Be Very Careful about getting “deals” in senior housing today.

Yesterday I was informed about a rate a national senior housing provider was offering to have people move in. This recession has made people do some crazy things. But when a person offers a rate at less then their costs, buyers should be beware.

You may think why do I care if they offer it below their cost of doing business? Well, lots of reasons, here are a few:
-the biggest cost for a provider is staff, if they try to cut costs they will cut here, this means less staff, less attention, more risk.
-Food is often a place where providers cut costs, quality of food can vary dramatically, you don’t want Hot Dogs served for three meals.
-Is there a bait and switch here, they may offer you a very low rent but a very high care cost.
-You have to assess what the companies motives are, if they are public they may just be trying to create a story for Wall Street so they can say Census is up, we are doing a great job. But this illusion can’t last forever.
-Quality Control measures, peer reviews, clinical staff auditing, secret shops, service phone calls, all the things that maintain quality are tossed when these companies are in cut mode, well there goes the quality, you have to inspect what you expect.

So here is how it works, staffing is 50%-55% of the operators costs, the more care a person gets the more costs the operators has. Also keep in mind, it is just not the care managers salary of $11 or $12 hour but the fully loaded costs with benefits and government taxes, it is not uncommon for that costs to be 27%-33% more then the salary.

Real Estate Costs dictates rates. I have families that ask me , why can someone get a room in this building for $2600 and five miles away it costs $3200, it is all about real estate values. The land the property is on is a major cost factor, commercial land will usually be commensurate with local housing prices. So if you want to live in a community where the average house value in $290,000 versus a community where the average house value is $550,000 the monthly cost of senior care will be substantially less. There are other factors that also play into this, how old the building is and the quality and amenities of construction will also drive costs. These costs can be 24% -30% of costs.

Then the compelling costs come down to Insurance in a highly regulated industry. So those are the major costs factors.

I saw a rate of $1400 a month for Alzheimer’s Care in Las Vegas from a competitor. I can tell you that the debt service, food and insurance costs more then that, before we even include staffing costs. So there is no way someone can provide quality care for these types of prices.

So how is a consumer to know; look for the homes who have the lowest staff turnover, this is an indication that staff is happy, they are not overworked nor underpaid.

Look at the census or occupancy of the community you are considering, quality rises above deals. If they have been open awhile (more then two years) and are less then 85% occupied, you will know why they are giving you a deal.

Ask if you can talk to two or three family members who have been there more then a year. This way you can get a historical perspective on what has been happening, has there been a lot of turnover, a lot of cuts, have programs been slashed?

Make multiple visits before you move in at different times of day. This way you get a good feel for the home. Don’t make an appointment just show up and see what is going on, you may be surprised.

This recession is putting many companies out of business, but the good ones will be around a long time.

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