security and staff availability; Emergency call systems for each resident s unit; Health promotion and exercise programs; Medication management; Personal laundry services; and 10

13 Social and recreational activities. Residents or their families generally pay the cost of care for an assisted living facility from their own financial resources. Assisted living facilities are typically not supported by government assistance and therefore are basically private pay. Government reimbursements are provided in some states at this time, although this is a recent trend and is at a minimum level of assistance. The insurance industry is, however, revising long-term care coverage to include provisions for more of the elderly housing options, such as, adult day services, assisted living facilities, and continuum of care facilities. This is a relatively recent change in the past 5-8 years; therefore, few people are of the age to benefit from such insurance plans at this time. Estimating Need for Assisted Living Facilities The Assisted Living Federation of America states that currently (2003) more than a million Americans live in an estimated 20,000 assisted living residences (Table 3). Assisted living facilities are increasing in numbers every year. Oklahoma had 4,379 licensed beds in 77 assisted living facilities in 1998 [3]. That increased to 5,008 licensed beds in 92 assisted living facilities in 2002 [2]. Oklahoma showed an additional 629 beds and an additional 15 facilities in four years; this represents as increase of 14.4%. During the same time period ( ) Oklahoma decreased the number of nursing homes from 390 to 380 (-2.6%) and licensed nursing home beds from 34,969 to 34,069 (-2.6%). There were 676 Oklahoma adult day service participants in That number increased to 761 by 2001, which is a 12.6% increase. 11

14 Table 3 Utilization of Long-Term Care Facilities Percent Category Change United States Assisted Living Facilities Number of Facilities 20,000 Oklahoma Assisted Living Facilities Number of Facilities % Number of Licensed Beds 4,379 5, % Nursing Home Facilities Number of Facilities % Number of Licensed Beds 34,969 34, % Adult Day Services Number of Participants % 12

15 Table 4 illustrates assisted living facilities in Oklahoma by the four districts (quadrants) of the state. The average number of licensed beds per facility was 54 beds and there are 89 elderly people per licensed assisted living facility bed. The number of elderly persons per licensed bed varies greatly throughout the state from 253 elderly persons per bed in the Northwest district to 64 in the Southeast district. A local survey of 27 assisted living facilities was conducted in Oklahoma in 2002 and illustrates occupancy rates; rural facilities were 90% occupied and urban facilities 81% occupied (Table 5). Oklahomans are clearly looking for alternative long-term health care services to meet their individual needs. Oklahoma was used as example because the authors reside in this state and were able to readily access the state data. For other states, the state health department, state department of human services, or other state agencies dealing with elderly care issues may be contacted to obtain similar information. In order to determine the need for additional assisted living facilities in a specified service area, an estimate of the number of potential assisted living facility residents is needed. Due to the new, emerging, and expanding range of elderly services, little, if any, research studies have been conducted on the determination of need at this time. Research results have provided limited data to document the need for assisted living facilities. As noted earlier, the U.S. Administration on Aging states in 1995 that 6% of elderly persons aged 65 years and over report having problems with two or more ADLs. Utilizing this percentage to determine a base number of elderly who might utilize the services of an assisted living facility, Table 6 illustrates an example for two states and a county in each state. The population and poverty data utilized in this table are readily available through the U.S. Census Bureau 2000 website < The 13

16 Table 4 Assisted Living Facilities in Oklahoma by Districts and State Totals, 2002 (1) (2) (3) (4) Number Number Ave. No. No. of Persons City Population of of Licensed of Licensed 65+ and older Facilities Beds Beds Per Licensed Bed NE District < 5, ,000-10, ,000-15, ,000-30, ,000-50, > 50, , NE District Totals 43 2, NW District < 5, ,000-10, ,000-15, ,000-30, n/a 30,000-50, > 50, n/a NW District Totals SE District < 5, n/a 5,000-10, n/a 10,000-15, ,000-30, ,000-50, n/a > 50, , SE District Totals 20 1, SW District < 5, ,000-10, ,000-15, ,000-30, ,000-50, n/a > 50, SW District Totals 23 1, STATE TOTALS SOURCE: Oklahoma State Department of Health, 2002; U. S. Census Bureau, 2000 Census 14

17 Table 5 Assisted Living Facilities Questionaire Results - Size, Occupancy, and Cost by Rural and Urban Areas, 2002 Community/City Number Licensed Number of Occupancy Monthly Population of Units Beds Occupants* Rate* Cost 20 Rural Facilities Average 14, % $2, Range 597-3, %-100% $1,500-$3,250 7 Urban Facilities Average 61, % $2, Range 13,156-95, %-95% $1, $2,500 *Seven facilities did not provide number of occupants. SOURCE: Oklahoma survey conducted

18 Table 6 Estimating Need for Assisted Living Facilities State of Example Co., State of Example Co., Oklahoma Oklahoma Mississippi Mississippi 2000 Population 65 Years & Over 455,486 5, ,204 2,034 Percent of 65 Years & Over in Poverty Status, % 11.1% 18.8% 25.4% 6% having Problems with 2 or more ADLs 27, , Number of 65 Years & Over in Poverty Status, , , Estimated Number of Potential Participants 24, , SOURCES: U.S. Census population 2000, U.S. Census poverty rate 1999, U. S. Administration on Aging 1995 data 16

19 occupied beds or licensed beds of the nursing homes and assisted living facilities will need to be obtained from state or local community data. For example, the state of Oklahoma has a population of 65 years and over of 455,486 (2000 U.S. Census) and a poverty rate of 11.0% (2000 U.S. Census, 1999 data). First, by applying the 6% (the elderly persons aged 65 years and over reporting problems with two or more ADLs), you derive the number of elderly in Oklahoma that have problems with two or more ADLs. For the state of Oklahoma, the number is 27,329. The second step is to apply the poverty rate to this number; the state of Oklahoma poverty rate was 11.0%. The results show that 3,006 of the elderly having problems with two or more ADLs are also at poverty level. The third step is to substract the number at poverty level from the 6%. The result is 24,323 elderly having problems with two or more ADLs that might utilize the services of an assisted living facility in the state of Oklahoma. These same numbers are shown for an Example County in Oklahoma and for the state of Mississippi and an Example County in Mississippi. The same methodology has been applied. For the Example County in Oklahoma, the number of elderly having problems with two or more ADLs (6%) is 348, and after reducing for the poverty rate, the number of elderly that might utilize the services of an assisted living facility is 310. For the state of Mississippi, the number of elderly that might utilize the services of an assisted living facility is 16,770. For the Example County in Mississippi, it is estimated that 91 elderly might utilize the services of an assisted living facility. One further step in this analysis could be to gather data from the targeted service area on actual occupancy of assisted living facilities and nursing home facilities. The 17

20 estimated number of potential participants would need to be further reduced by these numbers. In lieu of the availability of occupancy numbers, the number of licensed beds could be substituted as a higher estimate of occupancy, which assumes 100% occupancy. This provides a more conservative bottom line number. Data was available for the Example County in Oklahoma (Table 7). The Example County, Oklahoma, has 163 licensed nursing home beds and 20 licensed assisted living facility beds. After subtracting these two numbers from the subtotal (the 6% less the number in poverty), the estimated number of elderly who might utilize assisted living facilities in the Example County in Oklahoma is 127. These numbers may still be inflated due to many other variables that could affect utilization patterns. There are many cultural and social issues involved in a person s decision on whether to utilize a long-term care option. There are also many financial considerations, both the individual seniors financial status as well as the targeted service area s economic and demographic situation. Financial indicators for a particular targeted service area can be researched and analyzed further. Data are available from the U.S. Census Bureau demographic profiles for the states and counties (and some data by zip code areas), such as income levels by households and families, selected mean and median incomes, per capita income, poverty status by families and individuals, employ status, employment by occupation and industry, etc. Local data may need to be gathered from the targeted service area; i.e., occupancy of nursing homes, adult day services, assisted living centers, and any other elderly facilities, participation in senior service programs (senior nutrition programs, senior citizen center), surveys, etc. Additional data could be obtained from other state 18

21 Table 7 Estimating Participation, Example County, Oklahoma A. Population Age 65 and Over for the Service Area 1 5,807 B. Percent of Population Age 65 and Over Having Problems with 2 or more ADLs 6% C. Population 65 Years and Over having Problems 348 with 2 or more ADLs A. x B. D. Poverty Rate for Service Area % E. Number of Persons 65 Years and Over Having Problems with 2 or more ADLs and in poverty 39 C. x D. F. Number of Persons 65 Years and Over having Problems with 2 or more ADLs LESS those in poverty 310 C. - E. G. Occupany of Assisted Living Facilities 3 20 H. Occupany of Nursing Home Facilities I. ESTIMATED NUMBER OF POTENTIAL ASSISTED LIVING FACILITY PARTICIPANTS 127 F. - (G. + H.) 1 Population from U. S. Census Bureau 2 Poverty Rate from U.S. Census Bureau 3 Data obtained at either state or community level 19

22 agencies or through their websites for Medicaid participants, TANF, food stamps, and WIC participants, number of current nursing home, adult day service, and assisted living facilities licensed beds, unemployment rates as well as number of employed, state, county, and local sales tax rates and amounts collected. From other national data sources, information is also available; i.e., number of Medicare recipients, transfer payments, personal income by source, full-time and part-time employment, etc. All these variables must be taken into consideration in order to estimate participation and to make a decision on whether or not to build an assisted living center. Facility Design The design of an assisted living center may vary a great deal, however most designs are focusing on a simple floor plan, similar to a large private home with many large bedrooms. Most plans allow for a square or rectangle design with the common living areas (kitchen, dining room, living room/recreation room) in the center of the facility with the bedrooms (or the one bedroom studio units) outlining the back three walls of the four wall square or rectangular design. Special rooms can then occupy the corners of the plan. These may include a laundry room, janitorial room, hair salon, nurse s station, medical or medication room, director s office, staff quarters, or a larger apartment dwelling. This floor plan proves to be very functional. Finishing out the facility can include such amenities as a fireplace, porches, and media centers, with décor that helps provide the feelings and comforts of home. A great deal of effort is usually put into making the façade of the assisted living center resemble that of a large home. This 20

23 all relates to the mission of assisted living facilities providing a smooth transition from independent home living to the daily assistance of an assisted living center. Some states have regulations concerning assisted living facilities; these regulations may include any or all of the following. Assisted living facilities must have separate dining and common areas. For privacy and independence no more than two residents should occupy each sleeping room. Lockable doors should be on resident sleeping rooms or residences except for documented contraindication. No more than four residents shall share toilet and bathing facilities. Provisions should be made for each resident to control the temperature in the individual living unit. Residents should also have the right to use personal furnishings in the individual living unit. An example of two facilities will be presented in this guidebook. The six person facility is based on 3,242 square feet which is an average of 540 square feet per participant. For the twelve person facility the total square feet is estimated at 4,550 which averages 379 square feet per participant. Many assisted living facilities offer a variety of unit options for different costs as well. Participants typically are given a choice between a one-room studio and a onebedroom unit with the option of a second occupant with either option. A variety of floor plans are available for purchase. In determining the feasibility of an assisted living facility, a basic floor plan should be developed to determine the square footage needed for the number of participant rooms planned in order to estimate the construction and operating costs. 21

24 Cost As mentioned earlier, assisted living facilities were designed to fill the gap between nursing home facilities and residential care homes. Median estimates of the basic rate for one year in an assisted living center is around $25,000 according to a fact sheet published by the AARP in June In many facilities residents pay more if they need more than the basic assistance. That number also varies depending on the type of unit offered at the facility as well as the level of assistance needed. In some instances, assisted living facilities have different levels of cost depending on the level of assistance required by the resident. Due to the wide range of services provided, this report will provide examples of two different models of assisted living facilities that may be considered. Some assisted living facilities are designed with a medical philosophy as the main concern. One model (referred to as the social model) of assisted living facilities embraces the social philosophy resembling residential care homes. This style of assisted living forfeits some of the availability of medical services for the clients preference of independent living with minimal assistance and the opportunity for socialization. The other model provides the maximum amount of assistance available to its clients. This model (referred to as the medical model) of an assisted living center will basically combine all of the independence of residential living with the highest level of care that can be provided without having to move to a nursing home facility. This report will discuss these two models and present them as two alternatives for communities to consider. The first alternative will be considered as the social model of an assisted living center and will be shown as a six-person facility with minimal medical 22

25 assistance. The second alternative will be an assisted living center to provide a higher level of medical attention and will be shown as a twelve-person facility. Many assisted living facilities offer a variety of unit options for different costs as well. Participants typically are given a choice between a one-room studio and a one-bedroom unit with the option of a second occupant with either option (Figure 1). For the purposes of this report, the sample estimates given will assume only one participant per studio type unit. Capital costs consist of total capital equipment outlay costs and annual capital costs. Annual capital costs are further defined as annual replacement costs of the capital equipment items based on a straight-line depreciation system or an annual amortization amount based on years of the loan and interest rate. The annual capital replacement costs are important since they act as a sinking fund to replace worn capital items and are needed to purchase additional capital items in the future. Annual operating costs are the day-to-day expenses of operating the facility (salaries, benefits, utilities, food, maintenance, supplies, insurance, etc.). Capital and operating costs are based on the average known replacement or operating costs. To determine costs in the future, an adjustment factor can be used. There are two different adjustment factors, construction cost index and consumer price index. The adjustment factors are applied to the current costs in this guidebook to determine costs when this guidebook is used in the future. The adjustment factors are: Adjustment Factor 1 Adjustment for Construction Costs = Current Construction Cost Index 2003 Construction Cost Index Adjustment Factor 2 Adjustment for Consumer Prices = Current Consumer Price Index 2003 Consumer Price Index 23

26 Figure 1 Floor Plans Studio One Bedroom 24

27 Adjustment Factor 1 should be utilized for construction costs only, such as the building itself. The Adjustment Factor 2 should be utilized for all other costs. Tables 8a 8k present the capital costs for construction, as well as the capital costs for a kitchen, dining room, living room/recreation room, laundry/janitorial closet, director s office, salon, participant room, outdoor patio/deck, nurse s station/medical room, and transportation costs. The estimates are given based on the six person social model facility and the twelve person medical model facility. The estimated costs for constructing a six person facility is $359,200 and for a twelve person facility is $490,000. The cost to furnish a kitchen for a six person facility is estimated to be $4,205 while a twelve person facility is $4,400. The totals for a dining room are $1,645 for a six person facility and considerably higher for a twelve person facility in order to accommodate more people at $3,145. A living room/recreation room costs approximately $4,165 for a six person and $5,115 for a twelve person. A laundry/janitorial closet should cost about the same for each facility, $1,395, as would a director s office estimated to cost $4,660. A salon is shown as a viable option, but not as an example for either of the two sample facilities. If a facility chooses to furnish a participant room, a table is provided to estimate costs but neither sample facility has that option shown. Estimated costs are provided for an outdoor patio/deck for both facility options. The estimated cost for the outdoor patio/deck is $620 for a six person and $1,120 for a twelve person facility. A nurse s station or medical room is shown to costs $325 for the six-person facility and $680 for the twelve-person facility. Transportation is an option that a facility can consider and is not included in the two alternatives. 25

28 Table 8a Estimating Capital Costs - Construction Estimated 6 person Estimated 12 person Item Cost Per Unit Units Facility Units Facility Land and Parking $35,000 Per Lot 1 $35,000 1 $35,000 Building $100 Per Sq. Ft. 3,242 $324,200 4,550 $455,000 (Includes Communications and Security System) Other: TOTALS $359,200 $490,000 26

29 Table 8b Estimating Capital Costs - Kitchen Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Telephone $75 1 $75 $1 $75 Clock $20 1 $20 1 $20 Coffee Maker $100 1 $100 1 $100 Waste Basket $30 1 $30 1 $30 Toaster $25 1 $25 1 $25 Mixer/Blender $65 1 $65 1 $65 Microwave $150 1 $150 1 $150 Refrigerator $1,000 1 $1,000 1 $1,000 Cooking Range/Oven $650 1 $650 1 $650 Dishwasher $600 1 $600 1 $600 Freezer $800 1 $800 1 $800 Misc. Serving Utensils 1 $15 per person 12 $ $300 Baking/Cooking Utensils $350 1 $350 1 $350 Mixing Bowls $50 1 $50 1 $50 Linens 2 $75 6 units 1 $75 2 $150 Window Covering $35 1 $35 1 $35 Other: TOTALS $4,205 $4,400 1 Salad, dinner and dessert plates and bowls; serving platters and bowls; glasses and cups; and silverware. 2 Kitchen towels, dishcloths, aprons, tablecloths, napkins, potholders, oven mitts, etc. 27

30 Table 8c Estimating Capital Costs - Dining Room Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Table & Chairs $1, persons 1 $1,400 2 $2,800 Clock $30 1 $30 1 $30 Decoration $100 1 $100 2 $200 Window Covering $50 2 $100 2 $100 Waste Basket $15 1 $15 1 $15 Other: TOTALS $1,645 $3,145 28

31 Table 8d Estimating Capital Costs - Living Room/Recreation Room Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Couch $1,000 1 $1,000 1 $1,000 Love Seat $600 1 $600 2 $1,200 Easy Chair $300 1 $300 2 $600 Recliner $450 1 $450 1 $450 Lamp $50 3 $150 4 $200 Coffee Table $125 1 $125 1 $125 Side Table $75 2 $150 2 $150 Television $350 1 $350 1 $350 VCR $100 1 $100 1 $100 TV Trays $50 1 $50 1 $50 Waste Basket $15 1 $15 1 $15 Window Covering $50 2 $100 2 $100 Clock $25 1 $25 1 $25 Bookcase $150 1 $150 1 $150 Entertainment Center $300 1 $300 1 $300 Stereo $200 1 $200 1 $200 Decoration $100 1 $100 1 $100 Other: TOTALS $4,165 $5,115 29

32 Table 8e Estimating Capital Costs - Laundry/Janitorial Closet Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Clock $15 1 $15 1 $15 Waste Basket $15 1 $15 1 $15 Washer $500 1 $500 1 $500 Dryer $450 1 $450 1 $450 Ironing Board $35 1 $35 1 $35 Iron $30 1 $30 1 $30 Folding Table $100 1 $100 1 $100 Vacuum Cleaner $200 1 $200 1 $200 Brooms, Mops, Etc. $50 1 $50 1 $50 Other: TOTALS $1,395 $1,395 30

33 Table 8f Estimating Capital Costs - Director's Office Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Clock $20 1 $20 1 $20 Waste Basket $15 1 $15 1 $15 Phone $75 1 $75 1 $75 Desk $400 1 $400 1 $400 Office Chair $250 1 $250 1 $250 Side Chair $75 2 $150 2 $150 Decoration $50 1 $50 1 $50 Window Covering $50 1 $50 1 $50 Computer $2,500 1 $2,500 1 $2,500 Fax Machine $250 1 $250 1 $250 Copier $300 1 $300 1 $300 Bookcase $150 1 $150 1 $150 Filing Cabinet $150 1 $150 1 $150 Lamp $50 1 $50 1 $50 Printer $250 1 $250 1 $250 Credenza $200 0 $0 0 $0 Other: TOTALS $4,660 $4,660 31

34 Table 8g Estimating Capital Costs - Salon Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Clock $20 0 $0 0 $0 Waste Basket $15 0 $0 0 $0 Phone $75 0 $0 0 $0 Chair $75 0 $0 0 $0 Beautician's Chair $450 0 $0 0 $0 Rollabout Hairdryer $150 0 $0 0 $0 Decoration $75 0 $0 0 $0 Window Covering $50 0 $0 0 $0 Beautician Supplies 1 $200 0 $0 0 $0 Other: TOTALS $0 $0 1 Curlers, brushes, combs, curling iron, hand held dryer, etc.) 32

35 Table 8h Estimating Capital Costs - Participant Room Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Clock $20 0 $0 0 $0 Waste Basket $15 0 $0 0 $0 Phone $75 0 $0 0 $0 Bed $600 0 $0 0 $0 Bed Covering/Linen $150 0 $0 0 $0 Dresser $250 0 $0 0 $0 Lamp $50 0 $0 0 $0 Decoration $75 0 $0 0 $0 Window Covering $50 0 $0 0 $0 Side Table $75 0 $0 0 $0 Recliner $450 0 $0 0 $0 Easy Chair $300 0 $0 0 $0 Side Chair $50 0 $0 0 $0 Microwave $65 0 $0 0 $0 Apartment Refrigerator $150 0 $0 0 $0 Other: TOTALS $0 $0 33

36 Table 8i Estimating Capital Costs - Outdoor Patio/Deck Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Waste Basket $15 1 $15 1 $15 Thermometer $15 1 $15 1 $15 Glider $250 1 $250 1 $250 Side Table $40 1 $40 1 $40 Table w/umbrella $400 0 $0 1 $400 Chairs $50 2 $100 4 $200 Bench $200 1 $200 1 $200 Other: TOTALS $620 $1,120 34

37 Table 8j Estimating Capital Costs Nurse's Station/Medical Room Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Clock $20 0 $0 1 $20 Waste Basket $15 0 $0 1 $15 Thermometer $15 0 $0 1 $15 Blood Pressure Cuff Kit $35 0 $0 1 $35 Stethoscope $20 0 $0 1 $20 Chair $150 0 $0 1 $150 Scale $50-$150 1 $50 1 $150 Medicine Cabinet $250 1 $250 1 $250 First Aid Kit $25 1 $25 1 $25 Other: TOTALS $325 $680 35

38 Table 8k Estimating Capital Costs Transportation Estimated 6 Person Estimated 12 Person Item Cost Per Unit Units Facility Units Facility Wheelchair Accessible $36,000 0 $0 0 $0 Passenger Van Other: TOTALS $0 $0 36

39 Table 9 summarizes the capital costs. The total estimated capital costs for the six-person facility is $376,215. The total estimated capital costs for the twelve person facility is $510,515. Table 9 also converts the capital costs into estimated annual capital costs. Annual capital costs are based on amortizing a loan or utilizing a straight-line depreciation to estimate replacement costs. A table of amortization factors is included in Appendix A. Replacement costs should be allocated to a sinking fund in order for the funds to accumulate and be available to replace the capital items when needed. For the alternatives presented, the construction costs are amortized over a 30-year period at an 8% interest rate, the other categories are based on replacement costs for the time periods of 5-7 years. The six-person facility s annual capital cost is $34,338, while the twelveperson facility is $46,456. Tables 10a-10d provide estimates for annual operating costs by category of spending. Table 11 provides a summary of the annual operating costs. The total annual operating costs for the six-person facility is $160,812 and $267,236 for the twelve-person facility. The total annual capital and operating costs amount to $195,150 for the six person facility and $313,692 for the twelve person facility. The cost per participant per year is higher for the six person facility at $35,525 as compared to $26,141 for the twelve person facility. The monthly participant costs are $2,710 and $2,178, respectively. These cost totals indicate that there is an economy of size in building assisted living facilities. The cost per participant decreased as the size of the facility increased. Revenues are shown in Table 12. Assisted living facilities may charge a variety of prices for their services. Some centers charge a base fee and then seek additional charges for what they consider extra services, such as hair care, incontinence, 37

40 Table 9 Total Capital and Annual Capital Costs 6 Unit 12 Unit Item Facility Facility Capital Costs Construction $359,200 $490,000 Kitchen $4,205 $4,400 Dining Room $1,645 $3,145 Living Room/Recreation Room $4,165 $5,115 Laundry/Janitorial Closet $1,395 $1,395 Director's Office $4,660 $4,660 Salon $0 $0 Participant Room $0 $0 Outdoor Patio/Deck $620 $1,120 Nurse's Station/Medical Room $325 $680 Transportation $0 $0 Total Capital Costs $376,215 $510,515 Annual Capital Costs Years Construction 30 $31, $43,525 Kitchen 7 $601 7 $629 Dining Room 7 $235 7 $449 Living Room/Recreation Room 7 $595 7 $731 Laundry/Janitorial Closet 7 $199 7 $199 Director's Office 7 $666 7 $666 Salon 7 $0 7 $0 Participant Room 7 $0 7 $0 Outdoor Patio/Deck 7 $89 7 $160 Nurse's Station/Medical Room 7 $46 7 $97 Transportation 5 $0 5 $0 Total Annual Capital Costs $34,338 $46,456 38

41 Table 10a Estimating Annual Operating Costs 6 Person Facility 12 Person Facility Cost Type of Annual Annual Category Per Unit Unit Cost Cost Administrative Office Supplies $4.50 unit/month $324 $648 Postage $2.00 unit/month $144 $288 Telephone $15.00 unit/month $1,080 $2,160 Pagers/Cellular Phones $60.00 per month $720 $720 Administrative Advertising $8.00 unit/month $576 $1,152 Dues/Memberships $2.00 unit/month $144 $288 Education/Training $3.00 unit/month $216 $432 Audit Expense $75.00 per month $900 $900 Licensing Fees $3.00 unit/month $216 $432 Misc. Expenses $2.50 unit/month $180 $360 Subtotal Administrative Expenses $4,500 $7,380 Dietary/Kitchen Raw Food $4.05 occupant/day $8,870 $17,739 Kitchen Supplies $5.00 occupant/month $360 $720 Smallwares/Minor Equipment $6.00 occupant/month $432 $864 Subtotal Dietary/Kitchen Expenses $9,662 $19,323 39

42 Table 10b Estimating Annual Operating Costs 6 Person Facility 12 Person Facility Cost Type of Annual Annual Category Per Unit Unit Cost Cost Resident Care Care Supplies $10.00 occupant/month $720 $1,440 Pharmacy $3.00 occupant/month $216 $432 Activities/Entertainment $4.50 occupant/month $324 $648 Housekeeping Supplies $11.00 occupant/month $792 $1,584 Subtotal Resident Care Expenses $2,052 $4,104 Maintenance Repair Expense $11.00 unit/month $792 $1,584 HVAC Expense $5.00 unit/month $360 $720 Grounds Contract $8.00 unit/month $576 $1,152 Pest Control $0.14 sq. ft. $454 $637 Alarm Monitoring $50.00 month $600 $600 Misc. Maintenance $5.00 unit/month $360 $720 Subtotal Maintenance Expenses $3,142 $5,413 Transportation Gas/Oil $ month $0 $0 Vehicle Lease/Purchase $ month $0 $0 Vehicle Maintenance $ month $0 $0 Subtotal Transportation Expenses $0 $0 40

43 Table 10c Estimating Annual Operating Costs 6 Person Facility 12 Person Facility Cost Type of Annual Annual Category Per Unit Unit Cost Cost Marketing Advertising $10.00 unit/month $720 $1,440 Referral Agency Fees $0.00 unit/month $0 $0 Printing $3.00 unit/month $216 $432 Misc Marketing $5.00 unit/month $360 $720 Subtotal Marketing Expenses $1,296 $2,592 Utilities Electricity $1.00 sq. ft. $3,242 $4,550 Gas $0.73 sq. ft. $2,367 $3,322 Water $0.13 sq. ft. $421 $592 Cable TV $10.00 unit/month $720 $1,440 Sewer $10.00 unit/month $720 $1,440 Trash Removal $3.50 unit/month $252 $504 Subtotal Utilities Expense $7,722 $11,848 Property Property/Liability Insurance $32.00 unit/month $2,304 $4,608 Property Taxes $0.70 sq. ft. $2,269 $3,185 Subtotal Property Expenses $4,573 $7,793 41

44 Table 10d Estimating Annual Operating Costs 6 Person Facility 12 Person Facility Cost Type of Annual Annual Category Per Unit Unit Cost Cost Personnel Salary/Year FTE's FTE's Director $36, $11, $18,000 Cook $20, $15, $20,000 Dietary Aide/Server $11, $ $3,775 LPN $33, $ $33,280 Activity/Social Director $18, $3, $7,488 Cert Nurses Aide $15, $62, $65,520 Maintenance $18, $1, $5,616 Subtotal Personnel Expenses 5.38 $94, $153,679 Personnel Benefits 30.00% $28,469 $46,104 Contracts Physician $72.00 occupant/qrtr $1,728 $3,456 Pharmacist $27.50 occupant/month $1,980 $3,960 Registered Nurse $9.00 occupant/month $648 $1,296 Dietitian/Nutritionist $2.00 occupant/month $144 $288 Subtotal Consultant Expense $4,500 $9,000 Total Personnel/Benefits/Contracts Expense $127,865 $208,783 42

45 Table 11 Summary of Costs - Capital, Operating, and Participant 6 Person Facility12 Person Facility Total Capital Costs $376,215 $510,515 Total Annual Capital Costs $34,338 $46,456 Annual Operating Expenses Administrative $4,500 $7,380 Dietary/Kitchen $9,662 $19,323 Resident Care $2,052 $4,104 Maintenance $3,142 $5,413 Transportation $0 $0 Marketing $1,296 $2,592 Utilities $7,722 $11,848 Property $4,573 $7,793 Personnel/Benefits/Contracts $127,865 $208,783 Total Annual Operating Expenses $160,812 $267,236 Total Annual Capital & Operating Costs $195,150 $313,692 Costs Per Participant Per Year $32,525 $26,141 Costs Per Participant Per Month $2,710 $2,178 43

46 Table 12 Projected Revenues Per Unit Per 6 Unit Facility Per 12 Unit Facility Participant Fees Participant Fees Participant Fees Item Low Medium High Low Medium High Low Medium High Monthly Fees $1,500 $2,500 $3,500 $9,000 $15,000 $21,000 $18,000 $30,000 $42,000 Annual Fees by Occupancy Levels 100% $18,000 $30,000 $42,000 $108,000 $180,000 $252,000 $216,000 $360,000 $504,000 90% $16,200 $27,000 $37,800 $97,200 $162,000 $226,800 $194,400 $324,000 $453,600 80% $14,400 $24,000 $33,600 $86,400 $144,000 $201,600 $172,800 $288,000 $403,200 70% $12,600 $21,000 $29,400 $75,600 $126,000 $176,400 $151,200 $252,000 $352,800 60% $10,800 $18,000 $25,200 $64,800 $108,000 $151,200 $129,600 $216,000 $302,400 44

47 transportation, etc. Some assisted living facilities have certain levels of care that a participant may be charged according to their particular required assistance. Still others charge one rate to include it all. Size and types of rooms are also to be considered in determining the rate. Table 12 shows a range of rates that might be charged to account for various levels of care and size of rooms. The monthly rates range from low, $1,500, medium, $2,500, to high, $3,500. This table illustrates the annualized fees, as well as different occupancy levels. Table 13 summarizes the estimated annual capital and operating capital costs and projected revenues, based on selected occupancy levels. For the six person facility, supplemental funding would be needed unless the facility charged the high monthly rate of $3,500/month and could maintain occupancy levels above 80%. For the twelve person facility, the facility could show a profit at the medium monthly rate of $2,500 with an occupancy of 90% or above. For the twelve person facility, a profit is shown for the high monthly rate of $3,500 with 80% occupancy or above. All costs shown are based on average costs and projected as estimates only and should be adjusted appropriately for a specifically chosen area. Case Study A case study has been prepared as an example of how to utilize the forms provided in this guidebook (Forms 1-25). The case study target area will simply be referred to as an Example County. For the purposes of this Example County, the assisted living facility being proposed is a twelve-unit medical model facility. Form 1 illustrates 45