Whose quality of life is it, anyway?

In the spring of 2001, Bill Thomas, dressed in his usual sweat shirt and Birkenstock sandals, entered the buttoned-down halls of the Robert Wood Johnson Foundation. His message: Nursing homes need to be taken out of business. "It's time to turn out the lights," he declared.

Cautious but intrigued, foundation executives handed Dr. Thomas a modest $300,000 grant several months later. Now the country's fourth-largest philanthropy is throwing its considerable weight behind the 48-year-old physician's vision of "Green Houses," an eight-year-old movement to replace large nursing homes with small, homelike facilities for 10 to 12 residents. The foundation is hoping that through its support, Green Houses will soon be erected in all 50 states, up from the 41 Green Houses now in 10 states.

"We want to transform a broken system of care," says Jane Isaacs Lowe, who oversees the foundation's "Vulnerable Populations portfolio." "I don't want to be in a wheelchair in a hallway when I am 85."

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The $122 billion nursing-home industry arose from the 1965 birth of Medicare and Medicaid, the government health-insurance programs for the elderly and poor that provide billions in government reimbursements. Made up of both not-for-profit and for-profit companies, the industry still generates most of its revenue from Medicaid and Medicare.

Now, many nursing homes are aging, and the industry has suffered through so many scandals involving patient care that many elderly shun the thought of entering such institutions. A 2003 survey by the AARP, an advocacy group for older Americans, found that just 1% of Americans over 50 with a disability wanted to move to a nursing home.

WSJ: Rising Challenger Takes On Elder-Care System