Independent living resident monthly fee increases aren’t just higher than previous years. They also have surpassed last year’s predictions, according to the result of a recent poll by specialty investment bank Ziegler.
The April CFO Hotline survey of more than 250 not-for-profit senior living chief financial officers and financial executives revealed that median monthly fee increases for independent living units were 6% — up from 4.48% last year and 3% in previous years and the highest since Ziegler began collecting fee data more than a decade ago. The maximum fee increase reported was 13%, which is down from 15% in 2022.
In the September 2022 CFO Hotline survey, providers had projected a median independent living fee increase of 5% and an average of 5.33%, in contrast to actual median monthly fee increases overall of 6% and average overall increases of 6.32%, as of April.
The West region saw the highest average independent living fee increase, at 6.86% as of April, compared with the 5.87% projected in 2022. The South followed, with an actual average increase of 6.45%, compared with a projected 6.15% increase last year. The Midwest saw a 6.36% actual average increase this year, compared with a projected increase of 4.9%, and the Northeast implemented an average 5.71% increase, compared with last year’s projected increase of 4.4%.
The vast majority of responding communities (91.2%) reported that they do not plan to implement a mid-year increase.
In a breakdown of fee increase by primary contract type, all participants said they have or plan to increase monthly fees significantly more in 2023 than they did in 2022, which already was significantly more than in 2021.
Type C (fee-for-service) contracts are associated with the highest 2023 independent living monthly fees, at 6.55%, compared with 4.27% in 2022 and 2.56% in 2021. Overall, across all plan types, monthly fee increases jumped from 2.96% in 2021 to 4.44% in 2022 up to 6.32% in 2023.
The survey also polled financial professionals on entrance-fee increases for 2023. The majority of organizations with entrance-fee contracts reported increases this year, with a median increase of 5%, although Ziegler stated that several organizations reported double-digit increases.
Ziegler Senior Living Research & Development Director Lisa McCracken told McKnight’s Senior Living that the results show a clear response to the economic headwinds.
“Wages are up significantly, as are the cost of supplies and just the general cost of operations,” she said. “Many providers absorbed some of these increased costs early on when we started to see skyrocketing inflation, but you can only do that so long. We will likely see market adjustments in the coming years as the economic conditions ebb and flow.”
Respondents also indicated that in addition to independent living rate increases, their assisted living and skilled nursing rate increases were also significant, given the levels of care/service. They attributed the increases to continued, across-the-board inflation coupled with state-mandated minimum wage increases, which they said are putting “extreme pressure” on cost structures, leaving operators with few options to make up losses.
Several respondents said that rates will be even higher in 2024, with one respondent indicating that this year’s increase was the largest in 25 years due to wage and price inflation pressures.
