How a Continuing Care Retirement Community Works

Written by: John Milford. Posted: October 25, 2017. 



How does a Continuing Care Retirement Community (CCRC) work? 

This is a question that often pops up when our explorer discussions turn to where and how to live as one gets older. This article explains how this model of retirement living works, and discusses their financial model.


CCRCs: The Basics

Continuing Care Retirement Communities(CCRCs) are a form of community in which a person can enter the community as an independent adult, and then as health deteriorates move within the community to higher acuity settings: first to assisted living and then to a skilled nursing facility — all on the same campus.

These communities typically include social and recreational activities; options for dining, health and wellness programs; transportation; housekeeping; maintenance; and security services. And these services are provided by trained and credentialed staff who are often very dedicated individuals.  Residents are able to remain in the community as their care needs change, and Life Care CCRCs charge nothing additional for higher levels of care. 

The rest of this article digs more deeply into the details of the business model and the finances. For those interested in specific dollar figures, this article and talk contain some estimates of San Francisco Bay Area pricing.


CCRC Finances

Most prospective residents ask about the CCRC’s primary sources of revenue, and there are multiple revenue streams.

  •  There is a fixed entrance fee. This is typically to offset the cost of the real property, building, furniture, fixtures, and equipment, future medical costs (when included in the agreement), and to build reserves for refurbishment and replacement of major furnishings and equipment.
  •  There are also adjustable monthly fees (and services for an additional charge) which offset the operating cost of day-to-day resident services such as labor, supplies, utilities, medical, and all other operating costs, including routine maintenance.

Besides payment from the residents, there is third party revenue for care services, which comes in several forms as follow.

  • Medicare covered days in the Nursing Center by residents or non-residents, if capacity allows, and Medicaid if the CCRC participates in the program.
  • Medicare Secondary Insurance can contribute to revenue if residents are required by the CCRC to purchase it.
  • Long Term Care Insurance and Private Pay sources are less common, but have a place in the total revenue picture. 


Pricing a Continuing Care Retirement Community

Entrance Fees may be tied to land and development costs, which are more predictable.

Monthly Maintenance Fees offset the cost of providing resident services, and can vary over time.

Management can allocate initial prices and fee increases to entrance fees or to monthly fees, as long as all costs are covered. Particular care must be taken after opening a CCRC to control program ‘creep’, which can lead to a steep monthly fee increase or an abrupt service reduction in the early years (and beyond, if monthly fee increases fail to keep pace with expanding services). 


The CCRC Business Model

A Look ‘Behind the Curtain’ at Management and Operations

The CCRC’s financial model depends on residents entering independent living units and paying entrance and monthly fees. The often-large entrance fees can help the community maintain cash reserves, and the monthly fees collected from independent living residents go toward payment for daily resident services and help subsidize care for residents who require assisted living or nursing care.

Since many individuals rely on selling their main asset, their home, to pay the entrance fee, a slow real estate market can make it very difficult for older Americans to raise the necessary funds. As a result, according to CCRC providers, occupancy levels at many CCRCs fell notably during the 2008 economic downturn, but have recently rebounded, resulting in a return to stronger occupancy.

Since a high occupancy rate is the key to successful CCRC operation, the ability to quickly fill vacancies is necessary for these communities to fund general operations and build financial reserves. Some CCRCs may also admit residents directly into their nursing, assisted living or memory care facility as if it were a stand-alone facility to broaden their customer base and generate revenue by utilizing their excess capacity.

Prospective residents are screened to determine their general health status in order to determine the best living situation. Prospects must also submit detailed financial information that usually includes income and tax records to ensure that they can pay CCRC fees over time. Entrance fees are typically paid as a large lump sum and can represent a substantial portion, if not all, of potential residents’ assets.   Finally, an interview to assess social skills to determine suitability for community living is commonly done.


CCRCs and Profit

Most CCRCs are not-for-profit organizations. Typically, not-for-profits exist primarily for the benefit of the larger community in which the CCRC is located and hold themselves to standards of social accountability with a volunteer board of directors to govern the organization. Not-for-profit CCRCs, often 501(c) (3) public benefit corporations under the federal tax code, are granted a preferred tax status and not required to pay income taxes. In many cases, they are also exempt from local property taxes and may accept tax-deductible donations.

A crucial difference between not-for-profit and other business models is the approach to decision making. While many businesses begin with questions such as how do we ensure a reasonable return for our shareholders, a properly focused not-for-profit organization asks different questions. What is the best for the residents and the clients we serve? What is best for our community? And how can we reinvest revenues for the betterment of the entire community?

Note that the term not-for-profit doesn’t mean operating at a loss. Making money allows non-profits to fulfill their mission, and commonly among multi-site not-for-profits, a surplus at one location will be applied to assist another location in temporary financial difficulty, thus spreading the economic risk that comes with doing business in a single location.

In summary, making money among not-for-profits is not dissimilar to commercial operators whose gains are distributed to investors and reinvested in the enterprise. Even though profit is not an organization’s primary purpose, revenues must exceed expenses over the long term to cover current and future expenses and obligations. Revenue received in excess of expenses is typically reinvested in the operation or retained as reserves to mitigate future unforeseen expenses.

Recently, there has been an increase in the number of for-profit organizations operating CCRCs. These organizations are accountable to individual owners who may be private investors or shareholders.

Like the not-for-profits, a board of directors may be appointed to govern the organization, but in the for-profit model, a portion of revenue in excess of expenses is returned to investors through dividends or other means. With either model, it is in the CCRC’s financial best interest to provide high quality services efficiently so that it is attractive to consumers and profitable for mission expansion or return on investment for shareholders.


Free-standing vs Multi-site CCRC

Whether for-profit or not-for-profit, CCRC management teams are typically either a free standing (single site) operation or one of a multi-CCRC organization (a multi) with centralized upper management and shared support staff.

The difference between a single vs. a multi-site CCRC is in the lineup of local management staff. That is, the management team at a free standing CCRC can be expected to be larger than at a typical multi facility location.

The qualitative advantage of a free standing CCRC is that top management is closer to the customer (the resident) and front-line operating staff, giving the CCRC the full attention of the top management and support personnel.

By contrast, a multi facility CCRC, efficient because it carries only a portion of the management overhead expenses, often must ‘wait its turn’ for the attention of shared support staff such as a clinical consultant, senior facilities director, IT support, central accounting staff, HR, and the like. As well, ‘multis’ compete for capital dollars and for priority when seeking campus refurbishment and replacement funding. 


 CCRC Management Practices that Matter

The tone of a CCRC's operation is set by the local management.

The executive director who has the lattitude to attract and retain the best managers, provide the tools for them, and who has the good sense to get out of their way will outperform another who is stifled by a ‘top-down’ management organization. Seasoned managers who work together and who assist one another in delivering resident care and services often achieve remarkable levels of resident and staff satisfaction.

Maintaining high occupancy, immaculate building maintenance, resident satisfaction and ample financial reserves are the hallmarks of successful CCRC management. These are things to probe when investigating a specific CCRC.


 Building a Productive Operating Team

First, an astute executive director assembles a team of cheerful and supportive people. An eager, helpful person can usually be trained to the task at hand, but an unpleasant person can rarely be trained to be pleasant. Accordingly, when managers and staff at a premiere San Francisco CCRC were asked to choose the character qualities that made for a gracious workplace, they selected the following as the four most important to them:

            Gentleness: Showing care and concern in meeting the needs of others.

            Dependability: Completing what I consented to do. 

            Punctuality: Showing high esteem for other people and their time.

           Initiative: Recognizing and doing what needs to be done before being asked to do it. 

At this CCRC, regular training and periodic performance evaluation reinforced these qualities of workplace ambience, as well as the fine points of service. Although from a multitude of nationalities, the staff were proud to say, "Service is our second language."

Needless to say, such a staff were highly esteemed by the residents. Moreover, after fifteen years of operation, there were no labor relations problems which might have caused the staff to bring in a third party to look after their well-being in the workplace.


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Reader Comments: "How a Continuing Care Retirement Community Works"


from Kira Reginato (unverified) at November 08, 2017

Thank you for writing this article. Even though I have been in the senior care industry for years, I learned from what you wrote. I hope readers appreciate the not-for-profit CCRCs take on doing business. The for-profit model, being responsible to shareholders, has led to some poor quality outcomes for this population. Thanks for taking the time to do the spreadsheet of costs in the Article and Talk section!  


from carol keegan (unverified) at January 03, 2018

As a followup, I wonder what's happening with the CCRCs without walls business model?


from John Milford (member) at January 22, 2018

This business model emerged in the late 1980s as a way for well elders to access CCRC services without having to pay an apartment entry fee and move in. It has been slowly developing until today, but is still largely in the experimental phase. While seeming ideal to the older adult who wants to remain at home (and for the CCRC operator looking for additional revenue), it has more than one drawback: First, most CCRC residents who have paid a sizeable entry fee are less than enthusiastic about sharing their health services resources with 'outsiders', and many CCRC operators struggle with the profitability of offering the CCRC without walls service package.


from Ron Cole [email protected] (unverified) at January 04, 2021

What is the attitude about CARF accreditation and its importance to marketing and adherence to a good quality level of standards? Evaluation by an impartial/independent organization seems to be of value. It is apparent, however that the number of CCRC's membership in CARF is dwindling. Why is that?


from JimNCate (member) at June 29, 2021

Excellent question, thank you... hoping to see an answer here one of these days.


from John Milford (member) at July 02, 2021

CARF accreditation surveyors tend to be volunteers from other accredited organizations which offer services similar to the one being surveyed, and who are tasked to evaluate their peer organizations on a set of standards. While it always helps to have a thorough look at the operation every so often, the process is lengthy as well as costly in terms of fees and key staff time over the better part of a year. Hence, particularly the investor-owned CCRCs and the smaller CCRCs may tend to opt out. In my experience, only a tiny percentage of prospects ever asked about or were aware of accreditation status.


from Anonymous (unverified) at September 15, 2022

I feel there has been a failure on the part of CARF to meet the needs of CCRCs and market themselves sufficiently. Without having standards to adhere to and an independent unbiased third party to assess that, ownership/management are allowed to set their own standards with insufficient resident voice in policies and decisions. Some non-profits may use reserves acquired by one of their profitable CCRCs for expansion of their holdings rather than for use in the financially successful group. If CARF is not a good organization, then it is necessary to establish another credible to organization to fill this need.
Ron Cole


from Michael M Hirasuna (member) at September 02, 2022

What about the various plans offered by CCRC, like Type A (Life Care) or Type C (Fee for Service). Which is better? 


from John Milford (member) at September 08, 2022

Type A Contract - now widely termed 'LifeTime Care' - offers the most health benefit coverage.

Type B Contract - offers limited health coverage.

Type C Contract - 'Fee for service'

If all three are available, most buyers are guided by their health condition, risk tolerance, and available assets.


from Michael M Hirasuna (member) at September 08, 2022

If you went with Type C, would you need Longterm Care Insurance?


from John Milford (member) at September 19, 2022

With a Type C contract, Longterm Care insurance would help pay for the assisted living or nursing care according to the terms of the policy. But it would not be required.



from Ginelle (unverified) at December 14, 2022

I realize this may be a complicated question but hoping you can shed some light. Looking at the business model of CCRC’s, how much does it cost a CCRC when a resident moves out of IL to a higher level of care?


from John Milford (member) at December 14, 2022

Costs vary according to the incremental costs to the CCRC from the necessary increase in services for Assisted Living, Memory Care, or Skilled Nursing. Bear in mind that each level above independent living has increased labor costs driven by greater staffing requirements, medication management, clinical diets, and meeting other elevated regulatory requirements. Each campus will vary regarding local differences in those costs, so it is best to ask the local management when you visit.  


Discuss, Comment, Ask Questions


Key words: 
CCRC, CCRC financial model, Medicare, Medicaid, CCRC Pricing

Last Updated: May 13, 2020.

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