A case study in acuity climbing for 14 months while the resident agreements wouldn't allow repricing
Worth studying: a twelve bed licensed assisted living purchase in a small metro, 1.35M, 30 percent down, bought with the operations as a going concern. Eleven residents at close, average private pay rate 4,600 a month. Seller-reported payroll at roughly 51 percent of revenue checked out against the payroll register on the day of purchase. What often does not get checked with the same care is the resident agreements themselves. In this case all eleven were on all-inclusive pricing, one flat rate covering room, board, and care, no level of care tiers, and an annual increase capped at 3 percent with 60 days notice. That kind of agreement works fine for a seller who has been riding a low acuity book down. By month nine, two residents had gone from standby assist to two person transfers, one was on hospice, and one had started night wandering. Direct care hours rose from about 240 a week to 310. When local hiring cannot keep pace, agency staffing at 38 an hour against 19 in house fills the gap, and payroll can cross 68 percent of revenue by month eleven. A worst month burn of 9,200 in cash is a realistic outcome under that pressure. A 3 percent rate increase does nothing when the care hours generating that acuity have roughly doubled for a handful of residents, and nothing in a flat-rate agreement allows repricing for it, nor is discharging residents over a document the prior owner wrote a real option. In a case like this, selling the operation at 1.28M to a regional operator with a real caregiver bench, after accounting for the burn and both sets of closing costs, can leave the buyer down roughly 180k. The operating lesson: price the resident book at its current acuity, not at its current revenue, and treat every existing agreement as a term being bought that cannot be changed. New admissions belong on a tiered assessment schedule with pricing that moves when the assessment moves.
