Supply Factors in Long-Term Care and the Growth of Residential Alternatives
In an economic model the supply of a service is a function of the amount of the service that producers are willing to provide at the current market price. Hospital industry literature has shown that the factors that affect supply of long-term care services are similar to those that determine acute care services. That is, supply depends on four general factors: the basic structure of the industry (including average size, ownership, and concentration of firms); the costs of providing services (which are related to labor and construction costs); the technology available; and federal and state policy, including financing mechanisms ( Paringer, 1985, p. 236).
These factors provide the framework for the following discussion of the residential care industry as it now exists. The data regarding residential care are scarce, but they provide at least a general picture of the type and amount of service provided. As in the chapter on demand, the importance of federal and state policy in determining supply will also be addressed.
Any accurate discussion of the residential care industry is hampered by the multitude of housing and care alternatives encompassed in the term residential care (see Chapter 1). In fact, referring to the loosely organized array of foster homes, personal care homes, board and care homes, larger, almost institutional facilities, and others as an industry may be a misnomer. Nevertheless, policy and regulation have been directed at the full gamut of alternatives as if a true industry exists. The literature reflects the difficulty in defining the care options included under this rubric, a difficulty that leads to the wide variations in estimates