What to Expect in Senior Living Rate Increases for 2023 — and How Consumers Might React

Senior living operators across the country are preparing residents for some of the most aggressive rate increases in industry history, as providers stare down another year beset with higher costs and labor pressures.

In the current environment, increasing resident rates often has little to no impact on recovering margin lost during the Covid-19 pandemic. Instead, operators understand that it is a necessary measure simply to maintain the current margin and the status quo of service delivery in their communities.

Anthem Memory Care CEO Isaac Scott said on a recent edition of SHN+ Talks that Anthem’s 2022 rate increases were “double the increase that we had historically facilitated … and it didn’t put a big enough dent in what we’re doing to get back to those (pre-Covid) margins.”

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Operators are currently working out the exact 2023 increases as the calendar nears November; but, they have been preparing residents and their families that this is coming for months.

Sunshine Retirement Living, Harbor Retirement Associates (HRA), Senior Star, Commonwealth Senior Living and Frontier Management are just a few of the operators planning rate increases for 2023.

In general, the average expected rate increases that these operators shared with SHN are in the range of 7%-13% for 2023 and will in many cases not be uniform across portfolios, but will vary depending on market economics and resident needs.

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  • HRA: 7.5% – 8%
  • Sunshine Retirement Living: 7% – 10%
  • Senior Star: 8% – low teens
  • Commonwealth Senior Living: 6% – 8%

These planned increases are largely in line with findings from a recent SHN Pulse Survey of readers. Out of 16 respondents, representing a mix of operator sizes and care levels, 50% expect rate increases of 6% to 8% in 2023.

How much do you plan to raise rates in 2023? Source: SHN Pulse Survey

In 2022, respondents were more evenly split:

How much did you raise rates in 2022? Source: SHN Pulse Survey

Not a magic number

For many residents, this will be the second consecutive year of higher-than-normal rate increases. Frontier Management increased its rates by an average of 10% in 2022. The company will be bumping rates again in 2023, but did not provide a specific portfolio-wide percentage for its nearly 140 communities.

“There is not a magic number,” Kathy Swann, chief marketing and revenue officer with Frontier, told SHN. “Some [communities] are getting increases and some aren’t getting one at all.”

Frontier is instead taking rate increases on a case-by-case basis for both resident need and market economics. With the 10% increase in 2022, Frontier also made systemic tweaks to the way residents are charged by changing “quite a few” communities from an all-inclusive rate model to a level-of-care model, according to Swann.

Commonwealth Senior Living President and CEO Earl Parker is always worried about how residents will react when rates increase at a higher rate than the normal 4% to 5%, he told SHN.

Charlottesville, Virginia-based Commonwealth raised rates by an average of near 10% in 2022 across its 34-community portfolio. That 10% came by way of a 6% increase in March — the operator’s fiscal new year — and an additional bump just this month.

“I hear [operators] were raising rates by 8%-10% — we went in at 6%. But, the pressures forced us to have to make the difficult decision to do another one partway through the year,” said Parker.

Parker is worried not only about current residents staying with Commonwealth; he’s worried others won’t come.

“I think there is probably still a little bit of understanding [by residents] left out there, but I don’t think there’s a whole lot,” Parker said. So the goal for this year’s increases will be to avoid a double-digit bump.

“I think that number (10%) two years in a row would really give some people cause for concern,” Parker said.

While occupancy has continued to rise in 2022 despite rate increases, Parker is not alone in thinking that more rent hikes could create challenges. Most respondents to the SHN Pulse Survey expressed slight or moderate concern that higher rates will hurt occupancy.

How concerned are you that higher rates will hurt occupancy? Source: SHN Pulse Survey

Some residents will get some help paying for increases in rent from the Social Security Administration which announced earlier this month it will be bumping the monthly payout by 8.7% to $1,827.

Still, that increase will simply keep pace with the increases many are planning to implement.

“They do have a fixed income, and they could run out of money,” Sunshine Chief Operating Officer Sadek Nassar told SHN.

Bend, Oregon-based Sunshine Retirement Living will increase average rates across its 42-community portfolio by 7% – 10% after an increase of 5% – 8% in 2022.

Like many operators, Sunshine’s rate increases will be impacted by market-specific factors, specifically competition from other potential employers. And while some markets have been more heavily impacted by the labor shortage, every community in the portfolio has been impacted.

Dealing with costs, not margins

For many operators, rate increases are a frank need to continue the status quo and not something that will recover margins in a meaningful way.

“Costs are up, which erodes margin,” Sarabeth Hanson, CEO of HRA, told Senior Housing News. “Labor (costs) are up 14% — that’s a big number … and our non-labor expenses are up.”

Vero Beach, Florida-based HRA plans to increase rates across its 36-community portfolio by about 8% in 2023 after bumping them by about 6% in 2022.

“Unfortunately, there is no way to get back to the margin we were at prior to Covid-19,” Sadek Nassar, COO of Sunshine Retirement Living told SHN. “This is not to offset our margin in any way. This is just to try to keep up with labor demands and shortages.”

Labor is again at the center of margin compression across the senior living industry. Recent data from the National Investment Center for Seniors Housing & Care (NIC) shows a glimmer of hope in staffing shortages, but the cost of keeping staff has gone up.

The cost to pay workers is compressing margins, slowing move-ins, and backlogging corporate strategy.

In 2021 and early in 2022, labor costs were largely due to Covid-19-related factors like “agency [labor], overtime and bonuses to get shifts,” Parker told SHN.

Commonwealth’s current labor pain point is no longer associated with factors like agency-sourced labor and overtime. It is also not associated with turnover costs. It is simply the cost of paying workers their competitive wages, according to Parker.

“We’ve dramatically increased the wages of our associates in order to attract and retain them and lessen the reliance on agency or overtime,” Parker said.

As many businesses outside of the senior living industry, such as retail and food service, are also feeling the pain from a tough labor market, operators are actively finding ways to recruit and retain staff, which comes with associated costs.

Portland, Oregon and Dallas-based Frontier Management is attacking retention by offering increases in pay within the first month of employment, according to Swann.

“We’re rewarding [workers] throughout their first 30, 60 and 90 days,” she said. “And we’re offering continuing education throughout the year.”

Being upfront with residents

Despite the concern that residents eventually will balk at higher rates, there are best practices for implementing hikes.

Retaining staff is not only a key component of operating a profitable community, but it is an essential part of creating a happy home for residents, many of whom form bonds with the staff in their communities.

So, residents are not only understanding of rate increases, they are oftentimes on board with doing whatever it takes to retain the workers in their respective communities. Still, the jump in rates is something operators are communicating with residents as early as possible.

Tulsa, Oklahoma-based Senior Star has been talking with residents and their families throughout the year, saying that rate increases will likely be coming as a result of economic factors, particularly labor. Senior Star CEO Anja Rogers doesn’t think there will be fallout from the rate increases.

Senior Star raised rates by an average of 6.4% across its eight-community portfolio last year.

“Depending on the particular property, I think realistically we’ll be pushing [increseas] into the low teens in some areas,” Rogers told SHN.

“Because at the end of the day, if they’re happy right now and they’re enjoying and valuing the services that they receive, then they understand there is a price difference to that,” Rogers said.

This communication strategy was echoed by Swann.

“We were very upfront with our residents and their families far before announcing the rental increases for 2022,” Swan told Senior Housing News.

As early as 90 days prior to any implemented rate increases that were coming in 2022, Frontier opened its doors every Monday and Wednesday for residents and families to sign up for a meeting to discuss an upcoming increase.

Residents know that to keep staff they have come to know, and to maintain the same quality of care, food services, programming and accommodation, the companies that operate their homes need more cash flow.

Residents at Sunshine Retirement Living understand the circumstances and are not pushing back much, but that doesn’t mean they aren’t feeling the pressure, too, and the operator has already been in talks with residents who may not be able to pay.

“That’s a real conversation we’ve had with some of our residents. But we’re in the business of people – we love our seniors so we’ll do anything we can to maintain the current residents we have and absorb more of the cost,” said Nassar.

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