Senior Living Per Resident Day Analysis
By Scott McCorvie, CEO, Enhance Senior Living
About Enhance Senior Living
Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions and contact us today to learn how we can help you enhance senior living today.
To enhance your senior living knowledge subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music
Overview
Whether you’re creating a proforma model with varying lease-up and stabilization scenarios, you’re evaluating options. In addition, Per Resident Day is a critical part of senior living valuation and underwriting.
The PRD metric is one of the most useful performance tools within the industry, and can be successfully leveraged to add value in a number of different situations. Within this article, I’ll analyze the actual PRD calculation, discuss why this industry tool is so useful, and demonstrate several ways it can be used to create value in everyday applications.
Let’s start with the actual calculation.
Additionally, Per Resident Day, the PRD calculation equals revenue and expenses divided by the period’s resident days.
The revenues and departmental expenses are easily identified within the financials, but what if you don’t know the number of resident days? Well, this can actually be estimated by taking the number of occupied beds in the period, adding an estimate (or ratio) for second residents (double occupied units), and multiplying this figure by the number of days.
If you had 90 occupied beds in June, 10% are typically double occupied.
Additionally, the calculation would be ((90+9) x 30) = 2,970 resident days.
Furthermore, you would then take the monthly expense, raw food costs of $18,500.
Divide by the number of days to obtain Per Resident Day.
So, why is this metric important?
It helps compare operational performance across properties of varying sizes and occupancy.
Additionally, expenses differ when measured Per Resident Day for these properties.
The 40-unit community may be doing a more efficient job in expense management, and actually have a lower PRD expense indication than the larger property. Or, the smaller property may be doing an excellent job in dietary, but the housekeeping and nursing expenses are much higher PRD.
Having a solid understanding of the PRD performance between properties is valuable for comparing performance. Additionally, Per Resident Day benchmarks link performance to industry reports and dashboard analyses.
PRD assumptions are also very crucial in creating sophisticated senior housing proforma models. Analyzing the revenues and expenses on a PRD basis can show regressions and trends within the performance that can be utilized to more accurately project the go-forward performance.
Linking the proforma model to the appropriate PRD assumptions can also provide a more precise sensitively and scenario analysis. Last, including the PRD variables with a multi-year staffing model, unit revenue matrix, and a monthly absorption can provide more in-depth forecast on future lease-up performance and stabilization. This can be crucial in accurately projecting the financial performance for new development, conversion projects, management transitions, and other lease-up scenarios.
Overall, the PRD metric is one of the more vital tools within the industry, and can be used within a number of applications.
About Enhance Senior Living
Enhance Senior Living is a national senior living broker firm specializing in nationwide senior living investment brokerage solutions including active adult brokerage, independent living brokerage, assisted living brokerage, memory care brokerage, and skilled nursing brokerage. Learn more about our senior living broker and operational improvement solutions and contact us today to learn how we can help you enhance senior living today.
To enhance your senior living knowledge subscribe to the Enhance Senior Living Podcast. The show is on all podcast platforms including Apple Podcasts | Spotify | Amazon Music
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