Many operators say these agencies are costly and not transparent about how they get paid, yet they rely on the services to generate move-ins.
By Jane Adler
Like restaurant reviews on social media, industry ratings of third-party referral services range everywhere from one to five stars. Some operators love referral services, and some don’t. Still, most everyone uses them.
Operators and owners admit the services — free to consumers — are a robust source of leads. But operators complain about the cost of referrals to them and the low conversion rate of leads to actual move-ins.
Small operators often rely on referral websites since they don’t have the resources to host their own Internet advertising campaigns. Big referral companies have the marketing muscle to capture the consumer for that initial online search. A big ad campaign by referral service A Place for Mom features well-known TV host Joan Lunden.
Large-scale operators are less dependent on referral sites, but usually accept their terms and prices because they boost community awareness and frequently result in move-ins.
At the same time, the referral industry itself is in flux. New types of referral services are emerging, even industry-led initiatives. Regional and local referral services, with their own spin on the marketing model, are growing quickly. Meanwhile, the big online referral services are being challenged by a recent wave of state legislation that aims to beef up consumer disclosure.
“Referral sites are a necessary evil,” says Eric Mendelsohn, president and CEO of NHI, a REIT based in Murfreesboro, Tennessee, with 152 seniors housing properties. “They are good at what they do, but they are expensive.” Another gripe is that referral agencies don’t adequately disclose to consumers how they are paid, he adds, and only make referrals to communities that are their customers.
King of the hill
Two big online referral sites dominate the national market.
Founded in Seattle 18 years ago, A Place for Mom covers all 50 states. The company has 500 senior living advisors dispersed throughout the country. Another team of 300 advisors works with hospital and rehab discharge planners, as well as social workers.
A Place for Mom has 18,000 community customers, according to Sue Johansen, vice president of partner services at the company. Her office is in San Francisco. Like other referral services, the company covers senior apartments, independent living, assisted living and memory care communities. It does not help consumers pick nursing homes.
The privately held company is owned by Silver Lake, a technology investment firm, and General Atlantic, which provides capital for growth companies. Annual revenues for A Place for Mom are estimated at about $50 million, according to press reports.
The other big national player is Caring.com, headquartered in San Mateo, California. The company is owned by Caring Holdings, a private equity group.
Caring.com works with about 9,000 communities. It has about 100 advisors who work with consumers. The company won’t disclose annual revenues but one estimate puts the figure at about $7.6 million.
The sites have some minor differences. Consumers can conduct a rudimentary property search on Caring.com without filling out a contact form. Visitors to A Place for Mom must fill out a form or call an advisor to conduct a search.
The companies have similar business models. Online leads are funneled to their customers’ properties. If a property is not a customer, the advisor will generally not refer the consumer to that property.
If the lead results in a move-in, the community pays a fee to the referral service. Though fees vary somewhat, they typically are equal to about one month’s rent, operators say. The advisor is paid on commission — a portion of the referral service fee.
A 2010 investigation by The Seattle Times newspaper said the average commission paid to A Place for Mom in Washington’s King County was about $3,500 with about $650 going to the advisor.
Anecdotally, operators say consumers complain about too many follow-up calls from advisors.
Change of heart
When the online referral services first appeared, Richard Hutchinson, CEO at Discovery Senior Living, vowed never to use them. “But that’s not reality,” says Hutchinson. “My thinking has evolved.”
Discovery Senior Living operates 63 buildings in 14 states. The company is based in Bonita Springs, Florida, and has several capital partners including REITs and private equity investors. Discovery has an ownership interest in all of the properties.
Hutchinson likens the referral services to a credit card. “It’s a tool,” he says. Referral services, like credit cards, are expensive to use but are an option when the sales effort requires more support. “Every organization should think about using the service, but judiciously,” he says.
Senior living providers can’t afford to ignore online marketing — a big plus for referral services. Consumers often start their senior living search online. Consumers who are unfamiliar with senior living can find a lot of information about senior care on the referral sites.
“We feel there is a lot of work to be done to educate families about modern senior living,” says Johansen at A Place for Mom. The company boosts brand awareness with its robust TV advertising campaign. The website also offers tools for operators to drive business, adds Johansen, such as a property tour feedback mechanism.
Referral services employ sophisticated search engine optimization (SEO) and search engine marketing (SEM) campaigns to list their sites at the top of the search page. Consumers are more likely to click on the first results, which may eventually lead to a sale.
“We expedite the consumer through the progression of the search through to the actual move-in,” says Jason Persinger, chief digital officer at Caring.com. His office is located in Charlotte, North Carolina.
The national referral services also own other web addresses or URLs to increase the chances that a consumer will click on one of their sites. For example, A Place for Mom listings appear on seniorhousingnet.com, a website owned by the parent of Realtor.com.
A Place for Mom provides search assistance for 350,000 families a year, according to Johansen. The number of leads generated depends on several factors such as the location of the community, pricing, amenities and care level.
“We try to recommend four to five communities to the consumer,” says Johansen. Market penetration varies. In some markets the service works with 95 percent of the senior living providers, and in others the penetration rate could be as low as 70 percent. Critics say that a low penetration rate narrows consumer options.
About 35 to 40 percent of referred leads by A Place for Mom result in a move-in somewhere each year, says Johansen. She adds that the move-in could be quick, in less than a month, or take years, depending on where the consumer is in the decision process.
Operators anecdotally report that conversion rates to their buildings from leads provided by the national services range anywhere from 1 to 20 percent.
Caring.com refers more than 100,000 consumers to communities annually. The number of conversions to sales depends on a number of factors, but ranges from single- to double-digit results, says Persinger.
Discovery Senior Living reports that 1 to 2 percent of leads from national referral services are converted into sales. The conversion rate for leads from other sources such as word-of-mouth and direct advertising ranges from 10 to 13 percent. In some cases, Discovery also uses local referral services, often called placement agencies, which result in a higher sales rate than the national online services. The local services usually charge less than the national ones too, says Hutchinson.
Online referrals are costly from an expense standpoint, notes Hutchinson. Discovery pays its salespeople on commission and then pays the referral service a commission.
However, Hutchinson points out that Discovery is a big enough company to have its own 15-
person digital marketing operation. “We are pretty cutting-edge,” he says. But he adds, “All things cost money.” Operators with say three or four buildings don’t have the budget to create their own internal digital marketing campaigns and must rely on the referral services, he explains.
Users tailor their approach
At NHI, all 36 of its operators use various referral services.
Mendelsohn says the national referral agencies account for about 25 to 50 percent of the leads. That translates into about 10 to 20 percent of sales. “The services are very effective at what they do, but they’re expensive,” he says.
Is there a time in the sales cycle when a referral service makes more sense?
Older, less competitive buildings need the service, says Mendelsohn. New properties naturally generate attention. Geography plays a role. For example, an NHI property with no roadside visibility relies on the services for referrals.
At Discovery, referral services are retained when a newly acquired building relies on the leads. Typically, the sales team is trained to develop its own leads, gradually phasing out reliance on the referral services.
The company also uses the referral services when new competition comes into a market and providers are scrambling for market share. “That’s a tough environment where it’s hard to get leads,” says Hutchinson.
New players emerge
In 2017, the American Seniors Housing Association (ASHA) launched “Where You Live Matters,” a website with consumer information about senior living. A community locator was added last April. It lists 4,000 communities owned or operated by ASHA members.
Thousands of consumers have searched for communities on the site, which averages about seven minutes per visit, according to ASHA President David Schless. He doesn’t think the site competes with the paid referral services, but acts as a resource for consumers. “Where You Live Matters” is being refreshed to optimize site performance and will be relaunched in a month or so, he adds.
Local and regional services put their own twist on the referral business model. They typically refer to themselves as placement agencies and work in person with consumers. The placement agencies have an online presence, but get many of their customers through relationships with hospitals and other healthcare provider groups. The agency is paid a fee by the community when a referred resident moves in, usually 50 to 100 percent of the first month’s rent.
Ruby Care Senior Living Advisors covers five counties in the Dallas-Ft. Worth area. Patty Williams, Ruby Care co-owner, says that the national referral agencies used to be the only game in town. She and her business partner launched Ruby Care three years ago.
Williams points out the differences between her business and the national referral companies. Ruby Care meets face-to-face and one-on-one with consumers to determine their needs. The advisor goes on tours with the consumer and guides them through the process. “It’s very individualized,” she says, adding, “We have stepped inside every community we recommend.”
Also, Ruby Care doesn’t share the consumer’s contact information with the communities, so the consumer isn’t bombarded with follow-up phone calls.
Local services get organized
The National Placement and Referral Alliance (NPRA) represents about 450 member referral services. Members do not include online-only services.
Chuck Bongiovanni is president of the association and founder of Care Patrol, a franchise system of placement services. He says that NPRA members typically find leads through relationships with medical providers. Local services don’t have the marketing budget or know-how to compete online with the national Internet referral services, he adds.
Operators typically work with the in-person placement services as well as the national online services, says Bongiovanni. But he claims placement services have a higher move-in rate.
At Discovery Senior Living, conversion rates to sales from local referral or placement services are higher than from national services. Hutchinson attributes the difference to the personal touch and the market knowledge of the local service. He adds, however, that the highest conversion rates result from the company’s own internal marketing strategy.
The NPRA has spearheaded successful legislation in several states around the issue of consumer disclosure. A new law in Colorado that went into effect in May 2019 requires agencies paid to refer prospective residents to assisted living communities to disclose to consumers their business relationships with communities and the fact that they are paid for referrals.
A similar law was passed in Arizona last year.
Disputes can arise between national and local agencies about ownership of the lead. A consumer may initially search the online national referral service and then turn for help to the local placement agency.
Bongiovanni says that the placement agency may not get paid because the national referral service had the consumer’s name first. “Consumers don’t understand,” he says, adding that new legislation on consumer disclosure is in the works in other states.
Other types of referral services are emerging.
Based in Chicago, LivingPath.com aggregates lists of senior living communities. It currently has about 7,000 community listings on its website covering 28 states.
The listings are free to consumers and to the community. Leads are routed to the communities.
Communities can buy a premier listing for $600 a month. It provides additional content on the listing and a promotional video and photography for social media.
Rich content, such as videos posted on a website can help improve search rankings, according to Jonathon Woodrow, co-founder and CEO of LivingPath. Premier customers can also use their listing to recruit workers. “Employee leads is the next frontier,” says Woodrow.
Other company products include a list management service to monitor how a community’s listings look across the web as well as market data on pricing, availabilities and concessions data.
“We are growing our market presence,” says Woodrow.