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Continuing care retirement communities (CCRCs) provide provide a continuum of care for the elderly ranging from those who are able to live independently, those who require help in an assisted-living facility, and those who require more intensive care in a nursing home. These communities appeal to seniors because they can enjoy an independent lifestyle with the expectation that they will be able to stay in the same community, with their spouse, as their health deteriorates in their later years. There are currently 1,861 CCRCs in the United States,1 and the number of older adults living in CCRCs has more than doubled from 350,000 in 1997 to 745,000 in 2007.
Seniors today look forward to living independently longer than previous generations, but they also worry about whether their assets and retirement income will cover the cost of care they may require in their later years. CCRCs provide a growing population of America’s seniors with a convenient range of housing, supportive services, health care options and the ability to age in place. Many CCRCs require fairly large entrance fees (some can be in the five or six-figure range) and additional monthly payments. The fees cover housing costs and a range of care and services, including assisted living and skilled nursing. In addition, residents can purchase a meal plan, use a variety of on-site amenities and activities, and receive additional care which they can pay for out-of-pocket or have covered by insurance.
However, these arrangements are not without risks. The CCRC model is particularly vulnerable during economic downturns, as stagnant real estate markets drive down occupancy levels in independent living units, which serve as CCRCs’ primary source of profit. Financial difficulties for CCRC providers could place a consumer’s investment at risk and raise their monthly CCRC expenditures. In addition, according to the American Bankruptcy Institute Journal, “the CCRC industry is particularly vulnerable to insolvency, and several CCRCs have failed, primarily as a result of poor financial planning. Several high profile bankruptcy filings over the past year have cast a spotlight on these risks.
A recent investiogation into the financial stability of CCRC providers was conducted by the U.S. Senate Special Committee on Aging (Committee) The providers were selected based on the size of their assets under their management and the extent to which they were involved in a federal or state enforcement action. The information collected may not be representative of the entire CCRC industry. The following types of contracts were examined:
Type A (extensive contract) – wherein a resident typically pays an upfront fee and ongoing monthly fee in exchange for the right to lifetime occupancy in the appropriate level of care without an increase in monthly fees as the resident moves between levels of care;
Type B (modified contract) – wherein residents often have lower monthly fees than a Type A contract though the same housing and residential services are included, however, only some health care services are included in the initial monthly fee; and
Type C (fee-for-service contract) – which typically requires an entrance fee, but does not include discounted health care services.
Conclusion
The U.S. Special Committee on Aging came to a number of conclusions. First, the committee noted that unstable market conditions and poor financial planning have lead to financial difficulties or even insolvency among some CCRCs. In addition, choosing a CCRC can be extremely complex due to disparate state regulations, and variations in the type of contract that an individual can sign. Residents need to be aware of the risks that CCRCs pose and consider retaining independent counsel to review these complex agreements.
Some of the key areas that a consumer may want to explore include: the CCRC’s ownership and fee structures; financial performance and security measures; entrance fee refund policies; protections against involuntary transfers to different levels of care or to off-campus facilities; the extent to which residents are able to participate in management decisions; the methods available to residents to address their disputes and concerns with the CCRC; under what circumstances a resident can rescind or cancel his/her contract; and whether the CCRC is accredited.
Resources
The following resources can help potential CCRC residents determine information about CCRC policies, or assist CCRC providers who wish to strengthen their financial planning and management as well as disclosure and transparency practices:
• American Association of Homes and Services for the Aging (AAHSA) (2010). Continuing Care Retirement Communities – Suggested Best Practices for CCRC Disclosure and Transparency.
• American Seniors Housing Association (ASHA) (2010). Assisted Living and Continuing Care Retirement Community State Regulatory Handbook 2010.
• Commission on Accreditation of Rehabilitation Facilities – Continuing Care Accreditation Commission (CARF-CCAC) (2009). Accreditation Standards Manual.
• Commission on Accreditation of Rehabilitation Facilities – Continuing Care Accreditation Commission (CARF-CCAC) (2007). Consumer Guide to Understanding Financial Performance and Reporting in Continuing Care Retirement Communities.
• National Senior Citizens Law Center. Questions to Consider When Evaluation Continuing Care Contracts.
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