One challenge that the senior living industry faces is confusion among consumers caused by the various terms used to describe different types of providers. Yet, for continuing care retirement communities (CCRCs or “life plan communities), in particular, there is an additional layer of confusion due to the different CCRC contract types available. Confusion is bad for the industry and for the consumer. From the industry’s perspective, it can delay a prospective resident’s decision process. From the consumer’s perspective, confusion can lead to frustration, wasted time, and ultimately, a wrong decision.
Continuing care retirement communities provide residents with a full continuum of care, beginning with independent living and also offering assisted living, memory care, and/or skilled nursing care–usually in one location. Access to a continuum of care provides peace of mind for residents who live mostly independently today but want to have a plan in place for future care needs to arise. Unlike other types of senior living providers, most CCRCs offer residents contractual priority access to care services via a residency contract.
There are five main types of contracts offered in the marketplace which are generally labeled as follows:
- Type A (lifecare)
- Type B (modified fee-for-service)
- Type C (fee-for-service)
- Equity/Co-Op, and
- Rental
>> Learn more about the above contract types
Most of these contract types require an entry fee. But as you can see, some are offered under a rental contract, and still others are offered under an equity/ownership contract, whereby the resident actually owns their home. Therefore, I think it can be helpful to break out contract types according to the buy-in requirement and the monthly fee structure, as shown in the chart below.
|
Entry Fee Model |
Equity Model |
No Buy-In (Rental) |
|
| Type A (lifecare) Contract | Yes |
No |
No |
| Type B (modified) Contract | Yes | Yes |
No |
| Type C (fee for service) Contract | Yes | Yes | No |
Note: Rental contracts usually do not offer residents priority access to care services and may require a higher monthly rate than entry fee contracts.
The column to the left shows the type of month-to-month fee structure offered by the community. The row across the top describes the buy-in requirement, if there is one. You’ll notice, for example, that rental contracts always operate under a fee-for-service model. This means that residents will not pay an entry fee but will pay the full market rate for care services if/when those services are received. The same is often true for an equity contract. However, for communities that require an entry fee, this may not be the case. For instance, a lifecare contract is essentially an all-inclusive contract. Conceptually, a resident will pay an entry fee and their monthly fees should remain fairly stable over their lifetime, regardless of how much care is ultimately needed.
In summary, using the above chart makes it easier to explain how a CCRC residency contract works by simply checking one of the six possible boxes and then elaborating, e.g., “So you’ll notice that this particular community requires an entry fee and the monthly fees operate in accordance with the lifecare, all-inclusive model…” This chart also makes it easier to compare two separate communities offering different types of contracts.
Are you considering a continuing care retirement community for yourself or a love one? Learn more here.
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