This study analyzes the institutional, economic, and regulatory deficiencies of the long-term care sector of the health industry and develops an incentive reimbursement model as a means for correcting or ameliorating some of the stated deficiencies. The reimbursement model presents a schema which attempts to match patients to facilities, needs to services, and services to cost. A capital expansion coupon program is proposed, both as a suitable vehicle for channeling incentive rewards accruing to nonprofit institutions, and as a mechanism for subsidizing the approved expansion and/or renovation plans of “efficient” providers of care.