Two executive's titles were incorrect in a story Monday on Manor Care Inc. C. Arnold Renschler's correct title is president and chief operating officer. Stewart Bainum Sr. is chief executive officer as well as chairman of the board. Also, 5 percent of the population over age 65 needs nursing home care, a greater percentage than reported in the article, according to Manor Care. And, finally, the number of employes was reported incorrectly. The correct number is 17,000.
Marketers have long struggled to attract the affluent to expensive clothing, cars and homes. Now Manor Care Inc., the rapidly growing nursing-home chain based in Silver Spring, hopes to attract the same buyers to its facilities.
According to the company, this market is growing so fast that it will be a challenge to build enough beds to fill the need. Manor Care has grown by leaps and bounds already through the acquisition of three nursing-home companies over the last four years. For its fiscal year ended May 31, the company earned $30.2 million on revenue of $454.4 million, compared with revenue of $91.7 million and a profit of $6.9 million in fiscal 1981.
Manor Care is expanding after taking a hard look at statistics. The American population is growing older, and the number of people over 85, now at 2.7 million, will grow to 5 million in the next 15 years. According to Manor Care studies, 5 percent of those people will need nursing-home care.
Manor Care nursing homes now have a population of 15,995 residents -- the size of a small town -- in 149 health-care facilities in 24 states. The company plans to grow at the rate of about 2,500 beds a year, according to its new president and chief executive officer, C. Arnold Renschler.
Renschler, who was previously a practicing pediatrician, headed Manor Healthcare Corp. for 3 1/2 years before becoming chief of the holding company in July. At 43, Renschler still has the air and soft voice of a pediatrician, with a surprisingly boyish face under a shock of gray hair. Although he is relatively new to the corporate business world, he said he plans to lead the company into continuing growth and refinement of the nursing-home concept.
"We can build now as economically as we can buy, and the only limiting factor has been certificates of need," said Renschler, referring to the permits issued by states to allow the construction of nursing homes. He added that at least 60 or 70 percent of the growth will be internal, rather than from acquisitions such as the ones Manor Care has made so rapidly in recent years.
"You're talking about quite a bit of expansion," said Renschler. Although the company will continue to target the affluent elderly, it also plans to develop new programs that will answer a range of needs for varying costs.
Most people pay for their own stay in Manor Care nursing homes, according to Renschler, and the average stay is about nine months to a year. "It can range from 20 days for a Medicare patient to a lifetime of several years for an elderly person who just needs shelter," he said.
It is often difficult for Manor Care to determine whether an individual can afford to stay in its homes, because the length of stay for an elderly person can vary greatly. In general, the longer a person stays in a nursing home, the greater the chance the resident will deplete his or her own funds and need Medicaid.
As a result, the company has a financial application designed to screen out patients who cannot afford the facilities. About 30 percent of Manor Care's long-term patients are Medicaid patients, and about 9 percent of its patients are on Medicare. Neither program covers the full Manor Care costs in any state.
The cost of a year's stay in a Manor Care home varies in different facilities and from state to state, ranging from $10,000 at some homes in Texas to about $30,000 at one of the chain's eight luxury Williamsburg units.
Although the industry has traditionally been dominated by private operators, Renschler predicts that many more nursing homes will become part of large corporations as the business grows along with the elderly population. He said that corporate ownership of nursing homes will grow from 20 percent to 50 percent of the total in the next 10 to 15 years.
Although the company is interested in growing through expansion, "we continuously look at the opportunities in the industry with an eye to possible acquisitions," he said.
Manor Care is best known for its nursing homes, but it also owns and runs the Quality Inn motel chain. Eighty percent of the company's business is in health care, including a hospital in Texas and three live-in clinics in Florida for treatment of substance abuse.
The company has been selling unprofitable motels in an effort to streamline, and does not plan to buy any more, according to Renschler.
"We're keeping only a core of hotels that do meet our investment and quality objectives," said Renschler, adding that the focus is "going to be in health care. I think that to say it's in nursing homes is too narrow."
Although the company expanded its acute-care hospital in Texas last year, Manor Care has no plans to invest further in that field, Renschler said. Once again, the decision has been made with an eye toward statistics. "We think that that particular area is going to contract over the next several years as a result of change of emphasis in this country -- a movement away from traditional acute hospital care and more toward day services," Renschler said.
The new chairman said he envisions nursing-home services that provide different levels of care, depending on the needs of the individual. While this type of care, including sheltered communities and live-in residences with some nursing care, is now available, Renschler said he plans to make it available on a much wider basis. If an individual is able to choose a program to fit his or her needs, he or she probably will pay less money than the charges for a full-service nursing home.
"I think we're going to see more of a segmentation of care levels, with the well elderly living for longer periods of time in less sheltered kinds of communities -- living centers, their own apartments in senior citizens communities. There's going to be more of an emphasis on targeting services that are specific to the needs of a given resident," said Renschler, adding that the average age of a nursing-home resident will probably climb from a little over 80 to closer to 85 as medical technology continues to improve.
The catch is that Medicaid, which pays for the bulk of nursing-home care in this country, does not cover limited-care programs, according to Renschler. However, Manor Care estimates that more and more of the elderly will be able to afford special care.
"Number one, the elderly population in this country is going to be increasingly affluent in relationship to the elderly of the last 10 to 15 years. Secondly, private insurance is going to play a much more major role in the financing of long-term health care in the next decade, and, third, the states have stated in some cases directly and in other cases indirectly -- by the policies that they've adopted -- that continued expansion of the Medicaid system is simply not possible -- and in this country that the taxpayer is not going to pay for it," Renschler said.
In the states in which Manor Care operates, Medicaid reimbursement ranges from a low of $29 per day in Oklahoma to a high of around the low $50s per day in Maryland. Manor Care finds that about a third of its nursing-home patients eventually spend all their assets and become dependent on Medicaid. Occasionally, Manor Care moves the patient to a home where a bed certified for patients who receive government assistance is available, but Renschler said that the company tries to let the individual live in the facility just as he or she did before.
"We accommodate a higher percentage of Medicaid patients in, for instance, the state of Maryland than we do in the state of Oklahoma . . . and that's not by accident," said Renschler. Medicaid is a joint federal-state welfare program available to all states that provide medical benefits to low-income residents. The states define low income. He added that programs such as long-term insurance for nursing-home care, which is offered now by smaller insurance companies and will soon be offered by the large companies, will also help middle-income individuals pay their own way in nursing homes for longer periods of time.
Renschler bemoans the high costs, half of them in labor, involved in running nursing-home facilities. He said Manor Care, which employs about 1,700 people, screens employes carefully, then tries to offer them benefits attractive enough to retain them. Other costs that are watched carefully are building and food costs.
"One of the things you need to remember about long-term care is that it's not just health care -- it's housing," he said.