Later this year, almost two dozen current rental residents of a Milwaukee nonprofit continuing care retirement community will be on the hunt for a new home as the campus undergoes renovations to its facilities. As part of its repositioning, Eastcastle Place also will be eliminating rental contracts and shifting exclusively to entrance-fee options, the community’s executive director, Tyler Gudex, told the Milwaukee Journal Sentinel.
The move comes as the firm looks to consider the changing demographics of older adults — something all CCRCs must consider as they plan for the future, speakers said Thursday at at the 2021 Ziegler LeadingAge National Virtual Senior Living CFO Workshop.
“Consumer economics change greatly, and sometimes the issue is paying the entrance fee, and sometimes the issue is paying the monthly fee, and communities have to respond to the different economic conditions of markets,” said John Spooner, co-CEO of Greystone Communities. To that end, he added, CCRC pricing models need to be more consumer-friendly, which may mean moving away from fixed-rate pricing toward a more a la carte approach.
“Nearly every one of our clients has a goal of reducing refund obligations, reducing life care discounts, and in many cases, shifting that cost on to residents.” he said. “Conversely, the senior prospects are out to control monthly costs, and we’re seeing more and more people saying that they only want to pay for what [they’re] going to use.”
To help provide consumers with more choice while still allowing CCRC operators to meet their financial obligations, Spooner encouraged the use of alternative contract models. Doing so can help operators increase occupancy; improve the balance sheet, liquidity and cash flow; and make communities less reliant on timing of turnover entrance fee, he said. An example of an alternative contract, Spooner said, is offering a lower refund amount in exchange for a lower monthly service fee or a reduced entrance fee.
The best way for operators to begin the process of determining what contract model will work best for their organization is through a pricing alignment study, said Diana Jamison, chief financial officer at Covia. Taking the time to conduct such a study with the help of an actuarial firm can help CCRCs align with consumer economics, identify anomalies in pricing, create a long-term price increase strategy, and identify potential sales incentives to move difficult-to-sell units or locations, she noted.
“Using monthly contracts strategically, for example, can be a great way to sell units less in demand, such as those right by a road or next to a dumpster,” Jamison said. “It can also be a great way to bring in people who wouldn’t normally be able to afford moving into your community.”
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