The New York Times had an interesting article about the expansion of managed care that allows patients who need rehabilitation and therapy to stay at home.  Experts agree that the current nursing home institutional model is not working–financially or in quality of care.

"In the newer model, a team of doctors, social workers, physical and occupational therapists and other specialists provides managed care for individual patients at home, at adult day-care centers and in visits to specialists. Studies suggest that it can be less expensive than traditional nursing homes while providing better medical outcomes."

"These new adult day-care centers, known around the nation by the acronym PACE — Program of All-Inclusive Care for the Elderly — provide almost all the services a nursing home might, including periodic examinations by doctors and nurses, daytime social activities like sing-alongs and lectures, physical and occupational therapy and two or three daily meals. All the participants are considered eligible for nursing homes because they cannot perform two or more essential activities on their own like bathing, dressing and going to the toilet. But they get to sleep in their own beds at night, often with a home health care aide or relative nearby."

"The nonprofit groups that operate them receive a fixed monthly fee for each participant and manage their entire care, including visits to specialists, hospitalizations, home care and even placement in a nursing home. Because Medicare and Medicaid pay set fees instead of paying for specific procedures, center operators are motivated to provide preventive care to avoid costly hospitalizations or nursing home care. "

Nationally, the number of nursing homes has declined by nearly 350 in the past six years, according to the American Health Care Association.  For-profit companies have not yet moved into the managed care market, in part because of uncertainties about reimbursement formulas and the risks of taking on a nursing home population.