Contracts Must Provide Incentive to Get Younger Residents into CCRCs

The changing demographics of those entering senior living communities, including older and frailer incoming residents, can have certain implications for senior living communities’ business and financial models, but offering incentives to younger prospective residents can help communities counteract aging-in-place trends.

While some continuing care retirement communities (CCRCs) and other senior living models are being noticeably impacted by an older, higher acuity census, this isn’t necessarily true of everyone, says Warren Spieker, chairman of Continuing Life Communities.

Two important factors for CCRCs are the terms/refundability of the entrance fee, he says, and whether the community covers eventual costs of increasing care, or if patients will need to pay more.


Some communities will offer a 100% refund of the entrance fee, but do not include long-term care as part of their contract, and it’s these types of facilities that may need to worry about attracting younger residents, Spieker says. “There are two challenges with that: there’s no real benefit to move in at a younger age and pay a large entrance fee if care isn’t included. There’s no incentive, and the value proposition is not there.”

Value Propositions of CCRC Contracts

CCRCs generally offer three main types of contracts: Life Care Contracts (Type A), Modified Contracts (Type B), or various types of Fee-for-Service Contracts (Type C). Across the nation, CCRCs are just about evenly split between the three types, according to data, says Kathryn Brod, vice president of Senior Living Strategic Initiatives for Mather LifeWays.


While there’s “still a market for a CCRC that doesn’t include care,” says Spieker, he believes that Type A contracts, which offer what’s essentially a long-term care insurance policy that allows people to remain in their community, are more compelling for earlier entries.

And if you’re going with a la carte (Type C) services, he continues, “you better make it easy to get in—you can’t have a high entrance fee, and monthly fees, and then not cover any care.”

Type A contracts generally offer “great value,” Brod and Spieker agree, because they allow residents to “lock in” at a certain monthly rate when they enter independent living which stays the same even as they advance through the continuum of care.

Do Contracts and Entrance Fee Structures Need Updating?

In his white paper on aging and acuity trends in senior living communities, Ryan Frederick, founder of Point Forward Solutions, LLC, suggests that some companies may have to change their entrance fees and care plans that were “originally designed for younger, healthier residents.”

“As prospective residents are older and frailer, they are less likely to benefit from the full range of activities within independent living and may become more reliant on health care services sooner,” he says. “Since older, higher acuity residents have a shorter length of stay, the entrance fee is amortized over a shorter period of time and, therefore, may feel more expensive.”

In effect, steep entrance fees and Type C contracts might not be worth it for older seniors who may quickly transition into higher levels of care, which must then be paid for in addition to monthly fees.

Some communities are indeed experiencing an age creep, but Spieker says that at this point, his company hasn’t seen a need to change its entrance fee pricing. In one Continuing Life Community, the average age of incoming residents saw a slight shift upward in the past year and a half, while in another, the average age actually decreased somewhat.

“We haven’t seen a wholesale change in the average age of the people moving into our communities,” says Spieker. “In this economy, everyone wants a deal, so offering a discount, or some form of credit on the entrance fee in exchange for moving in quickly—that could work, but actually cutting prices and changing the fee structure hasn’t been our experience.”

However, the economy does make things difficult, says Brod.

“The economic conditions of the last few years have caused people to want to recover what they lost in decreased housing values, to the extent that someone says, ‘I’m going to wait and hope I can get some of that value back,'” she says. But in waiting, some people’s health may deteriorate, causing them to be more frail upon entering a community.

And that, says Spieker, is why it’s important to offer incentive to younger residents through a value proposition.

Make Contracts—and Community Amenities—Count

CCRCs under the Continuing Life Communities umbrella offer Type A contracts, which Spieker says are “like having long-term care insurance. [Prospective residents] have a vested interest in making sure they move in before they have a need for the care. If they already have that need, they can’t move into our independent living.”

It’s similar at Mather LifeWays, where incoming residents must qualify for a Type A and B contracts and pass a health screening to enter independent living. But Brod says that rather than targeting a specific, “young” senior demographic, they’re marketing to the young at heart.

“We have a community that has amenities that attract younger residents; it’s in an area where there’s high walkability, which appeals to the person who’s still healthy and vibrant,” says Brod, who says that many CCRCs around the country are looking for ways to remain a part of the surrounding community.

And for people who want to age in place—well, that can occur in a CCRC setting, she says. And with the housing market showing signs of recovery, “You’re always trying to encourage people to leave their homes, especially since they have to pass a health screen to move into a CCRC.”

Older residents might not be as attracted to a model that includes a large entrance fee and contracts that aren’t care-inclusive. For communities that are largely seeing older, frailer incoming residents, changing the entrance fee structure to reflect a consumer further along in the age and care continuum could increase attractiveness to prospective residents. And in general, creating a value proposition for residents and providing incentive to enter at an earlier age can be a winning strategy.

“I think the average consumer can see the value proposition: you sell the house, pay a portion of that to the entrance fee, and use the rest to cover the monthly fee along with some combination of Social Security, IRA, a pension, etc.,” says Spieker. “In exchange, you never have to move, and all the care is provided.”

Written by Alyssa Gerace

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