Adult Day Care Industry Analysis Adult day care centers are non-residential facilities that provide and support the health, nutrition and social needs of adults. They are usually staffed with professionals and the adults are kept in groups to provide meaningful activities and ensure ease of socializing and supervision. In some adult day care services, medical services such as assessment, rehabilitation and treatment may be conducted to ensure that chronic conditions such as dementia and Alzheimer's are well taken care of Cavanaugh & Blanchard-Fields, 2009.

At many of the centers, on-site nurses or nurse assistants are available to check vital signs of the adults and provide personal care services. In general, adult day care services benefit both the elderly and their caregivers Davis & Press, 2010.

This is because the elderly receive the much needed supportive care and the caregivers are able to remain in their jobs or normal routines during the day. They are also more cost-effective than other alternatives such as nursing homes Chiang, 2011()

Industry review

CHARACTERISTIC

DEVELOPMENT STAGE

New

Expanding

Stable

Declining

Growth Rate

High

Medium

Plateau

Minimal

Competition

Increasing

Shakeout

Entrenched

Decreasing

Market Leaders / Standards

None

In flux / emerging

Fixed

Contracting

Marketing Goals

Exposure and credibility

Differentiate from competition

Industry leadership

Survive

Market Share Strategy

Gain foothold

Build market share

Maintain share

Cannibalize weakened competitors

Product Range

Limited

Expanding

Wide

Reduced

Customer Loyalty

None

Hardening

Strong

Weakening

The adult day care industry has been reported to be one of the fastest growing industries in the U.S. since 2010. According to a study conducted by the National Adult Day Services Association, the estimate is that the number of centers grows by over 15% each year. Since the year 2002, the number of people receiving services from adult day care center has tripled from 100,000 to over 300,000 people. There is also the potential for creating jobs since most activities require aides and certified professionals such as nursing assistants. The U.S. Bureau of Labor Statistics estimates that the need for nursing aides will increase by 20% from 2010 to 2020. This suggests that the growth in the adult day care services will be high. According to MetLife National Study of Adult Day Services published in 2010, the average ratio of workers to adults in adult day care centers is usually 1:6 MetLife Mature Market Institute, 2012.

While this facilitates individualized care and reduces strain and stress to the staff, it often creates a slight burden of wages to the adult day care industry.

In the adult day care industry, there are over 5,000 centers, which provide care to over 300,000 Americans daily. About 56% of the adult day care centers are run as non-profits while 16% are operated by the public sector. There has been an increase in the number of adult day services operated as private for-profits from 22% in the year 2002 to 27 in the year 2010. This when evaluated together with the growth in the number of centers shows that there is increased potential in the industry.

History of the industry

According to the MetLife National Study on Adult Day Services, adult day care services have been present since the mid-1960s. Growth of adult day care services can be attributed majorly to two historical events. First is that in 1985, there was increased public funding opportunity which led to increased awareness of long-term care services. This was also driven politically since many policymakers began to appreciate adult day services as an alternative to home- and community-based services such as nursing homes, which are extremely expensive. Therefore these policy makers drove for increased funding to adult day services as a way to reduce Medicaid expenditure on long-term institutional care. The second historical event was in the mid-1990s and early 2000s when the National Family Caregiver Support Program was developed. This program increased the awareness on issues and challenges faced by adult caregivers and presented adult day care services as a potential solution for solving these. Through the program, there was also a push for increased public funding for adult day services which led to their proliferation MetLife Mature Market Institute, 2012()

Factors that affect growth

Growth of the adult day care services industry is driven by several demographic and economic factors. First is that advances in

This means many people in the baby boomer generation are now living to be much older and as they continue to age, the demand for these adult day care services increases considerably. Data from the U.S. Census Bureau shows that the number of people aged 65 and older has grown by over 15% for the period from 2000 to 2010. This number may seem like a small growth in this population but it is quite high compared to the just over 9% overall growth in the total population in the same period. Over the last 5 years, the population of adults above 65 years of age has increased by an average of 2.5% per year, which is higher than the 0.9% total population growth annually. This population represents the largest consumers of adult day care services. See figure 1 below.
Figure 1: Market segmentation by age

As a result of this increased life expectancy, coupled with lifestyle changes, the number of people being diagnosed with dementia and Alzheimer's disease is also growing significantly. Data provided by the Alzheimer's Association suggests that over 97% of people with Alzheimer's disease are above 65 years of age. The association also points that this is expected to grow as more people in the baby-boomer generation continue to age.

One major economic factor that continues to the growth of this industry is the increased expenditure on home and community-based services by Medicaid. Medicaid has often been known to support those receiving institutional care. However, over the last five years, this has changed considerably and Medicaid has spent more on services such as adult day care. These fall under the scheme of long-term care services which Medicaid finances. Medicaid is one of the largest contributors to the revenue of adult day care services, therefore increased spending on adult day cares results in increased profitability and continued growth of the industry. Policy regulations being enforced are also presenting growth opportunities for the industry. The Patient Protection and Affordable Care Act, which expands Medicaid coverage, is expected to increase Medicaid expenditure on adult day care services presenting opportunity for additional revenues for the industry.

On the economics side, economic growth and the recession is one huge factor affecting growth of this industry. It is estimated that just over a quarter of the industry's revenues come from private fees charged to clients. Therefore, when the economy growth, unemployment decreases and thus disposable income increases and more people are able to pay for adult day care services for themselves or for their loved ones. This also presents an advantage whereby when disposable income reduces, people become unable to pay for more expensive services such as nursing homes and thus look for cheaper options such as adult day care services. On the other hand, when the economy is in recession, unemployment increases and disposable income increases. People are thus forced to reduce the number of days they are attending such services which slows the growth of the industry. At the moment, per capita disposable income is increasing as the economy recovers from the recession levels.

Private insurers have had to keep up with policies instituted in Medicaid and Medicare in order to survive. Therefore, most insurers are currently providing long-term care services to their clients. This is driving more clients to take up private health insurance creating a cycle that fosters growth and demand for services provided by this industry.

Industry performance

The adult day care services industry is regulated at a medium level and the trend suggests the regulations are steady. This means there are rarely hard-hitting regulations. Licensing requirements for adult day care services vary from one state to another with most requiring service providers to register for licenses prior to beginning operations. Other states require that some services be licensed separates. Maine is one example where adult day care service providers are required to have a license to operate an adult day care service or a social adult day care program. Some states require that service providers be certified instead of licensed. In order to received Medicare and Medicaid funding, adult care service providers are required to be certified. This helps to create some regulation for the industry and creates somewhat a barrier to entry for new players. Michigan, Idaho, Oregon and North Dakota have also developed standards upon which adult care service providers operate. In relation to human resources, most states require that those providing services such as administering medication be licensed. Most states also have a minimum ratio of staff to participants. This ranges from 1:4 to 1:10.

Location overview

Figure 2: Distribution of adult day care centers by region

The proposed adult day care center to be established will be established in the state of New York in the Mid-Atlantic region. IBIS World (2013)

reports that the largest concentration of adult day care centers is in the West, Southeast, and Mid-Atlantic regions of the U.S. These three regions in total carry 55% of the total number of adult day care centers in the country. This is because they…