A senior housing and long-term care provider says it is happy that it has tried to focus on serving seniors who pay with their own cash or cash from private insurers, rather than seniors who depend on government programs.

Five Star Quality Inc., Newton, Mass. (NYSE:FVE), is reporting a $528,000 net loss for the third quarter on $329 million in revenue, compared with $5.2 million in net income on $305 million in revenue for the third quarter of 2010.

But operating income fell less sharply – to $4.2 million, from $6 million — and the net loss was due largely to losses on operations that have already been discontinued, the company says.

The “senior living average daily rate” at owned and leased communities increased to $147.47, from $146.55.

The percent of senior living revenues coming from “private resources,” rather than government programs, increased to 73%, from 72.4%.

Five Star has been acquiring high-end, private-pay residents, “so we have no government-related reimbursement issues,” Bruce Mackey Jr., the company’s president, said during the company’s earnings call.

The recent move by the Centers for Medicare & Medicaid Services to cut Medicare rates for skilled nursing facilities (is clearly not good news for the skilled nursing industry,” Mackey said, but, he said, the cut does show that Five Star has been smart to focus on the private-pay market.

The cut will reduce revenue about $16 million at the Five Star facilities that still house Medicare patients, but moves to acquire private-pay facilities should help make up for the effects of the cut, Mackey said.