Adult Day Care Moves Quickly Into For-Profit Sector By SHELLY GARCIA Senior Reporter For years, senior services were viewed as charitable efforts offered through hospitals, community groups and philanthropic organizations. But more recently, a population growing old in record numbers, the escalating cost of nursing care and the promise of business opportunity are all combining to create a burgeoning cottage industry in the field of adult health day care. “They’re growing like mushrooms because we need it,” said Parvin Nazari, administrator at Great Days Adult Day Health Care Center. Great Days, which opened in Woodland Hills in April, is among the new breed of centers, large, privately owned facilities that provide services to 100 to 200 or more seniors each day. Great Days is among the largest with capacity for 275 seniors. Another new operator, Margente Inc., plans to open an adult health day care center in Granada Hills sometime in January, according to Sue Horowitz, a broker with NAI/Capital Commercial, and William Adelman of TOLD Partners, who represented the parties in leasing space for the facility. Adult health day care centers, which provide medical care and social activities for the elderly, have emerged from a growing awareness that keeping aging seniors in their communities instead of nursing homes helps fend off debilitating illness, improves quality of life and can even prolong life. Along with the services of health professionals such as social workers, physical and occupational therapists and nurses, these centers provide activities like picnics, museum trips, arts and crafts and musical programs, even computer training. “The idea is to help an individual maintain themselves in a community setting for as long as possible without having to consider institutionalization,” said Devorah Teyer, administrator at Valley Storefront Adult Day Care Center, one of the oldest centers in the local area, which is run by Jewish Family Services. Until 1995, adult health day care centers were run almost exclusively by philanthropic, health care and community organizations like Jewish Family Services because Medi-Cal, which foots the bill for participants, limited its funding to not-for-profits. But the complexity of managing adult health day care centers and the limited financing available forced many not-for-profit centers to close their doors, and the legislature revised ownership guidelines to include private enterprise. Since 1999, the number of adult health care centers in the state has nearly doubled to 262 from 135. Just under half of those operate in Los Angeles County, and 37 are in the San Fernando Valley. With the population of those 60 and over expected to double between 1990 and 2020, experts say the need for these centers will escalate even further in coming years. About 81 percent of adult health day care centers in Los Angeles County are now privately owned for-profit operations. Some say it is only a matter of time before corporate owners begin taking over the industry and building chains, as has been the case with childcare centers and senior living complexes. Nursing homes, even good ones, hasten the decline in health of the elderly because they restrict mobility and activity. The full-time, live-in services nursing homes provide can cost upwards of $200 a day. But adult health day care allows those who require some assistance, medical monitoring and therapies to get what they need while remaining in their communities. Medi-Cal, which pays adult health day care centers $66.51 per day per participant, determines the number of days each participant can attend based on their individual conditions. Participants typically attend a center about three days a week, for about five hours a day. State funding guarantees a steady source of income to center operators, but it does not always ensure profitability. The financing has to cover not only staff salaries and the upkeep of the facility but also meals, activities and transportation for participants to and from the center, a cost that can eat away much of the funding, operators say. Not-for-profits, which tend to be storefronts serving 40 or 50 seniors a day, have had an especially difficult time managing on the funding they receive. “I write grant (applications) until they’re coming out of my ears,” said Teyer. “Thank goodness we’re under the umbrella of the Jewish Family Services, and another JFS program that’s doing better than I am can lend some help.” Even the newer for-profit ventures are not insulated from the cost pressures of running these facilities. “We have a very beautiful center, so our expenses are very high,” said Nazari, who operates one of the largest centers, with a capacity to serve 275 people. “And we’re already scared we won’t be able to meet our expenses.” Newer centers like Great Days hope to avoid the pitfalls encountered by their not-for-profit predecessors by increasing the number of people they serve. “When I started 17 years ago, a good sized program was 35 people a day,” said Lydia Missaelides, executive director of the California Association for Adult Day Services. “Today it’s not unusual to see a program apply for 130 or 150 (participants). I heard of one for 200.” Capacities of 200 per day are becoming the norm for these centers because at those numbers operators can achieve the economies of scale they need to be profitable. “You need 40 (participants) to break even,” said Rica Burton, founder of Choice Professionals Inc., consultants to the adult day health care industry based in West Hollywood. Capacities of about 40 participants typically cover the cost of the skilled health care workers needed to operate the center, and while larger populations require more staffing, those workers tend to be less costly, Burton said. “As you increase the population, your expense line rises at a much lower angle because now you’re only adding lesser and lesser priced people,” said Burton. The National Adult Day Services Association is working to increase funding, but Burton believes that L.A. County, with one of the highest reimbursement rates in the state, offers a good business opportunity to entrepreneurs. “How many businesses can you open with less than $1 million and recoup it all in two years?” she asked. “If you have 100 people, that’s over $6,500 a day.” Apparently, a number of would-be operators agree. The Adult Day Health Care Program of the CDA, which licenses these centers, at any given time juggles about 120 to 130 applications for new facilities and has been doing so for several years, said Janet Roberts, manager of the administration team of the Adult Day Health Care Program. “We have such a volume of them so, just because of the sheer volume, we can’t process centers as quickly as they would like to be licensed,” Roberts said.
