Over the years, I am often surprised by the number of senior living counselors and sales professionals who are unfamiliar with the types of contracts available with a Life Plan Community, also known as a Continuing Care Retirement Community (CCRC). I suggest that a truly superior sales counselor should have a firm knowledge of all types of contracts in order to more effectively assist prospects navigating the maze of senior living options. Prospects are typically trying to make a decision while organizing, digesting, and comparing communities that may not be apples-to-apples comparisons at all. If a sales professional has a thorough knowledge of the residency contracts available, he/she can better serve the prospect during comparison shopping and the decision-making process.
During the months of July and August, the RD Blog will cover the types of contracts offered by a Life Plan Community and broadly define each one. Additionally, the blog will suggest ways in which a sales counselor might emphasize the strengths of one type of contract versus another.
To begin the series, listed below are the types of contracts with a brief description of each:
Type A - LifeCare (or Extensive) Contract
A LifeCare Contract usually has a higher Entry Fee and Monthly Fee; however, a portion of future health care costs are covered within this fee structure. Therefore, if and when a resident moves into a higher level of care, there is little or no variation in the Monthly Fee.
Type B - Modified Contract
In general, a Modified Contract is less expensive than a LifeCare Contract, both in the Entry Fee and Monthly Fee. Under the terms of this contract, if a resident moves into a higher level of care, he/she will either pay a discounted rate or receive a pre-determined number of days at no additional cost.
Type C - Fee-for-Service Contract
The Entry Fee and the Monthly Fee are lower in a Fee-for-Service Contract; however, when a resident moves into a higher level of care, the Monthly Fee will increase to the amount of the daily market rate within a particular level of care.
Type D - Rental Agreement
A Rental Agreement does not have an Entry Fee although some communities require a nominal Community Fee. The Monthly Fee tends to be more substantial in order to cover all of the services without the benefit of an Entry Fee. Similar to the Fee-for-Service Agreement, if a resident moves into a higher level of care, the Monthly Fee increases to the market rate for that level of service.
Type E - Equity-Based Contract
Within this Equity Contract, the resident actually purchases equity in their home. A Monthly Fee is still required during residency in Independent Living and when a resident moves to a higher level of care, he/she pays the current market rate. In a few Equity Based communities, the resident may receive a reduction in the market rate for higher levels of care.
Each contract has specific advantages that has a unique appeal to the various personal circumstances of a prospect. A superior sales counselor should be able to speak to the advantages and disadvantages of each contract type as it relates to different situations. The July/August blogs will explore each contract type individually and suggest techniques to promote the unique sales position of each one.
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About the Author
Patty Scotten is a consultant with Retirement DYNAMICS® and serves as their marketing manager. Patty has over twenty five years’ experience in the senior living industry and has led several communities in preselling expansions or increasing occupancy levels. She graduated from Elon University and holds a Masters Degree from University of North Carolina at Chapel Hill. Patty is licensed as both an assisted living and nursing home administrator.