CCRCs under the microscope

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A growing segment of the long-term care field, continuing care retirement communities, has piqued the interest of the federal government.

The Senate Special Committee on Aging recently held a hearing on the risks involved in investing in one of these approximately 1,900 communities around the country. The communities typically require an entrance fee. Seniors spend anywhere from $20,000 to upwards of $500,000 to live there—sometimes for life. They also pay monthly fees.

During the hearing, which was held earlier this month, a report was released from the Government Accountability Office. The report found that regulation of the communities varies widely from state to state. Also a report issued from the Aging Committee found many CCRC ownership structures to be very complex, and that financial troubles at any level can have real consequences for individual residents. 

So is there is a reason for residents in CCRCs to worry? Larry Minnix, CEO of the American Association of Homes and Services for the Aging, isn't too concerned.

“We believe that the risk is minimal and that consumers should be informed,” he told McKnight's.

AAHSA, the American Seniors Housing Association, and the National Investment Center for the Seniors Housing and Care Industry actually released a comprehensive and informative report in conjunction with the hearing about this business. It offers a snapshot of CCRCs—who lives there, their history and how the financing works.

Among the findings, the report said that an estimated 65% to 75% of CCRCs offer contracts that include a lump-sum initial payment (entrance fee). The large majority of these offer some degree of repayment to the resident if he or she moves out of the community, or to the resident's estate if the resident dies.

Other notable information in the report:

—A total of 82% of CCRCs have not-for-profit sponsorship.

—Most residents represent the middle- or upper-income brackets. A total of 32% of new independent living residents reported current annual incomes ranging from $50,000 to $99,999.

—The number of CCRCs known to be in payment default or to have filed for bankruptcy since the economic crisis began only includes about 15 borrowers. Still, a number of CCRCs are facing covenant violations, or technical default situations.

—CCRCs that have filed for bankruptcy protection “in most cases have done so without adverse impact to the financial security of the residents,” the report said.

Erickson Retirement Communities comes to mind when thinking of financial risk affiliated with CCRCs. The CCRC declared bankruptcy and recently was sold to a private firm. While that was a troubling situation, it also seems to have been an anomaly because of its unusual corporate structure, which collapsed as a result of the recession. Their housing continues to serve residents.

CCRCs, while still small in number, are becoming a significant part of the continuum of care. The idea behind them is a good one. They help to protect people's wealth while providing for them medically as they age. Known for their amenities, such as upbeat dining facilities and health centers, they also offer an opportunity to age with quality care. It's hard to beat that.

To follow up on Minnix's point, people should be aware of the fine print when they move into one of these communities. CCRCs, for their part, should honor and respect the financial commitment that residents have made in their new homes.

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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Emily Mongan.

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