"It's a cheaper option than nursing homes -- daily rates are lower," says Redding. "You pay only for what you need, not for what your neighbor needs." Policymakers do have reason to be wary. If assisted living becomes covered by Medicaid, hundreds of thousands of elderly people might take advantage of it, thereby placing an ever greater demand on scarce government resources (Horvitz 1997).

As noted above, Sunrise Assisted Living Inc. is among the fastest-growing companies in the assisted living facilities industry; further, the company has managed to exceed analysts' expectations for earnings. The McLean provider of assisted-living services reported in March 2001 that net sales for its fourth quarter of 2000 increased fully 35% to $95.87 million from $70.35 million the year before. At the same time, the company's net income skyrocketed 128% to $8.8 million (39 cents per diluted share) from $3.86 million (18 cents); the diluted shares...
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