In the past several months, the U.S. Congress’ Government Accountability Office (GAO) and the Senate’s Special Committee on Aging have reviewed the financial viability of the nation’s CCRC’s (Retirement Communities that offer a range of living and health care options).
The cause for the study was concern over a few CCRC’s who declared bankruptcy and specifically the focus was on Erickson Retirement Communities, a developer of 20 CCRC’s in 10 states.
CCRCs vary in size, accommodations and services provided. They feature apartments or cottage homes and access to health care and a variety of other services, amenities, and activities. CCRCs provide housing and services for seniors who are independent; for those who need assisted living options; and skilled nursing care or rehabilitation therapy for those with more acute care needs.
To reside in a CCRC, seniors pay an entrance fee (usually atleast partially refundable, accept in most cases of those offering a ‘Life Care’ contract) and a monthly fee. Fee structures vary greatly depending on the setting, amenities, services, and special features provided by the sponsoring organization. Today there are approximately 1,900 CCRC’s in the United States. 82% of all CCRCs have a not-for-profit sponsor.
There are basically three types of Entrance Fee Contracts: 1) Life Care Contract (Most expensive and most intensive generally providing for on-site or accessible off-site assisted living and/or nursing care at no additional cost for the life of the resident); 2) Modified Contract (CCRC provides a limited amount of assisted living and/or nursing care services); or 3) Fee-for-Service Contract (resident receives a priority for assisted living and/or nursing care, but must pay the regular per diem rate paid by those admitted from outside the CCRC).
The government’s concern when a CCRC declares bankruptcy is with the resident and the ability of the sponsoring organization to provide the refundable portion of paid entrance fees. Many residents have a large portion of their personal assets involved with the entrance fee and have depended on the organization to provide for them as stated in their residency contracts.
While this concern is certainly real, I believe it must also be kept in context with understanding the broader picture of how well CCRCs actually perform as an industry. Recently speaking to this point is the CEO of AAHSA (American Association of Homes and Services for the Aging), the national organization of not-for-profit Retirement Communities. In an interview, on Friday August 13th, 2010 on the Fox Business Channel, AAHSA CEO, Larry Minnix was asked to discuss whether or not continuing care retirement communities (CCRC) should be considered a “risky investment” for seniors. Larry Minnix suggested CCRCs were a good fit for most seniors. He pointed out that:
• The financial success rate of CCRCs over the last 25 years is well above 95 percent.
• Many CCRCs provide financial aid to residents in financial distress.
• There are very few situations where residents have lost their entry fees if a CCRC fails.
Larry Minnix added in a recent blog the following:
“What bothers me about recent coverage, though, is that they focus on a very small number of problems at the expense of explaining how well seniors are served in these organizations. Despite a disastrous real estate market in the past couple of years, only one CCRC has said it cannot refund entry fees. The broader CCRC story is one of a high percentage of success. Few of the hundreds of thousands of residents of CCRCs have ever not received an entry fee that was owed them or their families. The truth is that the majority of CCRC residents and their families would tell you their story is one of satisfaction and security.
Though the GAO report counseled consumers to study CCRC contracts carefully (a very important idea), it did not recommend any federal oversight or action around CCRCs.
But all of the recent media coverage points up that CCRCs must continue to do a good job at being transparent, being fiscally responsible and being educators of current and future consumers, if people are going to understand the contributions that CCRCs make.”
The fact is that the majority of this nation’s CCRCs remain strong and financially viable. While feeling some of the affects of the down-turn in housing in the midst of a world-wide economic recession, CCRC occupancy has declined, but certainly not to the same degree as the general housing market. Future indicators and demographic projections are for a huge growth in the number of seniors in this nation, the outlook for current and future CCRCs is strong. CCRCs provide a unique function in society and one that will be viable well into the future!