When people decide to place their loved ones in assisted living facilities, they expect those facilities to offer better care than they could at home. Assisted living is meant to improve the quality of life for residents, and provide their loved ones with peace of mind that they are being cared for by compassionate, experienced professionals.
But lately, there have been a wave of situations across the country that seem to contradict this. Instances of abuse and neglect in assisted living have been on the rise, leaving some people wary about the assisted living and specialized memory care industries.
In this two-part series exploring the management of assisted living facilities in the US, we’re taking a look at the biggest causes for this decline in care, the consequences, and what individuals can do about it.
A Brief History of The Assisted Living Industry
Assisted living has been around for about 40 years, and was originally developed as a way to give seniors more freedom even as they required more help and care during their final years of life.
These assisted living facilities and memory care homes were primarily owned and run by individuals or corporations that specialized in the medical field. However, as time went on, this started to change. Many of these homes started to be bought by speculators and investors who were looking to capitalize on the aging US population.
REITs Enter The Scene
Fast forward to 2008. By this point, investors buying assisted living facilities was not new. But it suddenly became much more prevalent when Congress passed a law that gave certain investors the ability to hold senior-housing properties tax-free while also taking a slice of their annual income.
Two of the main financiers that took advantage of this: private-equity firms and REITs. REITs, or real estate investment trusts, are a class of investments that were created by Congress in the 1960s. They don’t have to pay corporate income tax and they distribute dividends to shareholders.
The 2008 law mentioned above allowed senior-housing REITs to not just act as passive landlords, but also to share in the profits of the operations at the assisted living facilities and senior care homes they owned. Because of this, REITs understandably started to have more of a hand in deciding how operations of the homes were to be conducted. That’s where things started to take a turn for the worse.
What Happens When REITs and Other Investors Own Assisted Living Facilities?
Investors, like REITs, have one goal in mind: Profits. They’re under a lot of pressure to maximize profits so they can distribute more and more dividends to shareholders. They focus on lowering costs and increasing profit margins even if that means providing lower-quality care to residents of the homes.
When an REIT comes in trying to cut costs, pay and staffing are often two of the first areas to be cut. However, these are also two of the areas that are most essential to provide high-quality care to residents of assisted living facilities. Many of the assisted living facilities across the country owned by REITs and other investors are perpetually understaffed. There are gaps in coverage, medication isn’t always given when it should, nurses are caring for twice as many patients as they were before, and residents aren’t receiving the level of care they need.
What other industry changes have we seen since REITs have come into the picture? What are the consequences of these investors owning the majority of the assisted living facilities in the US? In part 2, we’ll be taking a closer look at the nationwide staffing crisis, rising cases of abuse and neglect, and the role REITs play in all of it.
Sources:
https://www.washingtonpost.com/business/2023/12/17/assisted-living-industry-real-estate/
