Financially Evaluating A CCRC & How We Measure Up

By Jim Bowersox, Vice President & Chief Financial Officer Life Enriching Communities.

An article published by The New York Times and entitled “Seven Ways to Judge a Community’s Financial Health”. It offered a set of standards for evaluating a by which to evaluate the financial health of a Continuing Care Retirement Community (CCRC).

Of all the key indicators to determine the financial success of a CCRC, I felt the Times really selected the best. But I wasn’t alone in my thinking. Soon LEC residents came to me and asked me to evaluate our community against the standards within the article.

Evaluating Financial Health of a CCRC

As you tour communities ask about these financial checkpoints, I’ve also included the results from my internal evaluation using these measures.

1. Occupancy

Financially Evaluating A CCRC & How We Measure Up Occupancy

The NY Times uses 90% as a benchmark for occupancy. If the community has a steady demand for its services and has been at 90% for many years that would be a positive reflection of the financial viability of the organization. This is the first topic to address when evaluating a CCRC.

How We Measure Up: LEC’s total occupancy was 89% for 2017 comprised of Twin Lakes with 275 out of 282 accommodations (97%) and Twin Towers with 388 of 462 accommodations (84%) occupied. Favorable

2. Rate Increases

Financially Evaluating A CCRC & How We Measure Up Rate Increases

CCRC’s often increase the monthly fee every year. According to McKnight’s Senior Living, the national average monthly rate increase has been 3% over the past five years. Such increases are necessary because of inflation and to remain actuarially sound – ensuring that cash inflows exceed cash outflows.

Also, if monthly rates have remained unchanged for several years, it could be an indicator of low acceptances of prices or services in that marketplace. 

How We Measure Up: Our monthly fee-for-service rate increases averages from 2015 through 2018 were 3.11% for Independent Living, 3.56% for Assisted Living and 3.50% for private pay Skilled Nursing. Favorable. 

3. Debt Rating 

Financially Evaluating A CCRC & How We Measure Up debt rating

Issuing bonds to fund capital improvements and/or expansions is common among CCRCs. They turn to industry-leader Fitch Solutions to evaluate their credit profile and provide a credit rating for their long-term debt. 

Look for communities with an investment-grade rating which deems them a relatively financially-strong organization. Related to refundable entrance fee contracts, that future refund is likely safer with an investment grade rated CCRC. 

How We Measure Up: Life Enriching Communities’ Obligated Group (OG) has an investment-grade credit rating from Fitch Ratings of ‘BBB-‘(Stable Outlook). Only a small fraction of the Continuing Care Retirement Communities (CCRC’s) in the U.S. has an investment-grade rating. Favorable. 

4. Profitability 

Financially Evaluating A CCRC & How We Measure Up profitability

Is the community spending more cash than it’s bringing in? To determine this ask what the cash operating expenses is as a percentage of cash operating revenue. Any number below 100 indicates the community has enough cash to cover expenses. 

How We Measure Up: Our OG’s ratio is 95.9% which is better than the median ratio (97.4%) for other ‘BBB’ rated organizations. Favorable. 

5. Capital Improvement 

Financially Evaluating A CCRC & How We Measure Up capital improvement

Certainly, ask for detailed information about investment in capital improvements. But also take a look around as you tour. Are the common spaces in the CCRC well taken care of? How does the dining venue look? Are the grounds maintained and well kept? These visuals will give you clues and insights into how well the organization is investing back into the community. This is important when evaluating a CCRC.

How We Measure Up: LEC has a strong history of reinvestment in routine capital expenditures on an annual basis. The OG’s ratio of capital expenditures to depreciation expense in 2017 was 338% – largely attributable to the Twin Lakes expansion project. Another measure in the CCRC industry is “Average Age of Community” which is an estimate of the number of years of depreciation.  LEC is at 10.8 years compared to the 11.5 median for other ‘BBB’ rated organizations. Favorable.

6. Reserves 

Financially Evaluating A CCRC & How We Measure Up reserves

Ask if the CCRC has an actuarial valuation performed on a regular basis. This study evaluates whether reserves and future cash inflows are sufficient to cover future costs of care and services of residents as they age and utilize the continuum of levels of care inclusive of independent living, assisted living and nursing. 

CCRC’s that borrow money typically must agree to certain covenants that, among other operating requirements, establish liquidity or reserve minimums. 

How We Measure Up: LEC performs an annual actuarial valuation each year for its campuses. The results indicate that reserves far exceed requirements and that both campuses are in satisfactory actuarial balance. Meaning that contractual commitments by LEC will be fulfilled. Further, financial bond covenants related to unrestricted cash reserves relative to debt and debt service coverage were in compliance at 12/31/17. Favorable. 

7. Residents’ Role

Financially Evaluating A CCRC & How We Measure Up residents role

The level of resident involvement in a community is a clear indicator of engagement with CCRC leadership. And likely a better understanding regarding policies and practices that impact their lifestyle and financial situation.  To some, this type of engagement may represent forms of emotional and vocational wellness. Therefore fulfilling a purpose to serve fellow residents. 

How We Measure Up: There is a formal Resident Council and Campus Representative system at Twin Towers and Twin Lakes respectively. They provide feedback and suggestions to the Executive Directors. Various committees with resident representation also provide suggestions and recommendations to the Resident Council and Campus Representatives. One resident from each campus is elected as a non-voting member of the (Twin Lakes and Twin Towers) boards each year. Favorable. 

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Life Enriching Communities, Inc. (LEC), is an integrated family of lifestyle communities and senior living services in greater Cincinnati and Westlake, OH. Best known for our Twin Towers and Twin Lakes senior living communities, and our recent affiliation with Concord Reserve in Westlake, we have made aging well a top priority for nearly 120 years.

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What Are The Qualifications For A Senior Living Community?

The qualifications for many communities are based on several factors related to their financial picture. Here are the most common:

Qualifications Considered


The future is unknown. Therefore lifetime projection models rely heavily on historical statistics. Some of which are national and some regional. So, forecasting one’s ability to pay fees depends on how long they’ll live there. depends on the time frame that’s being considered.

The age in which a resident enters the community will be apart of the calculation.


Your income should include all earnings. It’s important to report them because they provide a baseline for paying monthly fees.

  • Stable and ongoing income source – social security or a pension
  • Variable sources of income – dividends and capital gains

Share income sources that you draw annually because they will be taken into account as well. Be certain to include their planned end dates.

  • IRA (Individual Retirement Account) or 401(k)
  • Rental income or a structured settlement

So keep in mind, any type of income that gets reported to the IRS is included in the projection.


In addition, you’ll want to examine your assets. Typically, only liquid assets are considered for community qualifications. Assets most often include property, savings, and investments.

Assets are important to cover the monthly fees needed as residents move to higher levels of care. Especially if the community is a CCRC.

Most often, proceeds from the sale of the house/condo pay the entrance fee.


Fees may vary widely within a community. Factors that affect the fees include the size and location of the accommodation. Also, influencing fees are the number of occupants in the household. So someone may qualify for several or all of the accommodations. The full scope of your financial landscape will determine the accommodation options.

Know Your Numbers

Finally, take inventory of your current financial situation.

  • Familiarize yourself with your current income streams and assets. Consult your most recent investment statement and tax return. These are key elements to consider along with the entrance and monthly fees.
  • Research your house value. Most counties have a public website listing the house value for tax purposes. Unless you have a committed buyer and signed a purchase agreement, most communities will only use the tax value of your property because it is an objective estimate.
  • Create a lifestyle budget. Most communities include a package of services provided through the monthly service fees. These can vary and are based on the contract type associated with that community. Certainly, ask for a list if one is available.
  • Outside of what services are provided, consider what lifestyle you want. For instance, do you plan to travel every year? Eat out every night? Or purchase the car you’ve always wanted? Listing these expenses out will help you create your lifestyle budget.

Twin Towers is a continuing care retirement community in Cincinnati, Ohio, offering patio homes, apartments, rehab services and more. We’re focused on supporting the vibrant and active lifestyles of our residents so they can age well. For more information, contact Twin Towers online or at 513-853-2000.

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What is an Entrance Fee for a Senior Living Community? 

Many non-profit Continuing Care Retirement Communities (CCRC) require an entrance fee. Or at the very least, offer an entrance fee option. The entrance fees can be viewed as a membership fee paid as you move into a community. It’s what provides you access to services you may need in the future.

Answers To 4 Entrance Fee FAQ’s

1. Am I Buying The Home?

No. There are a few ownership models outside of Ohio. But most CCRCs (which may also be referred to as a Life Plan Community) retain the ownership of the homes.  

The advantage to that individual is that the community has the responsibility to maintain the property not you. Freed from home ownership, you won’t ever need to sell a house again. Or worry about real estate market fluctuations.

2. So What Am I Paying For?

What is purchased is a contract for services detailed in the community’s Residency Agreement.  Briefly, it’s access to the continuum of care:

  • Independent living
  • Assisted living
  • Nursing care
  • Inpatient and/or outpatient therapy

So you have access to services and any level of care that you may need as you age.

This one-time fee is paid upon entry into the community based on the size and location of the selected home. In addition to the number of people residing there. 

Many non-profits CCRC include the assurance that care will be available, even if an individual outlives their financial assets. At Twin Towers, this is done through our Foundation’s Benevolent Care Fund. Therefore we ensure that if a resident in our community has exhausted their resources, they can remain within our community. 

3. How Do Most People Pay The Entrance Fee?

Most people use the proceeds from the sale of their house or condo to pay their entry fee although some use savings or liquidate investments.

Timing the sale of a house and paying an entrance fee for your first choice future home in a community can be tricky.  Here at Twin Towers, we ask for a 10% deposit of the entrance fee to start the application process. This starts a 90-day period during which many individuals sell their house.  

In certain circumstances, Twin Towers offers a payment deferral plan through a Promissory Note option. It allows you to make your move to the community. Then you defer payment of the balance of the entrance fee until your house sells, interest-free for up to one year.  We found this to alleviate much of the logistics with moving money around in an individual’s financial portfolio.

4. Do I Still Pay A Monthly Fee?

Yes. The monthly fee furnishes the comprehensive package of services associated with the level of care in which you live. 

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Twin Towers is a continuing care retirement community in Cincinnati, Ohio, offering patio homes, apartments, rehab services and more. We’re focused on supporting the vibrant and active lifestyles of our residents so they can age well. For more information, contact Twin Towers online or at 513-853-2000.

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