In 2014, average per-unit prices in the assisted living market increased by 25 percent. Assisted living average unit prices hit a record $188,700 per unit and average per bed prices for nursing homes jumped 4 percent to $75,500, setting records in the industry for the second straight year. The average price for independent living communities also set a new record of $246,800 per unit, 28 percent higher than in 2013. The new prices came in a year that also saw record levels of mergers and acquisitions. In 2014, close to 300 mergers and acquisitions, representing approximately $26 billion, were announced in the senior housing market. As prices increased, cap rates, or the ratio of net operating income to property asset value, plunged last year, providing more cash flow for investments. Rates for assisted living and nursing homes also decreased.
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Earlier this month, the OIG released a report on hospices, titled “Medicare Hospices Have Financial Incentives To Provide Care In Assisted Living Facilities.” The report provides information to inform CMS’ payment reform decisions and is part of the OIG’s larger body of work on hospice care. Although the report focuses on Assisted Living Facilities (ALFs), many of the issues discussed pertain to the hospice benefit more broadly. The issues are similar to those that both the OIG and MedPAC have identified in other hospice settings, such as nursing facilities. The report explores the financial incentives created by the current payment system and the potential for hospices to target beneficiaries in ALFs because they may offer hospices the greatest financial gain. The findings in this report and previous OIG reports show that payment reform and more accountability are needed to reduce incentives for hospices that solely focus on certain types of diagnoses or settings.
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Click here to read a summary of the report from NAHC.