Nursing Care Facility – Assessing the Industry and Growth Factors
Nursing homes typically generate billions in revenue each year, and that is prominently depicted in the significantly increased per patient day revenue. As per Marcum LLP’s 2014-2018 nursing facility analysis, the revenue generated per patient day rose to USD 515.26 from USD 470.52.
So, it’s clear as day that these facilities are a part of a large, profitable industry with room for more growth. In that light, this article will briefly discuss the points that make the nursing home industry so attractive to companies and individuals alike, including key factors driving this sector’s growth and associated opportunities.
What Drives the Growth of the Nursing Home Industry?
In general, there are four key factors driving the growth of nursing homes.
1. Labour costs
The nursing home industry takes advantage of the fact that trained, experienced nurses are mostly needed for round-the-clock care. This makes high-quality staffing facilities very cost-effective.
2. Dependent Population
The aging population has further helped to fuel the growth of the nursing home industry, as it has entailed an increasing need for skilled care in this area.
3. Visit Points and Living Arrangements
Although the nursing home industry is not a perfect fit for all people, it has become increasingly popular for those who require skilled care. Better and more nursing homes are being developed to meet the changing needs of physician orders, and this has led to a more diverse population to provide care for.
4. The Number of Nursing Homes
There has been a historic increase in the number of nursing homes worldwide over the past few years, as more facilities open to meet a growing need for skilled nursing care.
What are Some Opportunities in this Industry?
The nursing home industry is facing stiff competition from assisted living and home health agencies. However, this industry is still growing, and that paves the way for immense opportunities.
First off, the nursing home industry is expected to grow with the aging population. The baby boomer generation is now getting older with an urgent need for medical care. As per Statista, boomers have witnessed a steep decline (about six million people) in their population in the US alone. For this reason, the availability of nursing care facilities is imperative, something that opens the door for private players to invest and contribute.
Second, the rise of senior living facilities is also a positive sign for the nursing home industry. Many people are moving into retirement, seeking to stay in high-grade healthcare facilities and homes. The longer-life cycles further add to the opportunity with more and more facilities required to comply with the requirements.
Besides, the number of people who are living longer has a direct impact on the growth in this industry because there is demand for skilled care. The aging population is also responsible for rising health care costs — the average stay for an elderly person in nursing homes is 835 days. Even those who don’t require extensive care tend to stay for as long as 270 days on average.
All such opportunities point towards an increased emphasis on the employment of skilled nurses. As such, the opportunities for nursing professionals also exponentiate.
Some Challenges Worth Considering
1. High Barrier of Entry
Nursing home facilities are large, capital-intensive institutions. This means that the barrier of entry into this industry is high, something that complicates competition. Even if you have the resources to fund a facility, it would be exceptionally difficult to compete with established companies that already dominate this industry.
2. Change in Laws Affecting the Industry
There have been changes in laws regulating the nursing home industry because of increased recognition of patient rights. However, these laws may change in the future, creating an opportunity for entrepreneurs to work with lawmakers and help reform this industry.
3. High Capital Requirement
The fixed costs associated with starting a nursing home facility would be significantly higher than for most other industries. This would make it difficult or impossible for start-ups to enter the industry. However, there are resources available through which you can learn about financing options that may help you get started in this industry. For example, amidst the lending competition, creating new opportunities for lower-interest loans can help business owners with capital needs.
What does This Mean for Investors?
As mentioned above, the Nursing Home industry has tremendous room for more growth. Before investing in any company, it is important to research the market and the growth factors currently driving it. You should also look at the industry’s long-term prospects and how that fits into the investment strategy you are interested in. This industry has plenty of potential for growth because of the growing and aging population. All these things have been covered in our detailed reports around this industry. Reach out to us to know more.
