By Jack Cumming

Just the other day, I went to buy a book, Neal Gabler’s “Walt Disney: The Triumph of the American Imagination.” It was recommended by Jamie Siminoff, the founder of Ring doorbells. The price for the book was right, but the pricing led me not to buy the book.

The Kindle edition, with no marginal cost to produce another copy, was priced at $11.99, while the hardcover edition sold for $7.55. That’s not fair. It costs much more to manufacture a hardcover book. I passed on buying the book and figured I might have to get it from a library or just not read it.

Pricing Wisdom

That pricing wisdom applies as well to senior living. After all, I can think of no other business that requires as much trust from the buyer of the seller than is the case with senior living. If the pricing isn’t fair, can a resident ever trust the seller to deliver well-being for the rest of one’s life? The answer is clear. If providers are so money-driven that the pricing is unfair, then it’s hardly a business with the integrity to become a lifelong companion.

The elephant in the room is the coming of “dynamic pricing” to the CCRC and senior living worlds. Senior Housing News describes dynamic pricing as “… a strategy basing prices for products or services on changing market factors including supply and demand, competition, and existing inventory.”

In short, it means pricing from moment to moment based on whatever the market will bear. One resident might be advantaged while another has a lifelong disadvantage due to the “demand, competition, and … inventory” existing at the time of contracting. That may make sense in a profit-maximization context, but is it consistent with good faith and fair dealing?

A Matter of Trust

The larger question becomes whether the senior living industry, and especially the not-for-profit entrance-fee continuing care retirement community sector of it, can be trusted by consumers. A close legal examination raises many red flags to suggest that consumers should beware, and, unless they are very wealthy with a permanent trusted advocate, they should seriously consider other alternatives.

One thing seems evident. In an era in which a commitment to equity and fairness seems to be taking a back seat to dreams of corporate enrichment, it’s refreshing to find any entity committed to putting fair treatment of consumers first. That can be more meaningful than any short-term, unearned profit to be gained through questionable pricing practices.

The Captive Resident Example

One simple example, common among entrance fee CCRCs, can make the point. Let’s say that, after many years, a long-term resident decides that he or she no longer needs one of the larger apartments. Their unit was perfect for two healthy oldsters, but now only one of them survives, and that large apartment feels ill-suited.

At move-in, the entrance fee for the large apartment was $115,000, but now inflation and the market indicate a current entrance fee for the same unit of $365,000. There is a small one-bedroom unit, closer to the public areas, that carried an entrance fee of $35,000 years ago but that now commands a $125,000 entrance fee. Those are the givens.

Our protagonist, we’ll call him or her Logan Riley. If Logan moves to that smaller unit, the operator can resell the larger unit to a couple on the waiting list for $365,000. It’s in the operator’s best interests to encourage the move. The executive director tells Logan that it will require an entrance fee difference of $10,000 = ($125,000 less $115,000). Logan sees that as unfair and fails to make the move, instead buying a mobility scooter.

It Makes No Sense

Not only does this make no sense and eliminate the financial gain to the operator from the move, but it also damages the provider’s reputation for fair dealing and resident equity. Yet, this is a common CCRC practice. Now the industry is beginning to go a step further with opportunistic pricing for the provider’s benefit, but to the detriment of the residents’ trust.

Obviously, if Logan had taken the deal as the operator proposed, the owner-operator would have had an unearned windfall equal to the difference between the $365,000 current value and the $115,000 allowance paid to Logan, less the cost of turning the apartment. Still, that may not be as obvious as it seems.

Substance vs. Words

Many working in the industry think that the industry’s challenge is semantics and nomenclature, as an example, avoiding words like “care,” “facility,” and “retirement,” while doing nothing to change the substance. Still, semantic ignorance should not justify exploitation.

Examples of questionably equitable decisions abound in an industry that often claims the moral platform of not-for-profit values. That’s concerning and is a direct outgrowth of the divide between providers and residents. Until that artificial divide is bridged, bringing people with equal humanity into community with each other, the industry will continue to struggle with equitable injustice.

Clever, or? …

Often, maybe always, being clever or legalistic is not intelligence. Some think that cleverness is business acumen. It’s not. Trustworthy is business acumen. It pays to be a good neighbor, helping everyone to feel safe and fulfilled.

It takes courage to be trustworthy. There will be some on your board, or with you in the C-suite, who think clever is tops. But there is no corporate asset more precious than customer trust and public belief in your good faith and fair dealing.

In the long term, it pays to do what is right. You’ll know you’ve got it right, if anyone ever does, when the market buzz — that of residents, prospects, and everyone — becomes the promoters of your aging model. For now, that pall of skepticism hangs darkly over the industry.