Higher resident acuity and stubborn expenses are creating a “new reality” for senior living operators regarding the care they provide.
In 2025, senior living companies are evaluating care revenue as a lever to improve net operating income (NOI) across communities.
The average age of senior living residents in assisted living and memory care has increased in recent years as older adults enter communities with more chronic health conditions and hold off to move. Between 2020 and 2022, the portion of assisted living residents 85 and older rose from 50% to 53%, indicating an overall increase in average resident age, according to the Centers for Disease Control and Prevention’s National Center for Health Statistics.
An analysis in 2024 by the American Health Care Association and the National Center for Assisted Living found that the majority of assisted living residents are over the age of 85, and 4 in 10 residents are living with some form of dementia or cognitive impairment. AHCA/NCAL data shows the average length of stay in assisted living ranges between 22 months to 28 months.
To better capture care revenue while reflecting the higher costs of providing care, senior living companies have changed levels of care systems, while also adjusting for more frequent assessments of resident health to better place residents in their necessary care level.
“In stronger markets, you have more leeway, but ultimately, delivering quality care is what separates a mediocre or even failing property from a truly successful one,” Pegasus Senior Living CEO Chris Hollister told SHN. “This is the new reality, welcome to the future.”
The Dallas, Texas-based provider has revamped its level of care system in assisted living and memory care through relying on electronic health record reporting, assessments and an overhauled menu of care services.
A reliance on capturing more clinical data has also pushed operators to weigh their selections of tech partners to craft dashboards that are easily digestible for staff to make observations, notes and changes to a resident care plan without being stuck behind a desk and in front of residents.
Carlsbad, California-based Kisco Senior Living overhauled its care structure in 2021 and is on the march to align care margins with that of overall operating margin of 30%, “or close to it” CEO Andy Kohlberg said.
“The tricky part is setting what the rent component of assisted living is, and you have to segment out the rent piece out of the care piece,” Kohlberg told SHN. “There’s a complexity in separating rent from care cost.”
To react to changes in acuity, Kisco deploys demand-based staffing to shift resources and team members to communities most under high acuity strain. This has also led Kisco to match schedules to daily care needs of residents and conduct more detailed assessments to accurately charge for care.
As operators still rely on annual resident rental rate increases, some operators have shuffled care services to better capture care revenue. All of this is in the name of preparing for a future where acuity reins and drives an operator’s ability to stabilize communities during a period of strong demand, driven by aging demographic shifts, and low new construction rates.
Failure to capture care revenue leads to ‘margin error gap’
In the last five years, senior living providers have become familiar with providing increased care for residents that are in need of elevated care services in assisted living and memory care. But sometimes that phenomenon – referred to as acuity creep – can increase costs and create a “margin error gap” that ultimately “erodes NOI” over the long-term, according to 12 Oaks Senior Living President Greg Puklicz.
The Dallas, Texas-based provider has reported a 13.2% increase in level of care charges compared to 2024, Puklicz shared with SHN. This has been driven by 12 Oaks communities reevaluating levels of care point-scoring system that also added additional levels of care to provide personalized and more targeted services to residents.
“We’ve seen a real time increase in net margin from level of care activity,” Puklicz said. “
At the end of the day, Puklicz said, it’s critical for operators to match “actual care being provided” with resident acuity to capture care revenue and improve NOI.
12 Oaks Senior Living operates 40 communities in seven states.
Pegasus Senior Living also revamped its care billing and levels of care, effectively doubling the levels of care and structure around how residents are billed for care services provided in assisted living and memory care, Hollister said, moving to 12 levels of care in assisted living and six in memory care to create “narrower gaps in what the price is.”
This is in service of creating transparency and affordability for residents that may be in need of some additional care services but not require an extreme jump to another level of the continuum.
“There’s a psychological and very human element in play and it’s hard to have these conversations but if you assess correctly and document, you have the data and facts to build that trust,” Hollister said.
Hollister said Pegasus tracks NOI per unit per month, with care revenue increasing between $300 to $500 per unit across assisted living and memory care communities, approximately, since 2024. That “heads straight to the bottom line” and can lead to improvement in revenue, he added, if a community is able to grow occupancy to 90% or greater.
“It shows the progress and that’s a reflection of higher occupancy that we have because the fundamental operating economics are so much better than we were just a few years ago,” Hollister said.
Pegasus Senior Living operates 44 communities in 13 states.
Moving away from ‘all inclusive’ and ‘reassessing’ care services
As acuity drives operations in assisted living and memory care, some high acuity providers with skilled nursing exposure are taking skills learned providing nursing services into assisted living and memory care.
For example, Minneapolis, Minnesota-based Health Dimensions Group has for years offered skilled care, and as acuity in assisted living and memory care rises, forced the operator to think differently about its care structure, according to CEO Erin Shvetzoff Hennessey.
Due to skilled operators “living and dying” by their reimbursements, higher acuity operators can provide “knowledgeable and accurate” strategies in capturing care revenue, she said.
“We’re getting paid for all the care we provide,” Shvetzoff Hennessey said. “That same team also oversees revenue for our assisted living, and they’ve been able to apply the same systems and discipline to ensure levels of care are consistent across the portfolio.”
Shvetzoff Hennessey said she believes HDG is well-positioned with a mix of senior living communities and skilled nursing units to meet demand, while transferring insights in operations from both areas of the operating business.
In communities recently acquired by HDG, care teams are reassessing resident care, an exercise that has improved resident acuity documentation. Using care data, the community can discuss with families why their loved one is paying more for care than they were before.
Even highly occupied communities that aren’t billing correctly for care could be missing out on capturing current demand.
“You need to have that fine-tuned, because at a certain point, if you’re fully occupied but only raising rent by 5% each year and not adjusting care levels often enough, your NOI can’t increase quickly especially as labor costs rise,” Shvetzoff Hennessey said. “The key is finding additional revenue.”
Senior living technology company August Health, an electronic health record platform, has worked with dozens of operators in recent years to make changes to their care structures. A “general trend” witnessed by August Health Co-Founder Justin Schram has been operators moving away from “all inclusive” care levels to a point-based system with levels of care.
“A point-based system, when points are a proxy for caregiver time, allows an operator to more accurately measure the staffing needs of a community,” Schram told SHN. “When the acuity in the community rises, the care revenue will rise in tandem, thereby allowing the operator to fund the appropriate staffing level and maintain a margin.”
Schram said operators have also revamped “data integration across systems” to identify care revenue opportunities. In the past it was “all too common” that resident assessments would be entered in late or a level of care increase would not correlate with increased billing to reflect a rise in resident acuity, Schram added.
“Modern analytics provide a dashboard view that helps prevent care revenue leakage,” Schram said. “Operators especially value the ability to capture e-signatures on Service Plans, reducing the logistical challenges of securing agreement from residents or responsible parties on updated care plans.”
Care is the ‘third leg of the valuation stool’
Going forward, operators see challenges ahead in aligning operations in this higher acuity reality as the health care segment of senior living will continue to be the “third leg of the valuation stool” and a critical part of operations in the future, Puklicz said.
“The ability now to monetize health care initiatives will result in value creation for the community with better wellness experiences and extended lengths of stay for the residents,” Puklicz added.
In the future, Hollister said operators must now focus on length of stay improvements as transitions can be costly for communities. Another important aspect must be educating the general public on the ins-and-outs of just what exactly assisted living providers offer.
Improvements in fall prevention and fall detection, of which 12 Oaks and Pegasus both use ambient monitoring systems, will also play a major role in helping preserve a community’s overall length of stay, Hollister added. This must also be coupled with further technology adoption in operations, Schram said.
“The next wave of innovation leverages this real time passive monitoring to gain a more accurate picture of resident care needs and provides an even tighter feedback loop to ensure care needs are being met,” Schram said.
