1. Mapping The Future: Enhancing LTC for Older Minnesotans, 2005 to 2030
Nancy E. Rehkamp, Principal
Dave Schuh, CPA, Principal
Jim Rice, PhD. , Principal
Lars P. Johnson, Senior Manager
February 24, 2007

2. Mapping The Future: 2030 – Key Conclusions
The need for skilled care beds will decline by 7,300 beds over the next 25 years.
The investment in Home and Community Based Services & Assisted Living may delay or eliminate the need for some stays in SNF.
Increasingly, assisted living may substitute for SNF stays in the future, but over 16,600 new assisted living units will be required to achieve the estimated bed decline.
Services provided in care centers will shift dramatically as more and more residents seek short term care at care centers following an acute illness or ambulatory surgery
Admissions to SNF for short stay recovery and rehabilitation are expected to double over the next 20 to 25 years and will represent 70% to 80% of all SNF residents.
The payer mix is likely to change with Medicaid paying for less than 40% of all customer stays and Managed Care playing a larger role.
Studies are showing that Minnesotans have not saved enough for their long term health care needs. For an increasing number of older Minnesotans, this will limit their choices and increase the financial burdens on families and public programs.

3. Mapping The Future: 2030 – Key Conclusions
Capital costs to replace aging and outdated skilled care facilities are expected to be about $4.1 billion over the next ten years and almost $10 billion over the next 25 years.
Many of Minnesota’s SNFs are older, do not meet customer requirements and cannot be easily adapted for new technology.
The analysis indicates that Minnesota skilled care facilities may have insufficient financial performance and creditworthiness to fund capital and facility replacement.
A continued deterioration in the current fragile financial condition of skilled care facilities will result in a significantly greater reduction of skilled beds over the next 10 years than historical trends.
The consumer demand for SNF may not match the supply of SNF beds in certain regions of the State as beds close due to deteriorating financial performance.

4. Where is SNF bed capacity expected to change?
Model Base 2005
2030 Low
Scenario 
Bed Change
 % Change 
4,801
4,046
(755)
-15.7%
2,806
2,339
(467)
-16.6%
1,615
1,526
(89)
-5.5%
5,554
4,494
(1,060)
-19.1%
4,078
3,992
(86)
-2.1%
13,684
8,642
(5,042)
-36.8%
3,000
3,147
147
4.9%
35,538
28,186
(7,352)
-20.7%
East Central
Northeast
Northwest
Southeast
Southwest
Metro Twin Cities
West Central
Statewide

5. The Changing Landscape
Top Issues for Older Adults:
Finding meaningful work and/or activities following “retirement”.
Financial preparation for later years.
Health care costs, including long term care.
Preventing health decline and frailty.
Decline in available caregivers.
Communities that can care and honor elders.
Gaps in current social and financing mechanisms for programs and services.
Creating a workforce to serve elders.
Available information about the array of services and programs.
Providing services and programs that meet the diverse needs.
Care delivery through transitions.
Source: Review of current geriatric literature & Transformation 2010, DHS, 2005 & 2006 Reports

6. Tomorrow’s Older Adults Will Be Different
Today’s older adults are a generation of the fortunate
Property – the significant appreciation of housing can be used in retirement
Pension – most have a defined benefit pension plan
Prudence – this generation did not use credit cards, had greater savings habits and did not have high debt
Parents – many inherited at a much younger age than this generation of adults will experience
Today, 22% of adults over 50 are forced to retire an average of 8 years earlier than planned due to:
Health %
Downsizing %
Caregiving responsibilities 10%

7. Preview of the Future…lots to do….
A reduction in skilled care bed demand relies on:
An addition of Home & Community Based spending on about 2,500 to 4,400 people each year at $8,000+
Acute care utilization per 1000 population remaining constant. Even with a constant utilization rate the admissions from acute care will increase from 31,700 to 60,000 or more per year by 2030
An additional 16,649 Assisted Living units constructed by 2030
Those 65+ living alone will grow from 184,500 in 2005 to 347,000 of which about 100,000 will be 85+ by 2030 and many will not have family or others to provide informal care
Each year up to 90,000 individuals 65+ whose resources are inadequate may need assistance
Part of what you will hear from us today is that based on our analysis of future demand for skilled care, there might be a need for few skilled care facilities and skilled care beds. However, this assumes that we, the collective we, can garner enough staff, economic resources and ingenuity to create ways to provide all the other services that will be required to assist our elders live in the community or other senior housing venues. This list is our estimate of the additional services that need to be developed and provided in order to reduce the total skilled beds required state wide to 27,881, the low estimate of skilled care beds needed by During our presentation we will take you through the assumptions that the Imperative reached to create the model and estimate the number of beds required.
LTC Imperative Demand Modeling 2030

8. Understanding Today’s Use - Leading the Way
There are a number of reasons utilization of SNF and other formal care services is different in Minnesota than in other states.
More women work outside the home than any other state at 66.4% in 2004
Minnesota has the second longest life expectancy in the USA with a large segment of the population over 85 years.
The percentage of older Minnesotans, 85+, living alone is about 62.4% in 2002.
Minnesota ranks #1 in the per capita spending for Home & Community Based Services (2004) shifting people from SNFs to other community settings.
Minnesota has substituted SNF with HCBS by shifting the number of non-A case mix clients to HCBS. This number has grown from 35.7% in 2000 to 42.3% in 2004.
Minnesotans use SNF care following an acute care stay about 150% more frequently than the national average for older adults and more frequently for the 45 to 64 age cohort.
Sources: Kaiser Family Foundation Research, DHS Report to the Legislature on Future of Long Term Care; MHA Discharge Reports for through 2004; CMS Website accessed summer, 2006, & Mn. Transformation 2010 & DHS Staff.

9. Understanding Today’s Use
This now represents about 82% of all discharges
Total discharges from SNFs are increasing, but the discharges for the residents who stay one year or less are increasing faster. Additionally, the number of residents whose stays are one year to three years are about the same and those with lengths of stay longer than three years are declining.
Based on the data we analyzed we believe the significant decline in average daily census is attributable to residents who had lived in nursing facilities for more than 3 years who are not being replaced by similar long stay residents.

10. Provider Demand – Availability of SNF Beds
LTC Imperative Demand Modeling 2030

11. Factors Impacting Demand Modeling Process Overview  Capital Demand
2005 Imperative Data used as basis
Breakouts include Freestanding vs. C&NC and Regions (Metro, Northeast, etc)
Financial Performance Groups created to model future financial capital requirements

12. Factors Impacting Provider Demand
Future Operator Capital Demand?
(2015)
Current Condition
(Financial Position Groups)
Current
2005
Facilities with
Financial
Facility
Beds
Long Term
< $0 Cash Reserves
Condition
Count
Debt
Facilities
Beds
Distressed 48
4,588
$70.4 M 48
4,588
Estimated
Negative 40
3,774
$134.4 M 40
3,774
Impact of 10 Year
Continuation of
Watch 67
6,378
$131.0 M 17
1,332
State MA Rate
Stable 77
7,642
$258.6 M
C&NC 32
2,737
$52.1 M 28
2,413
Totals
264
25,119
$646.5 M
133
12,107
50% of Facilities at risk by 2015 from weak revenues and cash flows
Imperative Survey Respondents Only

13. Provider Demand – Estimated Bed Availability
2015 Projected Beds Available
State Projection 28,000 – 29, (80% of Current)
Imperative Financial Modeling 17,000 – 18, (50% of Current)
Potential Gap in Available Beds 11,000
Based on Historical Trends
Continuation of Current State Reimbursement Policies
OBSERVATION
Current financial condition of nursing facilities with continuation of state reimbursement policies will result in a significantly greater reduction in available beds over the next 10 years than historical trends.

14. Capital Demand Executive Summary
LTC Imperative Demand Modeling 2030

15. Timing Considerations: Nursing Facility Replacement
When Will Today’s Nursing Facilities Need to be Replaced
Based on the current average age of plant of respondents to the Imperative survey, approximately 58% of nursing facilities will likely need to be replaced or significantly renovated in the next 10 years.
Source: Imperative Survey.
Average Age of Plant = Accumulated Depreciation / Depreciation Expense

16. Capital Requirements: Facility Replacement
Based on the discussions with architects and recent facility replacements, the estimated replacement cost per bed for a skilled nursing facility “of the future” in current dollars is as follows:
Replacement Cost / Bed
($000s)
Construction and Related $140,000 - $175,000
Equipment & Technology $15, $30,000
Financing and Related $10, $20,000
TOTAL PER BED $165,000 - $225,000

17. How Will Required Capital be Financed?
Long term financial models projecting the future financial performance of Imperative facilities based on a continuation of current State reimbursement policies were evaluated. The table below reflects the projected financial performance of the “surviving” facilities (> $0 cash reserves at 2015) with replacement need in the next 10 years.
Imperative Financial Modeling Dashboard
This long term analysis indicates that facilities in the Imperative survey may have insufficient financial performance and creditworthiness to fund capital and facility replacement.

18. Key Conclusions
The transition to fewer SNF facilities and beds will occur slowly over the next 25 years.
Without changes to reimbursement from MA SNF facilities will close much faster & may leave some areas of the state without beds.
Facilities have already begun to transition to greater numbers of short stay residents.
Providing greater health services in Senior Housing will grow at an even faster rate encouraging naturally occurring retirement centers.
Personal health services demand will continue growing and will increasingly be funded by the family or individual. These services need to be designed, offered and priced for private pay residents.