Starting an assisted living facility vs in-home care vs nursing home business; which is the most profitable to own? Here is a detailed comparison to help you make a choice.
It is a fact that the senior population is indeed growing. According to the U.S. Census Bureau, more than 20 percent of U.S. residents are projected to be aged 65 and over by 2030. When people age, they have a lot of needs and require care in varying degrees.
There are a lot of businesses that have sprung up just to take care of the health and care needs of seniors. Some of these businesses include home care businesses, assisted living facilities and nursing homes.
Every savvy entrepreneur would like to put his or her money in an area with the most profit and less risks, and we are here to find out between Assisted Living Facility, Home Care and Nursing Home Business, which is more profitable than the other, and which has more chances to break even within a shorter time.
What is an Assisted Living Facility?
An assisted living residence or assisted living facility (ALF) is a housing facility for people with disabilities or for adults who cannot or choose not to live independently. The term is popular in the United States but is similar to a retirement home in the sense that facilities provide a group living environment and typically cater to an elderly population.
A consumer-driven industry, assisted living offers a wide range of options, levels of care, and diversity of services. Assisted living facilities may be part of a retirement community, nursing home, senior housing complex, or may stand-alone. Licensing requirements for assisted living facilities vary by state and the business can be known by as many as 26 different names including: residential care, board and care, congregate care, and personal care.
These residences are aimed at helping residents remain as self-sufficient as possible with the assurance of assistance when needed. A combination of housing, meals, personal care and support, social activities, 24-hour supervision and, in some residences, health-related services is usually provided.
Assisted living facilities are a great choice for those who can’t live on their own, but do not need nursing care. As needs change, these facilities offer different levels of care at different costs – and some are even associated with nursing facilities should your loved one eventually need full-time nursing care.
Some residences provide only meals, basic housekeeping, and help with the activities of daily living (ADLs) such as bathing, dressing, and grooming. Others go beyond these services and furnish transportation and certain health services as a way to remain competitive.
These facilities generally provide a home-like setting and are physically designed to promote the resident’s independence. The facilities can range from small homes with just a few residents of about 25 to high-rise apartment-style buildings with hundreds of residents. Living areas could be a single room or a full apartment with a small kitchen, with prepared meals also served in a common dining area.
Although assisted living costs less than nursing home care, it is still fairly expensive. Depending on the kind of assisted living facility and type of services an older person chooses, the price costs can range from less than $25,000 a year to more than $50,000 a year. There may be additional fees to note here if the resident needs other types of specialized care.
In an assisted living facility that has about 50 residents, if its daily charge on residents is $119 per day, it monthly net income could average $178,500. This is just a rough sketch as there are expenses to think about such as salaries, bills, lease, tax (if the business is not tax deductible) etc. This goes to show that income in this business may be tight, even as it provides very decent income.
Nursing Home Business
Nursing homes, also known as convalescent homes, are a type of residential care that provides round-the-clock nursing care for elderly or disabled people. Nursing homes provide a wide range of health and personal care services. Their services focus on medical care more than most assisted living facilities. These services typically include nursing care, 24-hour supervision, three meals a day, and assistance with everyday activities. Rehabilitation services such as physical, occupational, and speech therapy, are also available.
Some people stay at a nursing home for a short time after being in the hospital in order to recuperate. After they recover, they go home. However, most nursing home residents live there permanently because they have ongoing physical or mental conditions that require constant care and supervision.
Medicare or private health insurance may pay for skilled nursing facility care, but only for 100 days of care per year. Patients are required to cover the costs out-of-pocket for anything beyond that during the same year.
Likewise, Medicare does not pay for help with bathing, eating, or dressing, if that is the only assistance needed. Clients may qualify for Medicaid if their assets and income are limited, but many nursing facilities do not accept this form of payment, and they usually state it.
Nursing home care can be expensive. Although the average cost is more than $80,000 a year and climbing, it can vary widely depending on where you live and the needs of the resident. On average, beneficiaries in the United States can expect costs to average:
For the Semi-Private Room, residents get to pay $225 daily, $6,844 monthly and $82,128 yearly. For those that prefer private rooms, they get to pay, $253 daily, $7,698 monthly and $92,376 yearly.
In most cases, out-of-pocket nursing home costs are generally tax deductible under itemized medical expenses. If a patient is in a nursing home primarily for medical care, then expenses related to medical care, lodging and meals are deductible. However, seniors in nursing homes for personal reasons rather than medical will only be allowed to deduct costs associated with actual medical care, but not meals and boarding costs.
For a nursing home business that has about 50 tenants, and it has a daily charge of $225, its average monthly income could be; $337,500. This figure is higher than that of an assisted living facility because nursing homes usually need more specialized staff like nursing assistants and the likes. The salaries of these specialized staff and the various bills to be paid can eat deep into this income.
Home Care Agency Business
Home care is supportive care provided in the home of the client. Care may be provided by licensed healthcare professionals who provide medical treatment needs or by professional caregivers who provide daily assistance to ensure the activities of daily living are met.
Home care services usually include;
- Personal care, such as help with bathing, washing the hair, or getting dressed
- Homemaking, such as cleaning, yard work, and laundry
- Cooking or delivering meals
- Health care, such as having a home health aide come to the home
Home care professionals can provide almost every type of service that is needed in the home. Some types of care and community services are free or donated, but people run home care as a business, so it has to be paid for. Most private non-medical care providers are hired by the spouse or adult child when clients are not ready to move to an assisted living facility.
Because a lot of older people want to remain in their family home as long as they can, savvy entrepreneurs are rushing in to provide a range of non-medical home care services that help people age in place. To be successful in this business, you must have a staff that is trained to work with seniors and help them become comfortable with the choices you offer.
Non-medical home care costs are generally not covered by Medicare because the services are non-medical in nature. However, there are tax breaks available to individuals who help coordinate home care services for themselves and loved ones.
You won’t need a lot of supplies to start a successful non-medical home care business, but there are a few essentials. First of all, you will need a reliable vehicle to drive you to and from your jobs, and a cell phone to stay in touch with your customers. Almost any smartphone will do, and you can also use it to keep track of your schedule and the hours you work for each client.
Almost all non-medical care is “private-pay,” which means the bills are paid directly by the client or someone in their family. This means caregivers get paid promptly and often earn more hourly than when billed through an insurance company.
Non-medical home care rates currently range from $20 an hour to $40 per hour, depending on the location. The national average is $27 per hour, which works out to $54,000 a year with a 40 hour work week.
Some of the factors that account for the profitability of home care businesses is their low barriers to entry, as anyone with the right attitude can start a home care business. It also does not need a lot of capital to set up, and their franchises are also low cost. From that relatively low startup investment, the home care franchise business model can generate serious revenue, with current market conditions and territory sizes supporting high-volume sales.
Assisted Living Facility Vs Home Care Vs Nursing Home Business – Which is the Most Profitable?
The government is not involved in running a nursing home; instead, it pays the expenses for Medicare and Medicaid residents to private facilities that offer nursing care. Same can also apply in assisted living facilities, but not in all.
Cost Comparison of Nursing Homes vs Assisted Living Facility vs Home Care Agency
The cost of assisted living facilities nationally averages $119 per day, $3,628 per month and $43,536 annually. With the average annual costs of nursing home care being between $82,128 and $92,376 yearly, it appears that assisted living typically averages about half of the cost of nursing home options. Traditional home health care aides wages average $20.50 per hour, $164 per day, $4,920 per month, and $59,040 annually.
When looking at these costs, it would seem that nursing home businesses are more profitable because of the higher charges and income, but there are a lot of things to consider herein.
Nursing home patients require more care and so such homes may need the services of nursing assistants, physiotherapists and doctors in some cases, and all these people need to be paid. Furthermore, asides from setting up the business, you would need to lease a suitable apartment complex for your nursing home and assisted living facility.
This on its part is more finance. Again, a nursing home, and even an assisted living facility would take you more time and stress to set up as there are a lot of licenses and permits you have to get, and state inspections you have to pass.
This is not talking about competition as there are numerous other nursing homes and assisted living facilities you have to compete with to get clients. This would require you to employ extensive marketing techniques, and these cost money too.
In home care on the other hand, though its charges are quite minimal, but its startup costs are not as prohibitive as that of the others. In-home care givers provide care in the homes of their clients, so they need not worry about leasing and maintaining a facility, well, unless they need a home office. Again, because their care is non-medical in nature, so they do not need to acquire extensive permits and licenses just like the other two.
Also, they have no need to stock up on equipment and recreational facilities to keep their clients entertained, just like an assisted living facility. Again, an in home care business does not need so much staff, as one caregiver can cater to the needs of more than four clients. This goes to show that an in-home care senior business is easy to set up and run, and if the business is properly publicized, it would surely have enough clients to keep it afloat.
As an entrepreneur, the ultimate decision is now up to you on which senior care business to set up. You can choose to go with a business that has high net income but high startup and maintenance costs like nursing home and assisted living facility; or you can choose to go with the one the has lower net income and lower startup and maintenance cost like non-medical in-home senior care.