Q: How do we address the annual monthly service increase with our residents?

A: You are dealing with a very significant financial challenge.

First, the facts: 1) seniors will get a Social Security increase of only 0.3% in 2017; 2) short-term CDs and money market funds have returns of less than 0.3%; 3) inflation as reported by the September Consumer Price Index for all items, currently is 1.5%. This does not appropriately track the real world of a senior’s typical costs incurred in senior living communities.

The two areas of highest cost for sponsors and owner/ operators are dietary, representing approximately 20% of total operating expenses, and direct care, typically representing more than 40%.

In 2016, the annual increase in employee wages represented approximately 2.5% to 3.0%. Similar increases are planned for 2017.

In attempting to make these numbers work, consider at least the following: 1) occupancy enhancement; 2) responsible expense reduction and 3) optimized unit pricing. Enhanced financial performance represents both a pressing need and a huge opportunity frequently overlooked by many owner/operators. In 2017 and beyond, it will become a significant imperative.

Jim Moore runs a national senior housing and healthcare consulting firm based in Fort Worth, TX. He has written several books about assisted living and senior housing, including “Assisted Living Strategies for Changing Markets.”