Sizing Up The Market For Assisted Living in 2010

Sizing Up The Market For Assisted Living in 2010

by David G. Stevenson and David C. Grabowski

David G. Stevenson is an assistant professor of health policy at Harvard Medical School in Boston, Massachusetts.

David C. Grabowski is an associate professor of health care policy at Harvard Medical School.

Assisted living has emerged as an important housing and long-term care option for older Americans. To date, development of this sector has occurred largely without government financing or regulation. In this study we used primary data that we collected on county-level assisted living supply to gain a fuller understanding of this sector nationally. Reflecting their reliance on private resources, assisted living facilities are located disproportionately in areas with higher educational attainment, income, and housing wealth. As this sector evolves, policymakers will have to contend with issues related to access to services, public financing, quality of care, and regulatory oversight.

Public financing of the long-term care market in the United States has historically gone to the nursing home sector. Since the advent of Medicare and Medicaid, federal and state policies and a range of political and practical factors have contributed to an “institutional bias” in long-term care service delivery, favoring nursing home care over community-based alternatives.1 Over the past two decades, however, a wider range of home and community-based services have become available to older Americans who need assistance with activities of daily living. Assisted living in particular has rapidly emerged as a housing and long-term care option for older Americans. As of 1999, one-third of facilities that called themselves “assisted living” had been in business less than five years, and 60 percent had been in business less than ten years.2

A commonly cited definition of assisted living is put forward by the Assisted-Living Quality Coalition, a group of providers and consumer groups. The coalition defines assisted living as “a congregate residential setting that provides or coordinates personal services, 24-hour supervision and assistance (scheduled and unscheduled), activities, and health related services.”3 General agreement exists about the broader goals of assisted living care, including accommodating residents’ changing needs and preferences; maximizing residents’ dignity, autonomy, and independence; and encouraging family and community involvement. Yet there is a great deal of heterogeneity in the range of services offered and the populations served across facilities and markets. Indeed, many facilities fall short of the ideal.4 Importantly, the market for assisted living has evolved over the past decade as facilities have come to serve a more disabled resident population with an increasingly complex array of services, potentially implying that assisted living could be a more viable nursing home alternative than it initially was.5,6

Growth in assisted living has been driven in large part by consumer preference. People who need assistance in performing everyday activities such as bathing, eating, or dressing prefer to receive supportive services in the least institutional and most homelike setting possible. A general population survey found that people would prefer to be cared for in an assisted living facility over a nursing home if they needed twenty-hour care, by a margin of six to one.7 In addition, for some people with less intensive care needs, it may be possible to purchase assisted living care at lower prices relative to nursing home care. Although the cost of assisted living can vary considerably depending on the amenities and services provided, industry surveys by Genworth Financial put the average annual cost of assisted living care at $34,000 in 2009, compared to $74,000 per year for a semiprivate room in a nursing home.8

An important point from a public policy perspective is that the development of the assisted living industry has occurred largely without the influence of government financing or regulation. As such, there is no single regulatory or licensure category for assisted living facilities, which makes it difficult to estimate the industry’s actual size. With this caveat, one recent study estimated that there were approximately 38,000 assisted living facilities and 975,000 units nationwide in 2007 (a “unit” may contain more than one bed, as in the case of married couples).9 In contrast, the nursing home industry had approximately 16,100 facilities and 1.7 million beds nationwide in 2004.10

Previous efforts to collect assisted living supply data have largely been at the state level.9,11 These studies have identified much variation in assisted living supply across states; however, examining potential within-state variation or correlations between assisted living supply and market-level characteristics has not been possible. In this study we used county-level assisted living supply data that we collected from individual states. Specifically, we merged a 2007 cross-section of assisted living data with other market-level data on nursing homes and population sociodemographic traits, to gain a fuller understanding of the distribution of assisted living facilities nationally.

Study Data And Methods

Assisted living data There are no national data on assisted living facilities; however, there are separate data sources across states, such as state licensure registries. The authors collected detailed state-by-state supply data that included facility name, location, and capacity (units). Our data include a national cross-section for 2007.

Reflecting its imprecise definition, assisted living across states includes a wide range of licensure categories for congregate residential facilities beyond just “assisted living” (for example, residential care facilities, community living arrangements, and personal care homes). Similarly, state definitions for “units” can vary. Some states include only one bed per unit, and others include more than one.

To ensure comparability with previous findings and as a check for the comprehensiveness of our data collection, we used previous National Academy for State Health Policy compilations of state-level assisted living supply data as a guide to data collection and as a basis for comparison.9,11 We provide more detailed information about our data collection procedures and licensure categories included, by state, in an online appendix.12 For the analyses below, we limited our supply data to facilities with twenty-five or more units, in an attempt to focus on facilities purposely built to be assisted living and to exclude small group homes (for example, adult foster care facilities).

Nursing home data We used nursing home data from the Online Survey, Certification, and Reporting (OSCAR) system for all Medicaid- and Medicare-certified facilities (96 percent of all facilities nationwide). Collected and maintained by the Centers for Medicaid and Medicaid Services (CMS), OSCAR data indicate whether nursing homes are in compliance with federal regulatory requirements and include facility-reported information about facility, resident, and staffing characteristics. Following an initial survey, states are required to survey facilities no less than every fifteen months, and the average is about twelve months.

Using data from 2007 and earlier, we included the most recent survey observation for 15,792 nursing homes in our analyses. For these facilities, we also merged information from the Nursing Home Compare database (available online from—in particular, the 5-Star quality rating for each facility, which is a composite measure based on staffing levels, inspection results, and clinical outcomes.

County-level data We obtained data on various county characteristics from the 2007 Bureau of Health Professions Area Resource File (ARF). This file contains data on a range of population characteristics at the county level, including socioeconomic data, as well as availability of medical professionals and services.13

Analyses All analyses used a 2007 national cross-section of data. Using the assisted living supply data we collected, we first described the supply of assisted living facilities and units at the state level, including the penetration of assisted living units per 1,000 people age sixty-five and older. For the county-level analyses, we merged assisted living, nursing home, and ARF variables into a single county-level observation. Across these analyses, assisted living penetration (that is, the number of units per 1,000 elderly people) is the primary variable of interest.

Our choice of the county as the “market” for assisted living was partly pragmatic, because the ARF data are reported at the county level. Yet this distinction is also consistent with the previous literature on the nursing home market.14,15 In addition to denoting counties without assisted living, we divided counties into quartiles of assisted living penetration, from quartile 1 (low penetration) to quartile 4 (high penetration).16

Using our geocoded county-level data, we first present a national picture of assisted living penetration. We next present cross-tabulations of various county and nursing home traits, by assisted living penetration. Each of these analyses compared these traits across assisted living penetration quartiles, testing for significant differences from counties in the highest-penetration quartile. County traits of interest include educational attainment, median household income and other economic indicators, and racial/ethnic composition; our hypothesis was that assisted living facilities would tend to locate in relatively urban/suburban areas with higher socioeconomic status. Nursing home traits of interest included total residents and beds per 100 people age sixty-five and older, mean occupancy rate, percentage of for-profit and chain facilities in the county, mean activities of daily living score and acuity index of residents, payer mix of residents across facilities, and mean facility rating on the CMS 5-Star system—the quality-rating system used on the agency’s Nursing Home Compare Web site. Inclusion of nursing home traits was driven by the desire to gain a greater understanding of nursing home markets in areas with relatively high and low assisted living penetration.

Finally, we used the same approach to examine selected variables available only at the state level by state assisted living penetration. These variables include private long-term care insurance penetration (active policies per person ages 45–65) and Medicaid spending for all long-term care and for home and community-based services. Our hypothesis was that assisted living facilities would tend to be located in areas with a higher penetration of long-term care insurance and greater home and community-based service capacity.


Exhibit 1 shows the supply of assisted living facilities across states, including facilities, units, average facility size, and penetration of units per 1,000 elderly people. Nationally, there were 11,276 assisted living facilities with 839,746 units nationwide (74 units per facility) in 2007. The penetration of these facilities varied greatly across states: Connecticut, Hawaii, and West Virginia had fewer than 10 facilities per 1,000 elderly, and Minnesota, Oregon, and Virginia had more than 40. As noted above, our analysis included only facilities with twenty-five or more units. This restriction substantially lowers the total number of facilities nationwide (from 39,562) and more modestly lowers the number of units (from 1,072,536). Our estimates of the industry’s size including all facilities are consistent with the previously published studies mentioned above.

View this table:


Exhibit 1 Assisted Living Facility Supply, By State, 2007Source Assisted living supply obtained through primary data collection by the authors. Notes Reporting methods for these data can vary somewhat by state. Some states count only one facility per physical location, while others count one facility per license. In addition, state definitions for “units” can vary, with some states including only one bed per unit and others including more than one. Population data obtained from the 2007 Area Resource File. Penetration per 1,000 elderly obtained by dividing assisted living units by number of people age sixty-five and older.

Exhibit 2 depicts assisted living market penetration by county in terms of the number of units per 1,000 people age sixty-five and older.


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Exhibit 2 Assisted Living Penetration In The United States, By County, 2007Source Primary data collected by authors.

Exhibit 3 shows the correlation between assisted living penetration and a range of county-level sociodemographic traits. Counties with higher assisted living penetration tend to have greater educational attainment, median household income, and median home values and a lower proportion of minorities. There were few significant differences between the two highest quartiles, but differences across almost all traits were significant between the highest and lowest quartiles of penetration. Counties with no assisted living facilities, disproportionately located in rural areas, are especially distinct from counties in the highest quartile of penetration. In the counties with no facilities, rates of college educational attainment are much lower (13.8 percent versus 19.9 percent), median household incomes are much lower ($35,379 versus $43,034), median home values are much lower ($69,560 versus $98,541), and rates of minorities in the population are much higher (17.1 percent versus 12.8 percent), compared with counties in the highest quartile.

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Exhibit 3 County Traits, By Assisted Living Facility Penetration, 2007Sources Assisted living supply data obtained through primary data collection by the authors. Population data obtained from the 2007 Area Resource File. Notes Penetration defined as assisted living units per 1,000 people age sixty-five and older. ALF is assisted living facility. Statistical significance denotes difference from quartile 4.

There were fewer significant differences in assisted living penetration across counties on a range of nursing home market characteristics (Exhibit 4). The most visible differences center on the payer mix of local nursing homes. Relative to nursing homes in markets with lower assisted living penetration, facilities in areas with higher assisted living penetration have fewer residents relying on Medicaid and more residents relying on other (private) payer sources. For instance, the mean percentages of Medicaid and “other payer” in high-penetration areas were 60.6 percent and 27.6 percent, respectively, compared to 69.3 percent and 22.0 percent, respectively, in areas with no assisted living facilities.

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Exhibit 4 County-Level Nursing Home Traits, By Assisted Living Facility Penetration, 2007Sources Assisted living supply data obtained through primary data collection by the authors. Population data obtained from the 2007 Area Resource File. Nursing home data obtained from the Online Survey, Certification, and Reporting (OSCAR) data. Facility 5-Star ratings obtained from Nursing Home Compare database. Notes Penetration defined as assisted living units per 1,000 people age sixty-five and older. Statistical significance denotes difference from quartile 4. ALF is assisted living facility. NH is nursing home.

Exhibit 5 highlights the correlation between assisted living penetration and selected state-level traits, for which county-level data are not available. Penetration for long-term care insurance among people ages 45–65 was greater in states with higher assisted living penetration (10.0 percent and 5.5 percent across the highest and lowest quartiles, respectively). States with higher assisted living penetration also spend a greater portion of their Medicaid long-term care dollar on home and community-based services (44.4 percent) than do states with lower penetration (31.2 percent).

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Exhibit 5 Selected State Traits, By Assisted Living Facility Penetration, 2007Sources Assisted living supply obtained through primary data collection by authors. Long-term care insurance penetration obtained from: Stevenson DG, Frank RG, Hsu J. Private long-term care insurance and state tax incentives. Inquiry 2009;46(3): 305–21. Long-term care spending obtained from Burwell B, Sredl K, Eiken S. Medicaid long-term care expenditure. Thomson/Medstat; 2008. Population data obtained from the 2007 Area Resource File. Notes Penetration defined as assisted living units per 1,000 people age sixty-five and older. Statistical significance denotes difference from quartile 4. LTC is long-term care. HCBS is home and community-based services.


Assisted living has become a widespread housing and care option for seniors, with almost 840,000 units nationwide. In contrast to the nursing home sector, where facilities are heavily regulated and depend mostly on public dollars, the assisted living sector has, to date, grown without substantial government regulation or financing. The distribution of assisted living facilities nationally is consistent with what one would expect, given their reliance on private resources. They are located disproportionately in areas with higher educational attainment, income, and housing wealth. This trend is especially striking in the context of comparing counties with no assisted living facilities to those in the highest quartile of the distribution. For example, the median home value in the highest-penetration areas is more than 40 percent higher than in counties with no assisted living facilities ($98,500 and $69,600, respectively).

After rising sharply in the late 1990s, the supply of assisted living facilities has moderated in recent years.9 Moreover, occupancy rates and access to capital for new construction have both faced pressures in the context of the current financial downturn. Although industry wide occupancy rates are reportedly stable, some assisted living facilities (such as newer facilities or companies that embarked on ambitious expansion plans) have struggled to fill beds, especially in parts of the country where home values—a key mechanism seniors use to finance care—have been hardest hit.17,18 Some companies have sought bankruptcy protection, while others have looked for ways to contain costs and boost occupancy rates.

The long-term implications of these changes for the assisted living sector are unclear, but our data suggest that the growth in assisted living has dramatically changed the long-term care landscape. To date, however, very few government or academic studies have modeled this change or considered the potential implications for the long-term care sector as a whole. Policymakers and researchers will need to grapple with issues related to access to services, public financing, quality of care, and regulatory oversight. Each of these issues is considered in turn.

Access to services From the consumers’ perspective, the emergence of assisted living as a supportive housing option is largely a positive development. Given that private-paying consumers “vote with their feet” (and their dollars) in favor of assisted living, there is a strong preference for this care model. It is worth noting, however, that the sector is still a nascent one and that there is much variability across states and markets in capacity and services offered. In particular, low-income people, including minorities and people living in rural areas, have substantially less access to this care option. Our findings also suggest that access to assisted living is greatest in states where a greater proportion of Medicaid long-term care dollars is going to home and community-based services, which suggests that community-based service capacity matters. Given research suggesting disparities by race and income in the nursing home sector,19 future research should consider how the differential presence of assisted living across markets contributes to this phenomenon.

Public financing To date, states have been cautious in expanding Medicaid coverage for services in assisted living facilities. Many states have small programs under which Medicaid pays for personal care and medical services in assisted living, but few assisted living residents receive these public supports. One recent estimate is that approximately 115,000 Medicaid recipients nationwide received services in assisted living facilities in 2007.9 Unlike care delivered in hospitals and nursing homes, Medicaid cannot pay for beneficiaries’ room-and-board expenses in assisted living, which potentially creates a further barrier to access. Instead, these expenses typically are financed from a resident’s income, including Social Security, Supplemental Security Income, state supplements, private pensions, federal housing subsidies, and—in some states—family contributions.20

Although there are important noncost considerations in expanding Medicaid-financed care in assisted living (such as strong consumer preference), any proposed expansion is accompanied by important fiscal caveats. In particular, the cost-effectiveness of assisted living relative to nursing home care is unclear, especially if access is offered more broadly through a state Medicaid program. Assisted living has the potential to serve as a cost-effective substitute for higher-intensity nursing home care for some people. Yet policymakers are concerned about the moral hazard (or so-called woodwork effect) likely associated with offering people an array of long-term care services, especially attractive options such as assisted living. A key issue from a state budgetary perspective is whether assisted living coverage can be structured to increase substitution away from Medicaid-financed nursing home care while minimizing substitution away from unpaid care by family and friends. In the past, it has proved particularly difficult to target services only to people who otherwise would have entered a nursing home.21

Quality of care To date, there is limited and uneven evidence about the quality of care offered in assisted living facilities.22,23 For example, relative to the quality information that is publicly reported on the federal government’s Nursing Home Compare and Home Health Compare Web sites, there are fewer government-provided resources to guide consumer choice in assisted living.24 The paucity of information in this area results from a lack of uniform assessment data on assisted living residents as well as from uncertainty about the range of outcomes for which facilities should be held accountable.25

Reflecting the orientation of assisted living facilities toward consumer choice, an important component in the development of this research base should be comprehensive quality-of-life measures—a dimension of study that has proved challenging in the nursing home sector.26 Finally, an aspect that is unclear is whether the nature and quality of care would change in the context of a potentially expanded role for public financing—a factor that will depend, in part, on the government’s oversight approach.

Regulation As noted, there is wide variability across facilities in services offered and across states in the degree of government involvement as a payer and regulator of these services. Some states clearly specify the types of services that assisted living facilities can and cannot provide, sometimes defining distinct licensure categories accordingly. Other states give providers broader flexibility to meet the needs of residents.27

The government’s role in assisted living facility care will inevitably evolve if Medicaid and other public payers invest more in this sector. Indeed, twelve states have enacted certificate-of-need laws to hold down the supply of facilities, with the idea that the existence of fewer units will constrain public spending on these services.28 One tension that will likely magnify if public payments to assisted living increase is the trade-off between allowing providers flexibility in structuring housing and service options for consumers, on the one hand, and ensuring greater standardization of care and access to services, on the other.

A vital component of establishing public policy in the assisted living sector will be the collection of longitudinal, market-level data to track the growth of facilities and the evolution of people served and services offered. The analyses presented here offer a snapshot of assisted living facility supply nationally.

Importantly, these cross-sectional analyses do not allow one to draw inferences about the impact of growth in assisted living on a range of Medicaid or nursing home market characteristics over time or about the evolution in the case-mix of assisted living residents or the services they receive. Policymakers will need such data going forward to protect consumers and to craft sustainable policies that can meet the needs of our aging population across long-term care settings.


This work was supported by funding from the Changes in Health Care Financing and Organization (HCFO) Initiative of the Robert Wood Johnson Foundation (Grant no. 61511).

Received for publication July 2, 2009. Accepted for publication October 15, 2009.


1. Kane RA, Kane RL, and Ladd RC. The heart of long-term care. New York (NY): Oxford University Press; 1998.

2. Hawes C, Rose M, and Phillips CD. A national study of assisted living for the frail elderly: results of a national survey of facilities. Washington (DC): Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services; 1999.

3. Assisted Living Quality Coalition. Assisted living quality initiative: building a structure that promotes quality. Washington (DC): Assisted Living Quality Coalition; 1998.

4. Hawes C, Phillips CD, Rose M, Holan S, and Sherman M. A national survey of assisted living facilities. Gerontologist. 2003;43(6):.

5. Morgan L, Gruber-Baldini A, and Magaziner J. Resident characteristics. In: S Zimmerman, P Sloane, and J Eckert, editors. Assisted living: needs, practices, and policies in residential care for the eldelry. Baltimore (MD): Johns Hopkins University Press; 2001. p..

6. Spillman B, Liu K, and McGillard C. Trends in residential long-term care: use of nursing homes and assisted living and characteristics of facilities and residents. Washington (DC): Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services; 2002.

7. Brodie M, and Blendon R. National survey on nursing homes. Menlo Park (CA): Kaiser Family Foundation/Newshour with Jim Lehrer; 2001.

8. Genworth Financial. 2009 cost of care survey: nursing homes, assisted living facilities, and home care providers. Wellesley (MA): Genworth Financial; 2009.

9. Mollica R, Sims-Kastelein K, and O’Keefe J. Assisted living and residential care policy compendium, 2007 update. Portland (ME): National Academy for State Health Policy; 2008.

10. Jones A, Dwyer L, Bercovitz A, and Strahan G. National Nursing Home Survey: 2004 overview. National Center for Health Statistics: Vital Health and Statistics 13, no. 167 (2009).

11. Mollica R, Johnson-Lamarche H, and O’Keefe J. State residential care and assisted living policy: 2004. Portland (ME): National Academy for State Health Policy; 2005.

12. This document is available online at

13. Stambler HV. The Area Resource File—a brief look. Public Health Rep. 1988;103(2):.

14. Cohen JW, and Spector WD. The effect of Medicaid reimbursement on quality of care in nursing homes. J Health Econ. 1996;15(1):.

15. Banaszak-Holl J, Zinn JS, and Mor V. The impact of market and organizational characteristics on nursing care facility service innovation: a resource dependency perspective. Health Serv Res. 1996;31(1):.

16. Quartile cutoffs for penetration of assisted living units per 1,000 elderly at the county level are as follows: quartile 1 (lowest) = 0–13.2; quartile 2 = 13.2–21.2; quartile 3 = 21.2–32.6; quartile 4 (highest) = 32.6 and above. Cutoffs for state-level penetration are 0–14.0 units per 1,000 elderly (Q1); 14.7–19.1 (Q2); 19.4–26.1 (Q3); and 26.1 and above (Q4).

17. National Investment Center for the Seniors Housing and Care Industry. NIC Insider Newsletter. Annapolis (MD): National Investment Center for the Seniors Housing and Care Industry; 2009 Jun.

18. Knight VE. Funding senior living in an economic downturn. Wall Street Journal. 2009 Jan 5.

19. Smith DB, Feng Z, Fennell ML, Zinn JS, and Mor V. Separate and unequal: racial segregation and disparities in quality across U.S. nursing homes. Health Aff (Millwood). 2007;26(5):.

20. Stevenson DG, Murtaugh CM, Feldman PH, and Oberlink MR. Expanding publicly financed assisted living and other residential alternatives for disabled older persons: issues and options. Cent Home Care Policy Res Policy Briefs. 2000 Fall-Winter (3):.

21. Grabowski DC. The cost-effectiveness of noninstitutional long-term care services: review and synthesis of the most recent evidence. Med Care Res Rev. 2006;63(1):.

22. Zimmerman S, Sloane PD, Eckert JK, Gruber-Baldini AL, Morgan LA, Hebel JR, et al How good is assisted living? Findings and implications from an outcomes study. J Gerontol B Psychol Sci Soc Sci. 2005;60(4):.

23. Zimmerman S, Gruber-Baldini AL, Sloane PD, Eckert JK, Hebel JR, Morgan LA, et al Assisted living and nursing homes: apples and oranges? Gerontologist. 2003;43 Spec No 2:107–17.

24. Castle NG, and Sonon KE. The search and selection of assisted living facilities by elders and family. Med Care. 2007;45(8):.

25. Golant SM, and Hyde J. The assisted living residence: a vision for the future. Baltimore (MD): Johns Hopkins University Press; 2008.

26. Kane RA. Definition, measurement, and correlates of quality of life in nursing homes: toward a reasonable practice, research, and policy agenda. Gerontologist. 2003;43 Spec No 2:.

27. U.S. Government Accountability Office. Assisted living: examples of state efforts to improve consumer protections. Washington (DC): GAO; 2004. Report no. GAO-07-373.

28. National Conference of State Legislatures. Certificate of need: state health laws and programs [Internet]. Denver (CO): NCSL; 2009 [cited 2009 Jun 26]. Available from:

from  Health Affairs


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