People are always asking me, “Why is there such a great disparity in costs between assisted living communities?” I thought that it would be helpful for people to understand the basic reasons why.
Basic Reasons for Disparity:
- Location, location, location. Half or more of the operator’s costs come from their debt service. If you want to live in exclusive high rent districts, the cost will be more because the operator’s land costs more. This cost is then passed on to the consumer.
- Staffing costs are next in line for major costs. Three things to consider when it comes to staffing: how many hours they work, how much they get paid, and also the benefit load factor. People often think of benefits only as health benefits, but benefits can also include training, vacation, sick time, paid holidays, special education programs, and many other programs. The richer the benefit packet, the better the staff – the more money the consumer pays.
- Not everyone plays by the rules. There are buildings that don’t always play by the rules. They might be things you will notice right away. They may not do the training necessary. They may not pay overtime. They may not have staff on 24-hours, even if they say they do. Unfortunately, just as in every industry… there are bad guys.
- Capital expenses costs. A good provider will pay several hundred of dollars a year per resident to reinvest in the property and capital needs, not everyone does this.
- Beware of deals. So you go into a building that is in great neighborhood. Nothing seems visibly wrong and they offer you a deal $1500 less than the closest competitor. Deals are not good in senior care. Make a deal on your next flat screen, not your elderly loved one. Deals mean something is wrong.
- The Older the building the less the cost…usually. Again, debt service means less cost the operator is paying. The only exception to this is if they have refinanced the property and their new debt load is competing with newer projects.
If one were to add up all the possible extreme deltas from above it could easily tally over $3000 -$5000 difference a month over the low priced alternative.