Intermediate Care Facilities

SIC 8052

Industry report:

This industry includes establishments that provide inpatient nursing and rehabilitative services, but not on a continuous basis. Designated in particular are facilities certified under the Medicaid program to deliver intermediate care to the developmentally disabled.

Industry Snapshot

The Code of Federal Regulations defined an intermediate care facility (ICF) as: "a proprietary facility or a facility of a private nonprofit corporation or association licensed or regulated by the State . . . for the accommodation of persons, who, because of incapacitating infirmities, require minimum but continuous care but are not in need of continuous medical or nursing services. The term also includes additional facilities for the nonresident care of elderly individuals and others who are able to live independently but who require care during the day." While ICFs offer care in surroundings much like that found in SIC 8051: Skilled Nursing Facilities, ICF residents do not require the kind of round-the-clock medical attention that skilled facilities provide. Some facilities have both skilled and ICF sections within their facility, while other facilities are exclusively skilled or ICF. According to the U.S. Census Bureau, there were 26,031 residential mental retardation facilities, which employed 476,209 people, in 2010.
Elderly ICF residents with dementia-related cognitive impairments or who are nonambulatory receive assistance and supervision with "activities of daily living" (ADLs), such as bathing, dressing, and eating. Some ICFs are specifically designed to accommodate persons with Alzheimer's disease and other dementia and offer more secure boundaries to prevent wandering, as well as activities and social programs that address memory impairment. All ICF residents receive supervised medication dispensing and monitoring, transportation to doctors and medical facilities, and the option to participate in facility-provided activities and social programs. ICFs also provide services to people with developmental disabilities. The term "developmental disabilities" generally refers to mental retardation. Therefore, ICFs often are designated as ICF/MRs--Medicaid-funded facilities that provide residential care and services for individuals with developmental disabilities. ICFs must be staffed 24 hours a day and must have a licensed nurse on duty full-time each day.

Approximately 2.3 percent of the national population can be classified as mentally retarded. Although the majority of individuals with mental retardation or related conditions are able to live with their families or other adults in ordinary homes, other individuals with developmental disabilities are cared for in ICFs. Alternatively, individuals with developmental disabilities who require continuous medical or nursing care can be placed in nursing facilities. Many patients reside in ICF/MRs from youth until old age.

ICFs also can provide care to individuals with cerebral palsy, epilepsy, or other severe impairments of the central nervous system not attributable to mental illness that result in physical, mental, and behavioral disabilities comparable to those caused by mental retardation.

Individuals with developmental disabilities in ICFs typically require both health care and special services due to limited capabilities for self-care, such as housekeeping, language, social, and vocational skills. The health care offered by ICFs must include a consultation by a registered nurse at least once a week on the delivery of health care to individual inpatients and a licensed nurse on full-time duty for each day shift. Other services that ICFs provide include habilitation, or training, in daily living; self-help; socialization; prevocational skills, such as focusing on tasks and observing time schedules; and vocational skills. Some ICF programs sponsor sheltered workshops, in which disabled individuals receive less than minimum wage, calibrated to individual productivity, for economic output, and supported employment, whereby disabled individuals join nondisabled persons in work settings. ICFs sometimes provide respite care, which is temporary care of individuals with developmental disabilities who generally reside with and are cared for by their families.

Organization and Structure

ICFs are licensed and regulated by states but must also met federal guidelines. Medicaid, which is federally supported but state administered, is the primary source of economic aid for the ICF population, although other funds are available. In general, individuals with developmental disabilities qualify for Medicaid benefits by meeting the disability and financial criteria established for the Supplemental Security Income (SSI) funding. ICFs must meet federal standards intended to ensure that residents live in a safe environment, are supervised by qualified staff, and receive appropriate habilitation and medical treatment. Individuals who meet the disability criteria for Medicaid funding generally must be both mentally impaired (with an IQ of 50 or less) and functionally disabled (incapable of performing the ordinary activities appropriate for persons of their age). Financial eligibility is based on the economic resources of the developmentally disabled individual and, if the developmentally disabled individual is a child less than 21 years old and living in the family household, on the economic resources of that individual's parents. Once a developmentally disabled child has been institutionalized for a month or more in an ICF or comparable Medicaid institution, only income actually provided by the parents is considered in determining that child's financial eligibility for Medicaid.

Background and Development

Prior to the development of ICFs, care of individuals with developmental disabilities was the responsibility of individual states. Most individuals with developmental disabilities who did not live with their families were placed in large state facilities, generally in rural and isolated locations, that emphasized custodial care rather than treatment. By the 1950s, parents and advocates of individuals with developmental disabilities began to push for the reform of such large state institutions and for the development of community-based services, whereby individuals with developmental disabilities could receive special services but continue to live at home. In 1962 a panel appointed by President Kennedy recommended that only developmentally disabled individuals whose specific needs were appropriately met by institutional services should be placed within state facilities. This panel also recommended that federal and state agencies and local communities cooperate in the establishment of community services for individuals with developmental disabilities. In the 1960s and 1970s, with the press reporting on the often harsh conditions to which institutionalized individuals with developmental disabilities were subjected, the movement to reform and provide alternatives to large custodial facilities gained momentum.

Until the 1970s, individual states bore the economic burden of providing for individuals with developmental disabilities. In that decade, however, Congress began enacting legislation to provide federal funds for the treatment of developmentally disabled individuals. In 1971, Congress authorized the use of federal Medicaid funding for the services to be provided by ICFs. The purpose of Congress' substitution of federal funding for state funding was to encourage reform by imposing federal standards on state facilities. Throughout the 1970s, federal expenditures on ICFs rose rapidly, initially due to an increase in the enrollment of individuals with developmental disabilities who qualified for Medicaid benefits. In 1981 the Congressional Omnibus Budget Reconciliation Act authorized home- and community-based waivers whereby states could apply Medicaid funding for individuals with developmental disabilities to services provided in noninstitutional settings. Since that time, increasing numbers of individuals who otherwise would have been sent to ICFs have been treated within their homes and communities.

Medicaid spent $8.3 billion, or 7.7 percent, of its $108.3 billion budget for ICFs for the mentally retarded in 1994, according to the Health Care Financing Review statistical supplement published in October 1996. ICF/MR costs rose from $13 to $19 per aged person between 1987 and 1994. In 1994 Medicaid served 159,000 ICF/MR persons, up an average of 4.5 percent per year for each year during the previous decade. In 1995 there were 200,000 ICF/MR recipients for whom $10.4 billion was paid by Medicaid to vendors. This amount represented 9 percent of the total payments to all Medicaid vendors for all Medicaid services. By 1996 the total of Medicaid recipients in ICFs/MR had dropped to 100,000.

The trend of company mergers in the ICF sector in the late 1990s continued into the twenty-first century. In 2001 Universal American Financial Corp. and its CHCS Services acquired the assets of Living Strategies Inc., an employer-sponsored elder-care programs provider. Sun Prairie Company purchased 12 assisted living centers from Alterra Healthcare Corp. in 2001. Res-Care Inc., offering services to the mentally disabled, was purchased in 2000 by an investment group for a reported $700 million.

The nursing and residential care facilities market, which includes ICFs, took in an estimated $127 billion in 2003, up 4.6 percent from $121 billion the previous year. According to the 2005 Georgetown University Long-Term Care Financing Project, Issue Brief, in 2003, Medicaid paid for 46 percent of the nation's nursing home care that includes ICFs. In addition, according to a Government Accounting Office (GAO) report, Medicaid had become the "largest funding source for long-term care" in the country. In 2002 Medicaid spent $84.7 billion on nursing home and home health care, which was 34 percent of its total expenditures, according to the Long-Term Care Financing Project. Of the 40.4 million enrollees in Medicaid in 2003, 4.3 million were aged and 7.7 million were blind or disabled. All 50 states had at least one ICF/MR facility. ICF/MR benefits served approximately 129,000 people with mental retardation and other related conditions in 2006. Medicaid spending on intermediate care facilities continued to rise through the middle of the first decade of the 2000s as ICF facilities continued to decline.

October 1, 2009, began a new fiscal year for the U.S. federal budget, setting in motion the beginning of up to $16 billion in cuts over the next 10 years in Medicare-funded nursing homes by the Centers for Medicare and Medicaid Services. These cuts came as the U.S. House of Representatives and Senate struggled to work out a compromise health care reform plan that was feared by the long-term health care industry to include further cuts to Medicare and Medicaid spending. Bruce Yarwood, president and CEO of AHCA warned against more cutbacks, saying: "Arguments being made by some that seniors' benefits will not be reduced by cuts now contemplated ignore the fact that when Medicare cuts provider reimbursement, providers, in turn, are forced to cut staff because labor expenses comprise 70 percent of facility costs. Cutting staff within a facility, has a direct, immediate, negative impact on patients and their care--and that is what we fear most in terms of how the eventual final reform bill may be crafted." A concern for the entire skilled nursing industry, these cuts were expected to significantly impact ICF/MR facilities. According to a study by United Cerebral Palsy, although Americans with developmental disabilities and mental retardation made up approximately 1.3 percent of Medicaid recipients, they accounted for about 9.3 percent of Medicaid payouts.

ICFs faced some competitive pressure at the end of the first decade of the 2000s from community advocates who pushed for the expansion of community-based care. These advocates argued that persons with mental retardation or developmental disabilities could qualify for Medicaid benefits paid to a ICF or comparable facility much easier than obtaining benefits for community-based care. Consequently, MR/DD clients were forced to enter facilities to receive care that they could otherwise receive within their own homes and communities. Based on the 1999 U.S. Supreme Court Olmstead decision, in which the Court declared not providing community-based services (when they can be reasonably provided) violated the American Disabilities Act, a group of long-term care residents in Florida sued the state in 2008 to provide better community-based services. In 2009 Florida settled the case for $27 million in added services. In July 2009, in recognition of the tenth anniversary of the Olmstead decision, President Obama declared 2009 "The Year of Community Living."

Statistics from the American Health Care Association showed that in 2009 there were a total of 110,850 beds and 91,975 clients being served by ICFs. Of total facilities, 87 percent were privately run and 13 percent facilities were publicly operated. However, public facilities housed 38 percent of clients and private facilities housed 62 percent, suggesting that public ICFs were larger, with a higher bed capacity. The median number of beds for all facilities was six. The states with the most beds included Texas, California, New York, and Illinois. Of the 91,975 clients, 8 percent were 21 years and younger; 40 percent, 22 to 45 years old, 44 percent, 46 to 64 years; and 8 percent, 65 years and older. Fifty-eight percent were men and 42 percent were women. Almost all residents had mental retardation (91,317 residents, or 99 percent), 67 percent of which were diagnosed as severe or profound mental retardation (22 percent and 45 percent, respectively) and mild or moderate in 33 percent of cases (15 percent and 18 percent, respectively). Of the 38,897 clients with developmental disabilities, 37,897 patients had epilepsy (31,668 controlled and 6,229 uncontrolled), 19,876 had cerebral palsy, and 9,914 were autistic. Of total clients, about one-third were nonambulatory, another one-third were visually impaired, and more than one-half were speech impaired. Forty-six percent of the ICF population required medication to control behavior, 7 percent required use of physical restraints, and almost 9 percent of clients were admitted by court order.

Current Conditions

In 2011 the National Center for Assisted Living reported 31,100 assisted living facilities with 971,900 beds and 733,400 residents. According to the American Health Care Association, more than 7,000 of these facilities were classified as ICFs, with a total population of 129,000. All states had at least one ICF.

After experiencing an annual growth rate of almost 5 percent between 2007 and 2012, IBISWorld expected the residential intellectual disability facilities industry to continue to expand through the mid-2010s. According to a 2012 report by the research firm, "Healthcare reform contains provisions for intellectual disability diagnosis and coverage, which will further support growth during the period." The industry was worth approximately $22.5 billion in 2012.

Industry Leaders

At the end of the first decade of the 2000s and in the early 2010s, the national leaders ranked by number of facilities that included ICFs were the large chains Golden Horizons and Kindred Healthcare, Inc. GNSC Holdings, which operated under the name Golden Horizons, ran over 300 skilled nursing facilities and 40 assisted living centers in the United States. The company also offered an array of other health care services, including contract rehabilitation therapy, hospice and home health care, and nursing facility design and construction. In 2007 the company, which was privately held by equity investment firm Fillmore Capital Partners, posted revenues of $2.49 billion and employed 41,000. Kindred Healthcare, Inc. based in Louisville, Kentucky, had over 80 long-term acute care hospitals in 35 states. In 2008 this publicly held company had $4.18 billion in revenues and employed 53,700 workers.

Workforce

In 2009 ICFs employed 207,053 people, for an average of 37 per establishment. ICF employees include administrators and managers; nursing aides, orderlies, and attendants; licensed practical nurses and registered nurses; food service workers; cleaning supervisors, janitors, maids, and housekeepers; laundry and dry cleaning workers; maintenance personnel; and recreation workers.

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