Demand is expected to decline over the next five years as demand continues to fall
Los Angeles, CA (PRWEB) December 27, 2012
The Orphanages and Group Homes industry contracted over the past five years, as demand for foster care fell. Revenue is generated from federal government social services funding, grants, state and local government contributions and private donations. The Department of Health and Human Services also provides aid through Medicaid funding, which covers healthcare costs for children and disabled individuals in the care of this industry. “Since 2007, the number of children in foster care has declined at an annualized rate of 3.7%, from 488,000 in 2007 to an estimated 403,249 in 2012,” says IBISWorld industry analyst David Yang. Consequently, the government reduced funding for this industry. Furthermore, during the recession, falling disposable income discouraged private donations, which further reduced revenue. As a result, in the five years to 2012, IBISWorld expects industry revenue to fall on average 1.3% per year to $8.3 billion. However, revenue is expected to increase 0.1% in 2012 as the economic recovery slightly bolsters private donations.
The majority of operators are nonprofit organizations. According to census data, only 24.7% of industry organizations operate on a for-profit basis. Over the past five years, falling donations and government funding reduced profit margins, causing some firms to consolidate or exit the industry. Additionally, government legislation and polices such as the Fostering Connections to Success and Increasing Adoptions Act of 2008 focused on placing children with relatives instead of in foster care, which reduced demand for this industry's services. Furthermore, this industry has closed down large group homes in favor of smaller facilities, as this allowed for more individualized care for children. Consequently, in the five years to 2012, the number of enterprises is expected to fall on average 0.9% per year to 8,121. In the five years to 2017, this industry is anticipated to decline as demand falls. Similar to the previous five years, foster care participation is projected to continue its decline from 2012 to 2017, though at a slower average rate. Additionally, the steady economic recovery will partly mitigate falling demand for foster care. According to Yang, federal funding for Medicaid is also anticipated to increase strongly and private donations will increase as disposable income recovers. Consequently, IBISWorld forecasts that revenue will fall on average 0.9% per year to $7.9 billion by 2017, a slower decline than the previous five years.
In 2012, the top four companies in the Orphanages and Group Homes industry are expected to generate 7.4% of industry revenue, indicating a low level of market share concentration. While large organizations like ResCare and Boys Town operate across the country, most industry firms are small local organizations. This is because this industry provides residential care facilities primarily through group homes, children's villages, halfway homes and boot camps, which tend to be operated in a local sphere. In 2012, there are an estimated 8,121 organizations (enterprises) in this industry, of which 56.8% have less than 20 employees. For more information, visit IBISWorld’s Orphanages and Group Homes in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes foster homes, group homes, halfway homes, orphanages and boot camps. The industry does not include substance abuse facilities, retirement homes, correctional institutions or temporary shelters. While the industry provides some services to adults, these facilities are primarily for children and youth.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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