Books are on sale!

Dear readers,

I’m in the process of writing/editing a second edition for my book, Continuing Care Retirement Communities: An Insider Tells All.  The old price for the first edition was $13.99 plus $3.99 shipping/handling, but I’d like to clear out some of my inventory so that I have room for a second edition.  Therefore, for a limited time, I’ll be selling the first edition for $5.99 plus $3.99 shipping/handling.  This is a huge steal, and it’s cheaper than the Kindle version.  This will only last for as long as I have the first editions on hand.  Once they’re gone, they’re gone! BUY IT NOW

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The Naked Truth about CCRC Entrance Fee Refunds

Continuing care retirement communities market the entrance fee refund as a big selling point.  They try to make it sound like an easy transaction: You give them $100,000 to $1,000,000 up front, and they’ll return a portion of that fee to your estate when you die.  Since you’ll be selling your home to pay for the entrance fee, it’s not like it’s money you’ll miss, right?

Like most things in life, the truth isn’t that simple.  Entrance fee refunds are not the straight-forward transactions that CCRCs would have you believe.  In this post, I’ll share some of the hidden downsides of the entrance fee model, specifically as it relates to the entrance fee refund.

Be warned: This is kind of a dark subject, since it deals with what will happen after you die (or move out of the community).  But, for those who want to know, here are the facts.

Virtually all communities will have some waiting period after you pass. Obviously the manager of the CCRC won’t be standing over your bedside with a check waiting for your family the moment you pass away. But, you would except a check be presented to the estate within 30 days, right? Nope.  The truth is that your family may have to wait for a long time (in some cases over a year) for the refund to be processed.

Some communities require that your apartment be “resold.” In other words, your independent living apartment must be reoccupied by a new tenant.  How long does that take?  Could be months.  Could be years if the community has trouble filling the apartment.  And guess what?  Even after it gets reoccupied, the community usually has 45 days or more to cut your estate a check.

Some communities require that ALL of your apartments be “resold.” Spent a few months in assisted living and/or nursing? Those apartments must also be reoccupied by a new tenant before you get your check.

Refund policies vary if the apartment doesn’t sell. Some contracts stipulate a one-year maximum waiting period.  Others don’t say anything about when you’ll be getting a refund if apartments don’t sell.

No matter what’s in the contract, the community still has to have enough cash to pay it back. This seems like common sense, but most people don’t really think about it.  Your entrance fee refund is 100% dependent upon the community being in the financial situation that would allow them to pay you back.  While most states have laws requiring that CCRCs keep a certain amount of cash on hand for refunds, this can be put in danger if the community is in financial difficulty. Thankfully, this has been a rare occurrence historically.

Want to protect yourself? There’s two main things that you can do:

  • Check your contract. The resident agreement will contain a detailed description of how the community plans on paying you the balance of the fee.  If it’s important to you that your estate get the refund in a timely manner, then pay particular attention to this section of the agreement.
  • Don’t move in if the terms aren’t favorable. For too long, CCRCs have made all of the rules when it comes to resident agreements.  It’s worked out for the most part, but some seniors have gotten seriously burned when communities went bankrupt. While the CCRC lifestyle makes it tempting to overlook things like the entrance fee refund policy, I believe that seniors have the power to express their displeasure and be a force of change in the industry.

Want to learn more about CCRCs? Check out some other posts:

Who owns CCRCS?

What is adult daycare?

What is memory care?

Why pushing for a move to senior housing isn’t a good idea.

Understanding a CCRC’s “permanent transfer” policy

There are three things that I think everyone should understand about their move into a CCRC: the community’s amount of debt, the community’s entrance fee refund policy, and the community’s policy on permanent transfers to assisted living or nursing.  Today we’ll talk a bit more about the third one: permanent transfers.
When you move into a CCRC, you agree to move to a higher level of care in the event that you can’t stay in live alone anymore.  It’s called “permanent transfer” because they assume that you will never move back into independent living and thus can resell your apartment to someone else.
There are a few things you should note about CCRCs permanent transfer policy:
The community will decide when you have to move. By and large, almost all CCRC contracts have policies regarding residents who can no longer live on their own.  Due to the sensitive nature of the decision, most contracts require that the community’s executive director and its director of nursing sign off on the transfer.
You don’t have much say in the process. While the community will often consult you and your family about the move, you generally won’t have too much of a say.  This makes sense if you think about it.  Especially for residents who have dementia or other cognitive problems, it can be hard to spot one’s own inability to live independently. However, some seniors bristle at the idea of someone else telling them when they must move out of their independent living apartments.

Read your contract.  Policies vary from community to community, so read your documents carefully. In most cases, your doctor, the community’s head nurse, and administrators must “vote” in favor of your permanent move.  If you disagree, then you’ll have to either prove your independence or move out.  It sounds drastic, but that’s the way it’s handled in most places.

The benefits to the CCRC are many.  For one, the community can ensure resident safety by moving people who need more care to assisted living or nursing.  They can also resell the apartment, which improves their bottom line.

While permanent transfer policies help residents who are in denial of their conditions get the additional help that they need, sometimes there are disagreements.  Unfortunately, they usually work out in favor of the community.  So, if you’re not moving into a community that allows aging in place, it’s in your best interest to read and understand the permanent transfer policy.  It’s probably one of the most important things that you can do before signing on the dotted line.

Want to learn more about senior housing? Check out these posts:

Is it cheaper to stay at home or move into a CCRC?

How do I time my move into a CCRC?

Thoughts on the Frontline documentary about assisted living.

The naked truth about entrance fee refunds.

Who owns CCRCs?

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For many years, CCRCs were owned by local or regional companies or nonprofits.  By some estimates, up to 80% of CCRCs were nonprofits.  But, that’s been changing recently. When the housing market crashed, so did a lot of new nonprofit CCRC developments.  This caused a wave of acquisitions by for-profit providers between 2009 and today, which has forever altered the landscape of senior housing.

Here are some of the big players in the senior housing industry and a summary of who owns them: (Note that this list is certainly not exhaustive.  If there’s a big one that I’ve left off, please let me know.)

Also, as more and more retirement communities become more professionally-managed, companies have sprung up offering management services.  Life Care Services is one of the largest in the country.  They manage care for over 28,000 seniors.

Why does this matter for seniors?  For the most part, it won’t change life for seniors all that much.  But, there are some things to keep in mind:

  • Communities that used to be owned by small, local companies are now owned and operated by much larger companies. This doesn’t necessarily make that a bad thing.  Rather, it’s a fact that senior should keep in mind when shopping for retirement housing.
  • It isn’t always clear who owns what. Olive Garden is owned by Darden Restaurants, but you never really see their name.  It’s not that they’re being secretive.  It’s just that Darden owns about ten other chains of restaurants.  Similarly, Sunrise and Erickson are owned by much larger companies.  So, when you go visit the campus, remember that you’re visiting part of a much, much larger company that has service lines in dozens of other aspects of real estate and senior housing.
  • Get ready for that “big company” feel.  On the one hand, large companies having significant ownership stakes in restaurants, shopping centers, and other facets of American life has worked out well for us.  We see a Wal-Mart sign, and we know instinctively what types of things we can buy there.  It sets our expectations and helps us to understand the types of services offered in one location.  On the other hand, we’ve all had the experience of eating at a restaurant that “got too big.”  There will be senior housing chains that fail because they cut costs too much and service gets sloppy.  There will be others that people flock to because they offer the best service for the best price.

Seniors housing is undergoing a major change.  But, at the end of the day, you’ll still be looking for the same things when shopping for senior housing: good care, professional staff, a history of safety, well-kept facilities, and happy residents.

Want to learn more about CCRCs? Check out some more articles:

Should retirement communities be run like McDonalds? Part 1 Part 2

Signs of trouble in any community.

Helping friends find the right community.

New email scams, retirement is becoming more difficult, helping parents control money better, and finding an assisted living roommate

Danger

A new scam is out there: Don’t open any emails sending you condolences about your “dead friend.”

Retirement is going to become more difficult all around the globe.

Giving your aging parent a prepaid debit card might help them maintain independence but also prevent fraud.

Assisted living with a roommate may help make it more affordable for more seniors.

Should retirement communities be owned and run like a McDonald’s? (Part 2)

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 Note: This is Part 2 of two. Read “Should retirement communities be owned and run like a McDonald’s? (Part 1)” here.

The Bad News:

Managers don’t always care as much about customers. To be fair, this is an issue that every company faces. As a business owner or manager, your goal is to make money. Most of the time, you do that by making the customer happy. But, sometimes that goal can be obscured, especially when managers have bonuses or other competing interests at hand.

It’s worse in corporate situations where managers get bonuses based on financial performance. This can sometimes lead to short-term thinking, which is not always in the best interest of the customer.

For example, real estate investors and hedge funds are under enormous pressure to improve their return on investment, and sometimes this means taking more aggressive approaches to investing. Some of these plays will pay off. Others will blow up.

Risk is magnified.  Aggressive growth strategies in a large provider of senior housing can blow up quickly if the market shifts at the wrong time.  What’s worse is that communities that are perfectly healthy and vibrant can be dragged down by disasters in other parts of the country.  For instance, declines in real estate in one part of the country can impact sales at retirement communities in that area.  If these communities are owned by a regional provider, then no one outside of that area is really impacted.  However, a national provider that has trouble in one market might be tempted to pull cash from an otherwise healthy community to help cover the costs.

Parting Thoughts:

None of these benefits or drawbacks are set in stone.  There are plenty of corporations that begin shaving services and customer care as they get bigger.  Also, there are plenty of companies that are huge behemoths and yet still manage to make customers happy every single day.  The success or failure of a national chain of senior housing communities depends largely on the way the company is run, which is why it’s really, really important that these companies hire good managers.

I can’t say for sure if the consolidation trend is good or bad. In fact, it doesn’t matter because it’s going to happen one way or another. It will certainly impact residents’ lives, although not necessarily in bad ways.

My instinct is to rattle my saber and declare war against the invasion of Wall Street. Seniors shouldn’t have to worry about their home being sold at a bankruptcy auction after hotshot managers make silly decisions and invest foolishly. But, then again, that sort of thing happened in the industry prior to Wall Street arriving.

Ultimately, I think the rules of the game will have to be rewritten a bit, and, unfortunately, it will be big corporations wielding the pen.  Competition will continue. Consolidation will continue. There will be bankruptcies, but, by and large, the ramifications will be felt only for managers and debt holders, not seniors themselves. However, the benefits of consolidation mean that seniors might see better amenities and more activities.

Read Should retirement communities be owned and run like a McDonald’s? (Part 1)

Want to learn more about senior housing? Check out these articles:

Five questions to ask during your visit to senior housing.

Why do CCRCs charge an entrance fee?

What is adult daycare?

Take your pet with you to the retirement community.

Should retirement communities be owned and run like a McDonald’s? (Part 1)

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Note: This is Part 1 of two. Read “Should retirement communities be owned and run like a McDonald’s? (Part 2)” here.

Five or ten years ago, there weren’t that many really large companies building continuing care retirement communities. Sure, Brookdale and Sunrise were big, as was (and is) Emeritus and Atria. But, they largely focused on nursing homes and assisted living.  Most CCRCs were owned by smaller, regional companies or by nonprofits.

Since the market crashed in 2008, that has changed dramatically. Senior housing has become an increasingly attractive play for anyone from hedge funds to real estate investors.  This has spurred a round of consolidation that is relatively unprecedented.  It’s very possible that in the next decade, the majority of retirement communities in the United States could be owned by the same two or three companies.

Is that a bad thing? 

We tend to distrust big corporations, and I think for good reason.  But, yet, we all tend to eat at chain restaurants, shop at chain stores, and buy products from the same big online retailers.  Is it really a big deal if retirement communities follow suit? Would having a few national chains control the entire market impact consumers?

I see several benefits and drawbacks to this scenario:

Most large firms have better access to capital. Smaller retirement communities have to work harder to get credit in the event of financial difficulty, and it’s more expensive.  Larger firms can negotiate for loans and financing on a much more national basis, making it easier to finance campus improvements or new communities.  They also have better access to development consulting and other services, which might be prohibitively expensive for smaller companies. Overall this is good for residents, since providers can get the funding their need in a more efficient manner.

Standards and procedures will be more uniform. Ever visited a family restaurant that just didn’t function well? The cash register was too close to the buffet line, and the tables didn’t leave enough room for servers to walk? Well, most of those issues have been solved in chain restaurants.

As firms get larger, they learn which strategies work the best, and they optimize their organizations.  That’s good news for senior housing where staff have to handle a large array of situations and can benefit from additional training that smaller companies might not have been able to provide.

Lifestyle improvements. Larger corporations will probably be better-suited for creating amenities and activities that improve residents’ quality of life:

  • Better activities:  Smaller companies usually rely on one dedicated activity coordinator to handle all aspects of resident life.  If there were a few national providers, these organizations could pay a department of people to craft activities, travel, or other amenities that would help improve resident quality of life.  Since large corporations can negotiate on a grand scale, these services might also be cheaper.
  • Travel agreements among communities in the same chain would allow seniors to effectively visit any city in the country and always have a place to stay.
  • Large corporations can afford to investment in aging in place technology, which might help seniors stay independent for longer.

Read Should retirement communities be owned and run like a McDonald’s? (Part 2)

Want to learn more about senior housing? Check out these articles:

What to expect on your first visit to a retirement community.

Three sneaky sales tactics and your best defense!

How to find a CCRC.

What is LifeCare?