Many Continuing Care Retirement Communities (CCRCs) and Life Plan Communities (LPCs) are facing complex and dynamic challenges. In addition to the significant pressure of supporting an aging baby boomer population, facilities are navigating a fragile economy and evolving consumer expectations.
One thing that organizations can do to better equip themselves to combat these pressures is engage in the practice of timely benchmarking.
What is Benchmarking?
Benchmarking, or trending, is the process of measuring and comparing an organization’s performance, processes, and strategies against other leading organizations in their respective industries. The goal of this exercise is to uncover improvement opportunities and implement strategies that can help optimize operations.
These strategies can improve operational efficiencies in areas ranging from marketing efforts to organizational service line mix, to staffing and many more.
Why Your Organization Should Be Participating in Financial Benchmarking
One of the most effective ways to understand the overall financial health of your CCRCs or LPCs is by establishing key financial benchmarks or key performance indicators, known as KPIs.
Similar to the above definition, financial benchmarking specifically compares an organization’s financial performance.
Financial benchmarking provides deeper, more valuable insights compared to what you might find when only reviewing financial statements, allowing stakeholders to make informed decisions and develop appropriate financial goals.
Because your organization has its own structure and goals, it is important to make sure that your benchmarking reports analyze and compare against your organization’s own financial trends. It is also important to note that this analysis should not be used in isolation and results can be drastically different due to service line variations.
Financial Benchmarking for CCRCs and LPCs
To begin the process of establishing financial benchmarks for your CCRC or LPC, it is critical to first determine what benchmarks are most relevant to your organization’s goals.
Some examples of key financial benchmarks for CCRCs and LPCs might include:
- Days Cash on Hand
- Days in Accounts Receivable
- Cushion Ratio
- Average Age of Community
- Debt to Total Capital
- Debt Service Coverage
- Net Operating Margin
- Operating Ratio
- Full-Time Equivalent (FTE) Metrics – Revenue per FTE, Personnel Costs per FTE
Once you have established what benchmarks you want to evaluate, organizations should set clear and achievable goals. These goals should be SMART – specific, measurable, attainable, relevant, and timely, and should focus on how to your organization plans to meet those goals.
When building your plan, make sure that you assign goals to team members, set deadlines for specific outcomes, and establish your process for monitoring progress and evaluating the results.
If you have questions about implementing financial benchmarking at your CCRC or LPC, please reach out to Scott Prentice at sprentice@blueandco.com, or your trusted Blue Advisor.
