Continuing care retirement communities (CCRCs) face a unique set of challenges and issues, due to their fee structure and the way in which they provide healthcare. CCRCs must maintain high numbers of occupied units and beds, monitor competitors in the market, and actively recruit new residents. They must also be prepared for economic downturns, times of higher-than-expected health care utilization, and shortages of nursing and health care professionals.

Milliman helps CCRCs address all the risk management issues that arise from the long-term nature of their contracts, with in-depth actuarial approaches in the analysis of their income requirements and financial condition. We recognize each CCRC as unique, given the broad range of residency agreements among communities that stipulate financial responsibilities for both providers and residents.

To effectively serve the uniqueness of each CCRC, Milliman performs a detailed analysis based on the community’s configuration. Our three key areas of services include the following:

Historical resident data analysis. We first conduct an analysis on five years' worth of historical data to give a thorough picture of a CCRC’s unique characteristics and patterns of utilization at each care level. We gather data on resident population across the full spectrum of care—from independent living to assisted living to skilled nursing—including variables such as occupancy rates, transfer rates, and mortality rates. We also look at how the growing trend of the provision of home health care to independent living residents affects utilization of other care levels.

Population projections. To perform population projections, we use historical resident data from both the client community and other communities in our database to set assumptions for rates of mortality and transfer using the same key parameters. Projections are performed as of a starting (valuation) date on both the total population and by level of care. Key results include estimates of independent living turnover and future utilization of assisted living and nursing care beds on both a closed group and open group basis.

Actuarial and financial projections. This includes performing other financial analyses based on the historical data and population projections, including the following:

• Actuarial balance sheets. We evaluate the CCRC’s ability to satisfy its obligations to current residents and thus remain a viable operating concern—or the long-term relationship between the community’s assets and liabilities.
• Actuarial pricing analysis. We evaluate the adequacy of the current pricing structure for new entrants at a CCRC for each residency agreement (contract) and refund option offered.
• Actuarial cash flow projection. We estimate future sources and uses of funds, including key items such as monthly fees, attrition income, entry-fee refunds, health-center fee income, and operating expenses.
• Future-service-obligation calculations. To meet accounting requirements, we calculate the “obligation to perform future services” related to current residents as of the valuation date.