Caring for the elderly has become a major issue in America. Most American families at some point must deal with aging members whose needs for care are beyond what the family can provide. When it becomes clear that parents or relatives can no longer live at home without such assistance or memory care, the family faces decisions that are often complicated and difficult. The options for senior care are unfamiliar to most, and have changed significantly in the last several years. Although the image of nursing homes and large assisted living/memory care facilities usually comes to mind, new senior care options such as adult family homes are increasing. These small homes with eight or fewer elders are located in residential neighborhoods, and offer a home-like setting while providing needed care.

This book provides information and assistance in exploring the option of adult family homes for senior care. These are also called adult residential care, group homes, and board and care homes. The many advantages of this type of elder living situation will be fully described. The process of evaluating both personal and family considerations in selecting an adult family home and the process of assessing them as a business opportunity are also included in detail.

To give perspective, here is some background on elder care in America. Changes in family structure, lifestyles, and economics since the mid-1900s created an industry to provide elder care. Many American families were no longer able—or willing—to manage the day-to-day care needs of aging parents or relatives who were increasingly frail or ill. Historically, societies have had poorhouses and old folks homes. The United States characteristically turned these charitable facilities into a vast capitalistic enterprise.

The senior care and housing industry emerged in the 1950s and 1960s as nursing homes where elders received meals, housing, and assistance with daily living needs. These were called many names: nursing homes, assisted living facilities, skilled nursing facilities, nursing facilities, custodial care facilities, long-term care facilities. Their size varied from a few residents, such as 10 to 12, to large institutions housing more than 200 residents. The industry was further shaped by a series of laws.

• Social Security in 1935 set the stage for the private enterprise model in the U.S. In an attempt to keep elders out of public poor houses, the act prohibited payments to residents of public institutions. That sparked the rise of private nursing homes.

• The Hill-Burton Act of 1954, primarily meant to fund hospitals, was expanded to offer loans and grants to build nursing homes that agreed to provide low-cost care. This instituted the medical model of nursing homes that housed elders in institutions that resembled hospitals more than an apartment or multi-family home. This model is still prevalent today.

• Medicare and Medicaid in 1965 put a major infusion of money into the industry. Medicare, the federal health insurance program for people over 65, was set up to pay for doctor and hospital visits (later, medications and other therapies were added). Medicare had provisions to pay for short-term stays in convalescent homes, meant to assist elders to recover from acute illness or injury. Medicaid covered medical care for the poor.

Many nursing homes capitalized on Medicare by adapting to provide higher-level convalescent care services, intermingling these skilled nursing care beds with residential long-term care beds. This caused a blurring of distinction between nursing homes and skilled nursing facilities. By offering skilled nursing care services to some residents, nursing homes could significantly augment their income. The caveat was that Medicare would only pay for 100 days (recently expanded to 120 days) following a medically necessary 3-day hospitalization. After that, the elder either had to find another form of payment or leave the facility.

Medicaid is funded by matching state and federal funds, and coverage varies significantly from state to state. Through Medicaid, the U.S. and state governments use taxpayer money as the de facto payer for a large percentage of nursing home residents, currently over 75% of total resident days. The level of payment, however, does not cover expenses in long-term care facilities, creating serious problems with quality of care.

Before the late 1960s, nursing home care was relatively inexpensive. In addition, few people lived long enough to require much, if any, time in long-term care. Burgeoning health care costs and the rapidly rising elderly population changed this picture. In the nearly 100 years from 1960 to 2050, the population of those 85+ has rocketed an amazing 900%, rising from less than 0.5% to 4.5% of the total U.S. population.1

The majority of elders (73%) are still cared for in home settings in America. But the large numbers residing in America’s nearly 30,000 long-term care facilities, estimated to be about one million people, often face living conditions that are far below optimal. The funding structures for long-term care often lead to payments that fail to cover expenses. As a result, there has been widespread substandard care and cutting corners to improve the corporate bottom line. Add to that insufficient government regulation and failure of industry oversight structure, compounding over 85 years. These factors produced a crisis of confidence in the long-term care industry in the early 2000s with scandals involving elder abuse and neglect as well as financial exploitation and Medicare fraud.2

There had to be a better way. This flawed business model of mostly private enterprise senior care and housing created pressure for change in response to society’s need. During the 1990s, a different model began to coalesce that promised more personalized, home-like settings for quality and compassionate elder care. It was innovation in an industry changing with time and demands for a better structure for elder care. The adult family home model was the result. Regulations were enacted, mostly at the state level, to license homes in residential areas to provide care for limited numbers of seniors, between 1 and 8 residents. Although regulations vary by state, they generally cover structures and safety of the house and grounds, care standards for residents, and training requirements for personnel and business owners.

This new model for senior care and housing has many advantages: The settings are home-like, the numbers of residents and staff fewer, staff turnover is less, operators and caregivers know residents personally, homes are in neighborhoods that may be close to the elder’s family and in a familiar community. Elders may be able to live in a home with others of shared backgrounds. These adult family homes can provide higher levels of care as needed, without seniors having to move between facilities. Personal preferences of seniors can be honored in this more intimate, smaller setting. By having small numbers and stable personnel, these homes reduce the risks of infection. This book describes these benefits in more detail, both from the perspective of families seeking a better placement for loved ones who cannot remain at home, and from the view of people looking for investment and business opportunities in a humane and responsible segment of the senior care and housing industry.

The impact of the COVID-19 pandemic on the nursing care industry has starkly exposed its many flaws. According to the American Association of Retired Persons, this has been “an American tragedy” during which an inordinate number of deaths have occurred in long-term care facilities:

“In one of the most devastating health debacles in our nation’s history, some 54,000 residents and workers in long-term care facilities died of causes related to the coronavirus within four months of the first known infection . . . Fewer than 1% of Americans live in long-term care facilities. But 40% of COVID-19 deaths have occurred there.”3

The flawed structure of the nursing home industry was utterly incapable of meeting the crisis brought on by the COVID-19 pandemic. By the close of 2020, the death toll in long-term care facilities had surpassed 94,000, with over 300,000 infected staff and residents. With nursing homes the default choice for elder Americans needing assisted living care, placing large numbers of susceptible elders in big institutional settings with multiple staff exposure and poor quality of care, the stage was set for the ravages of the pandemic. Fault must also be placed on government officials who failed to respond vigorously to the pandemic early on, made decisions that deprioritized nursing homes, and failed to implement early and widespread testing. Lack of inspections—most were suspended after the pandemic was underway—and unrestricted government cash infusion meant there was no accountability. Agencies, facility owners, and government officials all pointed at each other to take blame.

Many long-term care facilities were understaffed and underfunded prior to the pandemic. There were numerous citations for infection control deficiencies. The for-profit structure had reduced care quality at many homes, especially in the 10% owned by private equity investment groups. Their main reason for being in the nursing home business is to extract money through management contracts and lease agreements, legally removing money while cost-cutting to increase apparent value and sell at a profit. Every dollar squeezed out of nursing homes is not going to enhance care of its residents.4

Solutions to this situation are not coming soon....