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Residence and Care Agreements

Costs of Type C versus Type B contracts.
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Alan,


I've noticed that for the same type of contract (A, B, or C), there is wide variation among different CCRCs as to the ratio of entrance fee to monthly fee. I.e. the pricing for a particular contract type seems to involve a decision as to how much to allocate to the entrance fee vs. the monthly fee. Perhaps the management of your CCRC decided that loading more onto the monthly fee works better. It's easy to make that change for the new type C contract. However, maybe it would be difficult to do that for the type B contract because of the already existing type B contracts.



Alan, if I noticed that unusual difference at my community I would be just as curious as you. Admittedly, if I had received the same shrugged shoulders you experienced at your CCRC when you inquired, my first reaction might have been that someone was asleep at the wheel.... with no one taking ownership. Watch the fee schedule for next year, and see if a correction was subtly made. If so, you'll probably never be credited with calling an error to their attention. If not, maybe you can find out who DOES set the fees.


If it was an actuary, you'll have difficulty getting an explanation from them, because management is their client, not the resident.


Good luck.



I live in a small (approx 200 independent living residents, plus 48 units divided into Memory, AL, and SNF) CCRC that offers two types of contracts: fee-for-service (Type C) and "equalized pricing" Life Care --- i.e., not the "traditional" Life Care in which one continues with their IL rate as they move into Health Care. The "traditional" is what Marketing people tout as a more of a level cost arrangement, in which a Life Care resident, even with the minor additional costs of two more meals/day, avoids the huge spike in costs that a fee-for-service resident would experience going into Health Care, paying the "street rate." In "equalized pricing" here, a fixed amount for Health Care is determined annually by an average of all Life Care units' monthly IL rates, ranging from 3-BR cottages to one-BR apartments. This weighted amount is for all levels of care. As a hypothetical example, a $4500/month rate is calculated and announced as the "Life Care rate this year" for Memory, AL, or the SNF. That's a steep discount from the "street rate" for SNF care which could be, say, $9200/mo. But that $4500 may be MORE than someone was paying for their one-bedroom IL apartment or MORE than a 2nd person fee in a two-person unit. Therefore, equalized pricing can mean a greater cost than IL for some. At first I thought this equalized pricing Life Care was more Type B than Type A, but one consultant said "not really."


Whenever Marketing asks me to host a "shopper" for a meal, I try to find out if the visitor(s) is shopping for Life Care or fee-for-service. I then strongly encourage them to make sure they get a thorough explanation of what Life Care is here directly from Marketing. Marketing can trust me not to "do their job" in that respect, and because of the complexity I don't want to be the source of "unusual" information.


From what I've read about the Baby-Boomers (my generation ... I call myself a "leading-edge Baby Boomer), they may be interested more in Type D (rental contracts) that don't require a big entrance fee. Naturally the monthly fee would be higher than an A, B, or C contract. Many may have taken out reverse mortgages and may not have the assets to divest for an entry fee .... but they may have the cash flow for higher monthly payments. Additionally, I think right now, statistically, more Type Ds are for-profit. At a for-profit community, what happens when a renter can no longer pay their rent? They could possibly be evicted, unless the For Profit Type D community has established a means to subsidize those who can't meet the monthly obligation.


I wouldn't be surprised if traditional entrance-fee CCRCs with empty land to develop might decide to build Type D units out of necessity as the Baby Boomers hit the system. Type D might be more easily introduced into those communities that already have some contract diversity (say, Type C and Type A). Or, in the "affiliation" world of senior living (I suppose similar to merger/acquisitions of the corporate world), some multi-site CCRC organizations will add Type D communities. Whether those would be actions taken by both non-profit and for-profit organizations remains to be seen.


Some shoppers I host say, "I couldn't believe the difference in cost for a 2-BR apartment here versus what the same size apartment costs at XYZ community across town." They don't realize that one is fee-for-service and the other Life Care. The more "shoppers" utilizing this forum to get the basics, the better.


Hi Alan. I am reasonably new to this website and forum. Have you gathered any insight/information about your question? Do you have any information about the success of the Type C contracts at your facility. Seems strange to me to offer two different type contracts at the same facility. I know that type A and B facilities can offer different % returns on the entry fee.

I'm curious to know how CCRCs with Type B and C contracts price them relative to each other.

Recently my CCRC  introduced a Type C contract option and has priced it in a way I find strange when compared to the prices of Type B contracts. As one would expect the entry fee for Type C contracts is less than the Type B entry fee, roughly 25% less. However the Type C monthly fee is 7.2% greater than that of a Type B contract.

I would think that from a marketing viewpoint, if for no other reason, both entry and monthly Type C fees should be less than the corresponding Type B fees.

When I've asked managers in marketing and finance people about this pricing their answers have ranged from "gee, that's interesting; I don't know" to "I have no role in setting fees and I won't speculate about them."

Can someone provide a rationale for type C monthly fees being greater than those of type B? What am I missing? Let me note that the B and C contracts are identical except that B contracts include a limited amount of health care coverage while Type C contracts provide no health care benefits.

Thanks for your help.
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