CCRCs must face many issues that other industries may not have to face.
Some issues that CCRCs face
Aging residents
When a new CCRC opens, it fills with relatively young and healthy residents. Therefore, during the initial years of operation, management will need to fill many of the vacancies in its assisted living and skilled nursing facilities with outside patients. However, progressively more of these units and beds will be needed for contractual residents who transfer from independent living. This transition to maturity is a critical phase for a CCRC as the higher-paying outside residents are replaced by lower-paying CCRC residents.
Healthcare expenses
Every CCRC must decide how it will provide care to residents as they progress along the healthcare continuum. Some may adopt a philosophy of keeping residents in independent living for as long as possible by providing in-home health services, while others may encourage a permanent transfer of residents to assisted living to receive those services.
Market downturns. Due to the entrance fee structure at most CCRCs, they are susceptible to downturns in the housing market. Since most new residents are selling their homes to finance the entrance fee, disruptions in the real estate and equity markets may result in fewer residents being able or willing to move into a CCRC.
Baby boomers
More and more retirees and reaching the age they want to move retirement communities. CCRSs must plan for the influx of potential clients. This means building more housing units, dining facilities, and adding amenities in preparation for the onslaught. You must build it for they are coming.Keeping up with the competition. CCRCs must continually be aware of other CCRCs in their area and the nation and be able to compete with them. As the affluent, relatively active, baby boomer generation ages, CCRCs must maintain their appeal to potential new residents at younger ages. Therefore, they must stay current with developing trends by offering new contract types, renovating existing facilities, expanding the independent living units, or adding new common areas and amenities.
Occupancy rates
Occupancy rates are the single most important indicator of a CCRC's fiscal viability because high occupancy generates entrance fees, and amortized entrance fees are used for maintaining moderate annual rate increases and providing funds for facility reserve funds. Occupancy rates should stay above 90%. This can be a problem during national economic downturns. CCRCs with a history of lower occupancy rates in the past 3 to 5 years or as projected for the next 3 to 5 years might be more vulnerable for closure, merger, or buyout.
Staff expenses
The largest sectors of operating expenses at any CCRC are staff salaries and benefits, particularly those related to nursing and healthcare. Some have struggled to hire enough nursing staff and have had to increase wages and benefits offered them.
Self-funded long-term health insurance. CCRCs offering type A or B contracts are essentially operating self-funded long-term health insurance pools. Residents pre-pay for future healthcare and long-term care, and such care is usually provided with no increase in monthly fees other than a fee for extra meals, or the care is provided at a discounted rate. This means CCRCs are exposed to the risk that future care needs may be greater than expected or that the cost to provide health care may increase at a greater rate than expected.
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