Westmount Retirement Center is currently utilizing a flat price per month cost accounting system. In the past this system was an effective one due to the fact that the vast majority of the patients of the Center all required the same services, making it cost effective to charge a slightly higher flat rate and parceling out the costs for the extra services for the select few across the board. As times have changed, the demographic profile of individuals who were looking to obtain medical services from the Retirement Center has changed along with them. It is no longer cost effective to offer a flat rate, as the Center is ultimately losing profits and losing money on this system. It is clear that the Center must make a change and a new pricing model should be developed, one that reflects not only the size of the suite selected by the individuals based on their needs and desires, but one that also factors in the level of medical care that these individuals need and the services that they require during their stay within the Center. In order to do so, several alternatives have been suggested, and through a review of these different alternatives it will be possible to determine the most appropriate pricing model for the Westmount Retirement Center and make a recommendation as to which strategy will need to be implemented.

The cost of assisted living is something that many people fail to consider when taking into account the type of assisted living center that they would like to live in, which has the potential to limit their options, as most centers are no longer utilizing the pricing strategy offered by Westmount Retirement Residence Center due to the fact that it is no longer cost effective to do so (ALFA, 2014). While most assisted living facilities offer “assisted living services (that) are included in the facility’s basic service costs, …some may be offered for additional fees” (Family Care America, 2013). Among the different options that Westmount may consider are to offer “an all-inclusive monthly price, tiered pricing based on required services, pricing based on individual services requested by the resident, or some combination of these” (Family Care America, 2013). While “more than half of assisted living communities use a tiered pricing model with bundled service,” it is not unusual for an assisted living facility to “regularly review service and care plans to ensure residents’ needs are being met” (ALFA, 2014).

Westmount has the option of continuing to bill a flat rate, recommended to be at least $3,022 per month, “the average cost for a private one-bedroom apartment in an assisted living residence” (ALFA, 2014), an increase from the standard rate at Westmount to the tune of almost $1,000, indicating the primary reason as to why Westmount is losing profits at this time. This will allow the organization to ensure that they are able to cover their costs while still providing their patients with the high levels of care they have come to expect. Alternately, Westmount may opt to utilize a tiered system, with the patients who need the least amount of care remaining at Westmount’s current rate of $2,235 and those who need more services rising up subsequent tiers, paying an overall total for their cost of service. The third option available to Westmount is to offer the same flat rate to all residents, somewhere around $3,000 per month and offering patients the option of purchasing the additional services that they would like, or charging additional fees for necessary services – a form of a la carte pricing; with the third option, Westmount residents would be able to still obtain all the services that they will need, but they would be required to pay for those additional services, ensuring that both the patient and the Center are able to sustain the levels of functionality that they so desire.

Based on the different options available to Westmount in the creation of a new pricing strategy, it is recommended that Westmount switch to the tiered pricing system. There are a variety of different reasons for this recommendation; first, this will show residents that Westmount is attempting to be as fair as possible in their pricing system, ensuring that those who need the least amount of additional services do not feel as though they are being treated unfairly, receiving no rate increase for no additional services needed, and showing them that they will not be requested to pay for the additional costs associated with the other residents whose increased needs have necessitated rate increases. Those who do not need excessive medical treatments would barely rise in price and would think that fair, based on their additional services, and those who need large amounts of care would find it fair that they would pay the most.

Westmount Retirement Residence Center, by applying the tiered pricing model, will be able to ensure that their costs are once more covered by the fees that they are receiving from their patients, that they are able to once more turn a profit, and that the residents of the center will not have to worry about decreases in cost of living or quality of care. As long as the information is presented to patients and their families in the appropriate manner, explaining that it is necessary for assisted living facilities to regularly reevaluate their pricing and that these are the lowest cost of living increases that can be applied within the center, residents should be pleased with the overall outcome and will choose to stay with Westmount; in addition, as a result of the lower increases, it is highly likely that Westmount will see an increase in new patients, working to provide benefits beyond that which were anticipated by the Center.