4.7. Business Models for Adult Day Services

Overview

Adult day services (ADS) can be defined as nonresidential services that are provided outside of a person’s home for less than a full day, which includes direct care for older adults and younger adults with disabilities [199]. ADS providers also offer respite for unpaid caregivers in order to work, have a break from continuous caregiving or meet other obligations. Each state adopts a different approach to regulating such services.

With the exception of West Virginia and Washington D.C., all U.S. states cover ADS under their Medicaid programs. Other states have Medicaid-funded ADS through separate waiver programs such as Adult Day (congregate versus individual), National Family Day Care Support Program, Title III – E reimbursement and/or HBSC Waiver/1115 [200]. According to AARP West Virginia, the fact that ADS providers are not eligible to receive reimbursements from Medicaid presents significant challenges to the delivery of such services. Additionally, 24 states cover ADS under at least one non-Medicaid public program, including funds from the Older American Act, Social Services Block Grant and state general revenues.

In West Virginia, ADS and respite services (RS) are paid for through an array of funding sources, including private pay (from clients or caregivers), long-term care insurance, Health Savings Accounts [201] and Veteran Affairs [202]. Local county aging programs provide ADS in the state – although regulations allow for such services to be maintained and operated by hospitals, nursing homes or other licensed health care facilities. Nationally, the range of providers includes faith-based organizations, hospitals, nursing homes (“adult night” services), nonprofit organizations and entrepreneurs [203]. The West Virginia DHHR Office of Health Facility Licensure & Certification (OFLAC) is the government agency responsible for regulating ADS, including proposing rules to be considered and adopted by the West Virginia Legislature [204].

Models of Care

Generally, states regulate ADS through four different models: (1) the health or medical model, which offers more extensive personal care, medical monitoring and rehabilitative services as well as organized activities, (2) the social model, which is sometimes combined with the medical model – also known as (3) combined or hybrid model – and designed to meet the needs of clients who need activities and supervision but not extensive medical monitoring and personal care and (4) the specialized model, which offers services to meet the unique needs of those diagnosed with certain conditions, including dementia [205]. The hybrid model is combined with some aspects of the medical model. However, primarily medical models are no longer utilized for adult day services in other states.  

West Virginia regulates ADS through the medical model, also known as Medical Adult Day Care Centers (MADC), Adult Day Health Care (ADHC) or medical ADS [206]. OFLAC defines Medical Adult Day Care as:

An ambulatory health care facility which provides an organized day program of therapeutic, social, and health maintenance and restorative services and whose general goal is to provide an alternative to twenty-four-hour long term institutional care to elderly or disabled adults who are in need of such services by virtue of physical and mental impairment [207].

However, according to AARP West Virginia, the last of the six medical models located in West Virginia closed in 2006 primarily due to stringent regulations, mainly related to physician and nurse staffing requirements [208]. The main challenges are that Medical Adult Day programs are too expensive to run. No groups have opened one in the state and services have gone unfunded [209]. Once no medical model ADS were operating in West Virginia, the West Virginia Bureau of Medical Services no longer included the waiver money for this model in their periodic application for funding from the Centers for Medicare and Medicaid Services (CMS). For this reason, these funds are no longer available.

It is important to note that, anecdotally, there is extreme stigma around the actual name of adult day programs. Many program participants have considerable cognitive ability and awareness, even if they have a dementia or a brain injury. Therefore, programs around the country have increasingly stopped using the terms “Adult Day Care” and “Adult Dependent Care” and started using terms such as “Older Adult Day Club,” or “Adult Day Health Program.” This paper uses the terms “adult day programs,” “adult day services” and “adult dependent care” (this last one, to facilitate communication and comprehension since it is still in the lexicon of the public at large). Also, the West Virginia Department of Health and Human Resources uses the term “Medical Adult Day Care” for adult day services, so this paper uses this term when referring to services licensed and regulated by the state (i.e., medical model).  

Operating a Nonprofit versus For-profit ADS Center

Roughly 71 percent of ADS centers in the United States are reported to be private nonprofit (56 percent) or associated with the public sector (16 percent), and 27 percent are private for-profit [210]. Additionally, 55 percent of ADS centers funding comes from publicly paid participant fees, 26 percent from privately paid participant fees, 8 percent from grants and 5 percent from donations [211]. Since Internal Revenue Service (IRS) rules prevent private foundations and public sector grant-making entities from awarding grant to private for-profit businesses, the most practical way to access additional funding for ADS centers is by operating as a 501(c)(3) nonprofit [212]. Since adult dependent care providers usually run their businesses with thin margins, this choice can make the difference between operating profit and operating loss [213]. And, the same is true for child care businesses. Several child care providers that were consulted during the research phase of this project reported that operating as a 501(c)(3) was the key to staying solvent. Section 5 includes a select in-state example of a successful child care business that operates as a 501(c)(3).

Benefits of ADS

ADS programs offer a supplement to home care and a cost-effective alternative to other types of adult dependent care, including assisted living and nursing home care [214] (see Table 4). ADS program participants tend to function better, since they are allowed to continue to live in their communities (i.e., age in place), and for this reason, long-term care is often delayed [215]. Caregivers, in turn, are provided with a break in caregiving responsibilities or they are able to enter/remain in the labor force [216]. The vast majority of caregivers and care recipients want to remain in their homes and communities as they age, rather than move to an institutional setting [217]. 

Additionally, the average daily rate for ADS in West Virginia is $50 compared to $352 for a semi-private room in a nursing home [218]. Furthermore, the results of studies on the efficiency and outcomes of ADS programs indicate that such services can improve health-related quality of life and the psychological wellbeing of participants and caregivers, respectively [219]. Lastly, ADS also contribute to reduce caregiver’s anger, burden, depression and role overload [220].

Policy Considerations

West Virginia is the only state that does not cover ADS under its Medicaid program and that solely uses a medical model to regulate such services, which create significant barriers for market entry and for providers to stay in business. The bottom line is that medical model adult day programs are no longer the preferred model to regulate ADS across the country. The Centers for Medicare and Medicaid Services (CMS) does offer waiver funding for social or hybrid adult day programs. However, CMS requires state regulations before funding could be applied for and granted, and presently, there are no comprehensive rules, regulations or licensing for any other model of ADS in West Virginia, other than the defunct medical model.

There are currently at least three adult day programs in West Virginia operating under the social model. Each of those programs receive some funding from the West Virginia Bureau of Senior Services (WVBOSS) through the FAIR (Family Alzheimer’s In-Home Respite) Program or Title III-E funding from the Older American’s Act [221]. Thus, WVBOSS has developed some guidelines (pre-COVID-19) in order to disperse funding to adult day programs, which can be found in a footnote [222]. Yet, these guidelines are not considered to be state-created rules and regulations (i.e., in the true sense of state mandated rules and regulations) and only must be followed if the programs receive funding from WVBOSS. Unlike child care facilities, there is no true licensing for social or hybrid model adult day programs in West Virginia.

It is possible that an adult day program could operate without such funding from the state, and consequently, there would be no rules and regulations other than general Health Department rules for any entity that serves food. Also, some adult day programs in other states have participants bring their own lunch. Yet, if food is served, that cost is included in the fees paid by the consumer. Providing food service does not have to prohibit the establishment of an adult day program. While West Virginia has not experienced the catastrophic problems that have occurred in other areas, the lack of state mandated rules does leave vulnerable adults with a dementia and unaware family members open to the risk of unprofessional and/or unregulated, unsafe care scenarios [223]. The National Adult Day Association has put together a checklist of key questions for caregivers who are considering enrolling a family member in a particular adult day program, including whether the program is licensed or certified [224]. 

Furthermore, there are some long-term care insurance policies that do cover ADS, but they require the program to be licensed by the state and in compliance with state mandated guidelines. For this reason, families in West Virginia who do have long-term care insurance often can only use it to pay for residential long-term care and cannot avail themselves of this financial assistance to cover ADS.

Notably, while some participants who use ADS need medical, nursing and rehabilitation services, not all of them need such assistance. For this reason, the state can benefit from offering more flexible options to ADS providers by licensing and regulating ADS through a social model or hybrid/combined model. As observed in other states, social or hybrid ADS programs are cheaper to operate, since rules and regulations are less strict, particularly related to staffing and mandatory services, and therefore, less costly for participants [225]. As a result of this policy change, providers would have the freedom to choose which model better fits the needs of the communities they serve, based on the types of services that are sought-after and what residents can afford, and also get more creative in designing their ADS programs [226].

According to AARP West Virginia, there are several ADS programs across the United States that are successful and could be replicated in West Virginia, including the models used by Minnesota, North Carolina and Washington State [227]. Success factors include sound regulations, a strong network of payors, caregivers and participants who fully understand the benefits of ADS and cultural competencies [228].