Type A and C contracts increasing in popularity with CCRCs

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Type A and C contracts increasing in popularity with CCRCs
Type A and C contracts increasing in popularity with CCRCs

Type A and C entry-fee contract use has become more common in continuing care retirement communities over the past 10 years, whereas type B contract and rental agreement use has become less common, according to a poll of chief financial officers and financial professionals conducted by specialty investment bank Ziegler.

Results of the March “CFO Hotline” survey, which received 145 responses from life plan community executives, are detailed in the latest issue of Ziegler's Z-News newsletter.

Many organizations offer more than one contract type to residents.

Type A contracts, also known as life care contracts, were used by 46% of CCRC respondents to Ziegler's survey in 2007 compared with 53.8% in 2017. Under these contracts, a resident's monthly service fee remains level at a pre-determined rate over the person's lifetime, regardless of the services required, except for adjustments for inflation and ancillary expenses.

Type C contracts, also known as fee-for-service contracts, increased from being offered by 50% of survey-takers in 2007 to 52.4% in 2017. Under this kind of contract, residents usually pay an entry fee and then pay the full market rate for the cost of care in assisted living and skilled nursing care.

Use of Type B contracts, also known as modified fee-for-service contracts, decreased from 45% of respondents in 2007 to 34.5% in 2017. Under these contracts, residents pay an entry fee and also are responsible for some expenses associated with assisted living or skilled healthcare services.

Rental contracts dropped from being used by 38% of responding communities in 2007 to 32.4% in 2017.

More than three-fourths (76.6%) of respondents said their communities had increased entry fees in the past two years, and 87% of respondents said they plan to increase entry fees over the next two years.

Read more about the survey and its results here.

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