Residential Care

SIC 8361

Companies in this industry

Industry report:

This industry classification consists of establishments that provide residential social and personal care for children, senior citizens, and special categories of individuals with some limits on ability for self-care but where medical care is not a major element. Included are group foster homes; halfway group homes; homes for the physically and mentally disabled; homes for the elderly; juvenile correctional homes; rehabilitation or residential centers; and children's boarding homes. Boarding schools providing elementary and secondary education are classified in SIC 8211: Elementary and Secondary Schools. Nursing homes and other providers of health-related personal care are classified in SIC 8051: Skilled Nursing Care Facilities, SIC 8052: Intermediate Care Facilities, and SIC 8059: Nursing and Personal Care Facilities, Not Elsewhere Classified.

Industry Snapshot

Facilities of many different types fall into the general category called residential care. The types of establishments in this classification include children's homes, rehabilitation facilities, group homes for people with a variety of limitations, halfway houses, and rest homes for the aged. For some segments of this industry, business was booming in the late years of the first decade of the 2000s. The market for space in assisted living facilities, for example, expanded greatly due to the aging of the U.S. population. Residential drug and alcohol treatment centers, however, battled trends in the insurance industry that focused resources on outpatient care.

Collectively, long-term care (LTC) facilities make up a multi-billion-dollar industry in the United States. Long-term care industry forecasts are difficult to make because of continuing changes in federal and state legislation. There are millions of people living in the various types of nursing homes and retirement communities that provide residential care for the elderly in the United States. The number of facilities continues to grow as America's population ages. In 2010, there were a record 40.3 million Americans over the age of 65. This figure represented about 13 percent of the population, and that number was expected to increase to 20 percent by 2020.

Organization and Structure

A broad range of residential care options exists for the elderly, making it possible for a client to choose a facility that is well-suited to his or her needs, both physical and financial. Traditional nursing homes provide continual shelter and 24-hour medical care for their elderly residents, who are unable to care independently for themselves. Nursing homes provide their residents with on-site meals and constant physical care, including assistance with bathing, grooming, and dressing. Nursing homes also often provide their residents with on-site social activities.

Retirement centers, increasingly referred to as assisted living communities, are designed for persons who are unable to function in an independent living setting but do not need daily nursing care. According to the Assisted Living Federation of America, in the late 2000s, there were approximately 30,000 assisted living communities in the United States housing more than 1 million residents. Assisted living communities generally assist with bathing, dressing, housekeeping, and meals. The amount of help provided depends on individual need. Retirement homes offering assisted living can be considerably more affordable than nursing homes, primarily because 24-hour medical care is not required. The cost can range from $800 to more than $4,000 a month, about 30 percent less than the range for licensed nursing home care. Unlike nursing homes, however, most assisted living is not covered by private or government insurance. Independent operators and corporations in related industries such as hotel management are prevalent in assisted living.

Continuing care retirement communities (CCRCs) are apartment complexes designed to meet the specific needs of the elderly, providing meals, social services, health care access, and sometimes housekeeping. CCRCs provide a somewhat higher degree of care than retirement centers, though health care is still secondary in these facilities. Continuing care retirement communities offer seniors long-term contracts that ensure lifelong shelter and access to certain health care services. CCRC residents are able to enjoy an independent lifestyle with the knowledge that, if they become sick or disabled, their needs will continue to be met. Residents usually pay an entrance fee and regular monthly payments for this service. Depending on the contract, the entrance fee may or may not be refundable. Most CCRCs enact requirements for incoming residents based on age, income level, financial assets, and physical health and mobility. Generally, residents are expected to move into the community while they are still fully able to care for themselves. Not-for-profit organizations, such as hospitals and religious groups, sponsor about 95 percent of the CCRCs in the United States.

Nearly two-thirds of drug and alcohol rehabilitation facilities, including outpatient and hospital programs not primarily engaged in the residential care industry, are privately owned, nonprofit operations. These institutions treat about 60 percent of the industry's substance abuse clients. The next largest segment consists of facilities run by state or local governments. These account for about 16 percent of rehabilitation operations, but treat nearly 25 percent of the industry's clients. The remainder of facilities are either privately-owned for profit (16.5 percent) or run by the federal government. The largest share of financial support for treatment services comes from private third-party payers, such as HMOs and Blue Cross/Blue Shield. State governments contribute about one-fourth of the industry's total funding. Only about 12 percent of funding comes from fees paid by clients.

Juvenile facilities make up another large block of institutions providing residential care. A steady rise in youth crime has led to an increased demand for juvenile treatment services and providers who are qualified and experienced in serving troubled youth. The juvenile facilities segment of the industry, however, includes not only detention centers for delinquents, but also shelters, training schools, camps, ranches, and group homes.

Residential care for the mentally retarded and developmentally disabled has undergone a qualitative change since the 1970s. The shift has been away from large state institutions toward smaller, more flexible community-based group home settings. The number of residents in large state-operated institutions has shrunk by more than half since the late 1960s. Meanwhile, the number of people in facilities with less than 15 residents tripled during the 1980s and continues to rise. Numerous mental health professionals consider group homes to be the most favorable residential environment for those with mental impairments. Throughout the 1990s, group homes had more than 100,000 residents nationwide, and had waiting lists with tens of thousands of additional names.

Background and Development

Facilities for Children.
Each type of facility that is a part of the residential care industry has a distinct history. Orphanages, for example, have a history that is centuries old, as well as a brutal reputation based on Dickensian tales of squalor and abuse. By the 1970s, a large percentage of the larger group homes had closed amid a flood of lawsuits and allegations of abuse and neglect. By the 1990s, however, orphanages began to reappear, as the need began to outdistance the availability of home-based foster care. The Hollywood-generated reputation of facilities such as Boys Town is somewhat more positive than that of the ordinary orphanage. Boys Town, which went co-ed in 1979, was founded by the legendary Father Flanagan in 1917. Located outside of Omaha, Nebraska, Boys Town covers 1,300 acres and has its own school, fire department, and zip code.

Orphanages and other residential care for children experienced increased demand through the last decades of the twentieth century, although very few of these facilities are run for profit. The main reason for the increase in this type of facility was the lack of space in foster homes. According to the Child Trends Data Bank, in 2011 there were an estimated 408,000 children in foster care, of which 15 percent lived in group homes or institutions. The AIDS epidemic created a special need for abandoned children who have AIDS or HIV or are born with a drug addiction. Residential care for parentless children can take a variety of forms, from the sprawling Boys Town, to home-like settings that house an average of eight children. The U.S. Census estimated that in 2003 the net revenue for employer firms of other residential care facilities, which include facilities for children but not facilities for the elderly or rehab facilities, was $6.9 billion.

Residential Care for the Mentally Impaired.
A history of poor conditions has also led to great changes in the residential care of the mentally impaired. Historically, these individuals were not distinguished from insane or violent people, and therefore residential care resembled incarceration more than housing. The shift toward group homes began in the early 1970s as a reaction to growing dissatisfaction with the care that was being received in large institutions for those with mental impairments and the developmentally disabled. Around 1972, lawsuits were brought in more than a dozen states, including New York, Illinois, Pennsylvania, and Texas, to protest the lack of adequate care in these facilities. As a result, scores of large institutions have since closed. The strongest resistance to the group home concept has come from the residents of neighborhoods that have been proposed sites for group homes. Some labor unions have also expressed concern, since many group home programs include vocational training that puts residents in competition with the unions for jobs.

Residential Care for the Elderly.
The emergence of different levels of residential care for the elderly is a relatively recent phenomenon. Until the last few decades, nursing homes were the only option for those who could no longer care for themselves independently. Continuing care retirement communities (CCRCs) began to appear around 1960, but they did not become common until the mid-1980s. In fact, about 80 percent of the CCRCs in existence in the early twenty-first century opened between 1985 and 1989. Not surprisingly, this rapid expansion met with some resistance from nursing home organizations. Among the states, Oregon has been at the forefront of the movement for alternative housing for the elderly. In Oregon, several group homes, whose funding is aided by the state, house more than a thousand residents who might otherwise be in nursing homes. Most of these group homes are privately owned and licensed by the state.

Residential care for the elderly expanded through the diversification of services offered during the late twentieth and early twenty-first centuries. Advocacy groups estimated that as many as half of the residents in nursing homes could function adequately in facilities that placed less emphasis on medical attention. This fact, combined with the more rigid restrictions created by the National Nursing Home Reform Act of 1987, which was passed to address the alarming increase in abuse cases, led to the emergence of a broad range of facilities that offer less intensive care. Residential care for the elderly is one segment of the industry in which both nonprofit and for-profit operations are well represented. As the elderly population is the fastest-growing segment of the U.S. population, with 4.2 million people over the age of 85 in 2007, and the baby boomers still aging, the need for residential care facilities was expected to continue to grow. According to a U.S. Census Report, the estimated net revenue for taxable employer homes for the elderly companies in 2003 was $11.5 billion.

Rehabilitation Facilities.
Since the early 1990s, rehabilitation centers have been experiencing particularly strong growth. A number of large, multiunit, investor-owned facilities have emerged. Several of the most successful rehabilitation chains have expanded through joint ventures with hospitals and nursing homes. At the same time, drug rehabilitation facilities run by public agencies are in crisis. Funding for public agencies has been frozen, and in some cases is being decreased, while the number of people seeking treatment in these facilities continues to increase. A U.S. Census report estimated that in 2003 the residential mental health and substance abuse facility employer firms among rehabilitation facilities garnered $6.4 billion in net revenues.

According to a 2009 D&B Marketing Solutions report, there were 30,222 establishments in the residential care industry, which generated a combined $24.9 billion in revenues. The average firm had 21 employees and a mean annual income of $1.1 million. Thirty-seven percent of the industry fell under the general category of residential care, which accounted for $5.9 billion in sales. The largest subsectors within the industry were homes for the aged (9.3 percent, $2.6 billion in average annual sales); residential care for children (6.7 percent, $848,000); and group foster homes (6.6 percent, $855,000). Subsectors with the largest average annual revenues include boys' towns ($8.1 million), homes for the emotionally disturbed ($7.6 million), and children's homes ($3.3 million).

The number of children entering foster care and group homes began to decline somewhat during the late 2000s. The population of placed children dropped to 496,000 in 2007, down from 510,000 in 2007 and down significantly from a peak high of 567,000 reached in 1999, according to data released by U.S. Department of Health and Human Services, Administration for Children and Families, Administration on Children, Youth, and Families, Children's Bureau. Of these, nearly one-half million children (half the total) lived with non-relative foster families, and one-fourth lived in kinship care (i.e., foster care with a relative). Of the remaining 25 percent, about 17 percent lived in group homes and institutions, and the rest lived in other types of facilities.

Residential care facilities for the mentally impaired were facing challenges from federal and state budget cuts to Medicaid in the late 2000s. 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. At the same time, community advocates were increasingly lobbying for community-based care, rather than residential care. For example, in 2008, a group of long-term care residents in Florida sued the state to provide better community-based services 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. In 2009, Florida settled the case for $27 million in added services.

Residential care for the elderly weathered the effects of the late 2000s recession better than other segments of the industry as demand remained high due to the increasing age of the American population. However, with the recession came a significant credit crunch. As a result, the rapid expansion within the industry, witnessed during much of the 2000s, slowed beginning in 2008 as industry leaders no longer had access to lines of credit to fund new projects. In addition, occupancy slowed slightly as the housing market crisis that ensued made it difficult for potential assisted living clients to sell their houses prior to moving into a facility. The cost of assisted living remained well below the cost of nursing home care. According to data from the American Association of Retired Persons, the average cost for one month of care in assisted living was $2,968, whereas the average cost for one month of care for a semi-private and private room in a nursing home was $5,566 and $6,266, respectively.

Current Conditions

There were 31,100 assisted living facilities in the United States in 2011, according to the National Center for Assisted Living. Together these facilities provided 971,900 beds, and the overall occupancy rate was 75 percent. Most facilities housed between 25 and 100 residents, although the larger ones accommodated more than 300. By 2011 the average cost of residing in an assisted living facility had risen to $3,477 a month, up 5.6 percent from 2010. Alaska had the highest average monthly rate, at $5,500, followed by Massachusetts ($4,950), Delaware ($4,626), Maine ($4,625), and Connecticut ($4,488). The states with the lowest rates were Georgia, Missouri, and North Dakota. Although construction of facilities continued to decline into the early 2010s, occupancy rates were on the rise. According to the National Investment Center, the average occupancy rate for senior housing was 88.4 percent in the first quarter of 2012.

Industry Leaders

In the early 2010s, Res-Care, Inc. was the leader among facilities that provide residential care and vocational training for mentally retarded and developmentally disabled people, as well as at-risk youths. Res-Care was founded in 1974 and was located in Louisville, Kentucky. In 2011, the company served 65,000 people with developmental disabilities and special needs in 40 states. Res-Care had 45,000 employees in 2011, and that year the company posted $1.5 billion in sales.

Childhelp USA was a nonprofit, nationally recognized, nationwide organization whose primary focus was the prevention and therapeutic treatment of child abuse and neglect. It ran residential treatment centers, children's advocacy centers, group homes, foster care services, child abuse and prevention training and education programs, and a school for developmentally disabled or special needs children, as well as community outreach and public awareness programs. Childhelp USA also operated a national child abuse telephone hotline. Headquartered in Scottsdale, Arizona, the organization traced its roots to 1959, when its founders established orphanages for homeless children in Japan. Besides establishing the country's first national child abuse hotline, the organization started the first residential treatment facility exclusively for abused children in 1978, and in 2001, it established the nation's first Children's Mobile Advocacy Center in Tennessee, followed in 2003 by one in Northern Arizona. These mobile centers provided an array of services to abused children living in rural and tribal areas. Programs were primarily offered in several locations in six states: Arizona, California, Colorado, Michigan, Tennessee, and Virginia. In 2011, Childhelp spent $20.1 million of its $35.9 million budget on its residential treatment program.

Sunrise Senior Living, Inc. (formerly Sunrise Assisted Living), founded in 1981, was the nation's largest for-profit assisted living company with about 300 facilities across the United States, Canada, the United Kingdom, and Germany. During 2008, the company posted a loss of $70 million, and its stock value spiraled downward, from $40 per share in 2007 to as little as $0.38 a share in November 2008: Sunrise was hard hit by the recession due to its heavy reliance on development to fuel growth. However, by 2011, the company was recording $1.3 billion in sales with 31,600 employees.

Workforce

According to the Bureau of Labor Statistics, there were 3.1 million employees working in nursing and residential care facilities in 2011. Approximately one-fourth of all residential care workers were employed by state and local governments, mostly in public welfare agencies and facilities for mentally disabled and developmentally delayed individuals. Another fourth worked in private social or human services agencies offering a variety of services, including adult day care, crisis intervention, counseling, and group meals. Many of these workers supervised residents of group homes and halfway houses. Others were employed in day treatment programs, detoxification units, community mental health centers, psychiatric hospitals, and sheltered workshops. In 2008, the average hourly wage for a nursing and residential care facility worker was $16.01.

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