Do we need to retire Continuing Care Retirement Communities?

By Steve Moran

For almost as long as I have been publishing Senior Housing Forum, once or twice a year someone will ask me if I have written about or will write about whether or not Continuing Care Retirement Communities (CCRCs) still make sense as a senior living option. The underlying assumption or sentiment is that CCRCs just won’t appeal to the emerging generation of seniors. Last week I spoke with Imran Javaid, Managing Director, Healthcare Real Estate Group at Capital One Bank, a Senior Housing Forum Partner, about his view of the CCRC marketplace and consumer demand. 

First, a quick primer on CCRC’s…

By far and away most entrance-fee-based CCRCs are owned and operated by not-for-profit organizations. According to LeadingAge there are roughly 1,900 CCRCs in the U.S. and about 18% are owned by for-profit organizations. There are 4 types of CCRCs, though the 4th type is not generally referred to as a CCRC.

  • Type 1:  These communities require a large upfront payment that is typically refundable in part after the end of the contract. Refunds generally run from 70%-90%. They also require a monthly payment. The key feature of this contract is that it includes access to Skilled Nursing (SNF), Memory Care (MC) — where available — or Assisted Living (AL) with little if any increase in the monthly fee. 
  • Type 2: The contracts for this type are similar to Type 1 except that access to AL, MC and SNF at little or no increase in limited usually to 30 or 60 days. After that initial period, a resident will be responsible for full market rates (or sometimes discounted rates). Type 2 contracts typically require a smaller upfront payment. 
  • Type 3:  This type of communities require the smallest upfront fee and only independent living is included in the monthly fee. If a resident needs AL, MC or SNF, they will pay either market rate or a preferred resident rate. They will also typically have priority access to these services if the community also takes residents from the marketplace community. 
  • Type 4, Rental CCRCs:  Rental CCRCs are not usually referred to as CCRCs, but they are multi-level communities that provide independent living, assisted living, usually memory care, and skilled nursing on a single campus. With the exception of perhaps a modest entrance fee, charges are made based on daily or monthly rates. 

Are They Still Relevant?

According to Imran, the demand for CCRCs essentially moves with the total available market. Based on their analysis, they have not seen evidence to suggest that there is waning interest in CCRC products by consumers. They appeal to a set of seniors who tend to be long-term planners. This would suggest that as Boomers age, the demand for this product will increase in line with the demand for other senior housing assets.

From a consumer standpoint, the benefits of a refundable entrance fee CCRC include the combination of life insurance and tax planning as well as long-term care and an active community lifestyle all rolled up in one product. Many non-profit CCRCs are faith-based and the entrance fee is amortized over time. In that instance the consumer rationale is really about long-term care and community lifestyle. Regardless, one of the benefits of the CCRC model for an investor is that once a resident has moved into a community they are much less likely to move out if there is an economic downturn. The length of a person’s stay in a CCRC is also relatively long making them resilient during tough times.

It’s All About . . .

As an active player in this market, I asked Imran how they evaluate risk in making those decisions. His response was that it is not a lot different than other senior living projects in that it all comes down to the local market conditions and the operator. He highlighted Life Care Services (LCS) as an example of an organization that does a great job of operating CCRCs. 

The bottom line for Capital One is that the CCRC market is healthy and worth consumers’ attention.

Your thoughts on CCRCs and the future?