Differences Between For-Profit and Not-For Profit CCRCs

By Brad Breeding

“What is the difference between a not-for-profit community and a for-profit retirement community?” This is a popular question among prospective members.

Many not-for-profit retirement organizations are single site organizations, although some, like Lakewood at Home, are part of a larger group. The distinguishing feature of a not-for-profit retirement community, as with other not-for-profit organizations, is that all of the money earned or donated goes towards pursuing the organization’s objectives, instead of to the owners. Not-for-profit communities are typically structured as 501(c)(3) organizations, which, by definition, requires that they operate  for charitable purposes. Providing lifetime housing and health care services, even if a resident depletes his or her personal finances through no fault of their own, is often core to that charitable purpose. Most not-for-profit communities will maintain a foundation or endowment fund, which, if properly funded, can greatly enhance the organization’s ability to provide such financial assistance. By being a part of Lakewood at Home, members have access to LifeSpire’s VBH Foundation, which can provide benevolent support should the need arise.

By contrast, for-profit communities are often owned by a larger parent organization and are typically more profit-driven than charitably driven. This is not inherently bad because leaders of a quality organization know that if they do not offer a desirable product and look after their residents then eventually there will be no profits. And while a for-profit community may be more inclined to ask a resident to leave if they are no longer able to pay, most operators understand that it is good business practice to accommodate residents to the extent possible. They do not want a reputation in the community of being uncompassionate. In fact, some for-profit retirement communities also maintain separate charitable funds to provide financial aid for residents.

In theory, the chances of a resident requiring financial assistance from the community should be relatively low, regardless of whether it is a for-profit or not-for-profit provider. This is because most organizations go through a financial qualification process with new residents. A thorough process will help ensure a higher than average chance that the resident has enough money, under average circumstances. Furthermore, many providers offer a refundable entry fee, and in this case, if the resident runs out of money then their entry fee refund will almost always be used to offset healthcare expenses before any financial assistance will become available. Finally, for providers who accept Medicaid, residents may qualify for government assistance to cover healthcare expenses when they exhaust their funds.

LifeSpire of Virginia is a non-profit, faith-based provider that operates four continuing care retirement communities across Virginia as well as Lakewood at Home. The Virginia Baptist Foundation raises funds to help LifeSpire’s life care residents who outlive their financial resources remain in their homes. In 2018, the VBH Foundation provided more than $1,100,000 in benevolence to 60 residents across all four communities.

Brad Breeding is co-founder and president of MYLIFESITE, a website designed to provide objective information about continuing care retirement communities. A certified financial planner, Brad’s extensive knowledge of the senior living industry, combined with his financial planning background, allows him to provide valuable insights about lifestyle, healthcare, and financial planning considerations for seniors. This article is legally licensed for use.  

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