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.”
From the December 01, 2016 Issue of McKnight's Senior Living