Evaluating Continuing Care Retirement Communities (CCRCs)

Elder Law | Jun 20, 2024 | Andrew H. Hook

Introduction

Continuing Care Retirement Communities (CCRCs), also known as Life Plan Communities, offer a comprehensive living arrangement for older adults, providing a continuum of care from independent living to assisted living and skilled nursing care. This memo aims to guide you through the critical factors to consider when evaluating CCRCs, ensuring you make an informed decision that aligns with your financial, health, and lifestyle needs.

Key Considerations

1. Types of Contracts

CCRCs offer various contract types, each with different financial implications and levels of care:

  • Type A (Life Care Agreements): Higher entry fees but include housing, amenities, and pre-payment for unlimited health-related services. Monthly fees remain relatively stable across all levels of care, providing financial predictability.
  • Type B (Modified Agreements): Lower entry fees than Type A, with pre-payment for some care and discounted rates for future health care needs. Shared cost of care risk.
  • Type C (Fee-for-Service Agreements): Lowest entry fees, with pay-as-you-go for higher levels of care at market rates. This model involves higher financial risk due to potential future care costs.
  • Rental Agreements: No upfront fee, but higher monthly payments. These agreements typically offer fewer services and amenities.
  • Equity/Co-Op: Purchase real estate or ownership into a co-op, with monthly fees and more say in day-to-day operations. Some fee-for-service.

2. Financial Viability

Evaluating the financial health of a CCRC is crucial to ensure long-term stability and security:

  • Occupancy Ratio: A high occupancy ratio (90% or more) indicates strong demand and financial stability.
  • Bond Ratings: Look for communities with an investment-grade rating (BBB- or higher), indicating financial strength.
  • Cash Flow: Ensure the community has positive cash flow from operations, covering annual operating expenses.
  • Financial Covenants: Check for any recent violations of financial covenants, which could indicate financial instability.
  • Actuarial Analysis: A detailed actuarial analysis can provide insights into long-term financial obligations and sustainability.

3. Amenities and Services

CCRCs offer a range of amenities and services designed to enhance residents’ quality of life:

  • Dining Options: Multiple dining venues, including formal and casual settings.
  • Fitness and Wellness: Fitness centers, exercise classes, swimming pools, and wellness programs.
  • Social and Cultural Activities: Entertainment outings, cultural and educational programs, and social events.
  • Creative Studios: Art classes, craft rooms, and woodworking shops.
  • Outdoor Spaces: Walking paths, bike trails, and gardens.
  • Healthcare Services: On-site healthcare facilities, including assisted living, skilled nursing, and memory care.

4. Cost and Payment Structure

Understanding the cost structure is essential for financial planning:

  • Entrance Fees: These can range from $100,000 to over $1 million, depending on the community and contract type.
  • Monthly Fees: Monthly fees cover housing, amenities, and some healthcare services. These fees can range from $2,100 to $5,000 or more.
  • Refund Policies: Check if the entrance fee is refundable and under what conditions.
  • Tax Benefits: Some CCRCs offer tax benefits, such as deductions for medical expenses and pre-paid healthcare costs.

5. Regulatory and Accreditation

Ensure the CCRC is regulated and accredited to guarantee quality and compliance:

  • State Regulation: CCRCs are regulated at the state level, requiring annual disclosure statements and financial oversight. In Virginia, the State Corporation Commission provides public disclosure statements for all licensed CCRCs operating in the state, which can be accessed at https://www.scc.virginia.gov/pages/CCRC-Disclosure-Statements. Similar public information is likely available for CCRCs in other states through their respective regulatory agencies.
  • Accreditation: Look for accreditation by organizations like CARF Internation (CARF), which sets standards for quality and financial health.

Questions to Ask

When evaluating a CCRC, consider asking the following questions:

  1. What types of contracts are available, and what are their financial implications?
  2. What is the current occupancy ratio, and how has it trended over the past few years?
  3. What are the bond ratings and financial covenants of the community?
  4. What amenities and services are included in the monthly fee?
  5. What is the policy on entrance fee refunds?
  6. Are there any recent violations of financial covenants?
  7. What healthcare services are available on-site?
  8. Is the community accredited by the CARF or other relevant organizations?
  9. What are the average annual increases in monthly fees?
  10. How does the community support aging in place?
  11. Is the community’s annual disclosure statement available through the state regulatory agency, and what does it reveal about its financial health?
  12. Is the community accredited by the CARF or other relevant organizations, and what were the findings of their most recent accreditation review?

Conclusion

Choosing a CCRC is a significant decision that requires careful consideration of financial, health, and lifestyle factors. By thoroughly evaluating the types of contracts, financial viability, amenities, cost structure, and regulatory compliance, you can make an informed choice that ensures a secure and fulfilling retirement.

For personalized advice and assistance in evaluating CCRCs, please contact HLC, Elder Law Firm. We are here to help you navigate this important decision with confidence and peace of mind.

Andrew H. Hook

President, CELA, AEP, CFP®
757-399-7506 | 252-722-2890
[email protected]

Andrew H. “Andy” Hook is the president of Hook Law, where he practices in the areas of estate and trust administration, elder law and estate planning, including tax, retirement, business succession, special needs, long-term care, and asset protection planning. Mr. Hook’s clients range from high-net-worth individuals with over $60 million in net worth to families just beginning to accumulate assets. A 1975 graduate of the University of Virginia’s School of Law, Mr. Hook is a Fellow of the American College of Trust and Estate Counsel (ACTEC) and a Fellow of the National Academy of Elder Law Attorneys (NAELA). Mr. Hook is also certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation, a CERTIFIED FINANCIAL PLANNER™ (CFP ® ), Accredited Estate Planner ® (AEP ® ), and an accredited attorney for the preparation, presentation, and prosecution of claims for veteran benefits before the Department of Veterans Affairs. Mr. Hook is a former President of the Special Needs Alliance, a nationwide network of disability attorneys, a former Director of NAELA, and a former editor-in-chief of the NAELA Journal. 

Practice Areas

  • Elder Law
  • Estate & Trust Administration
  • Estate Planning
  • Asset Protection Planning
  • Long-Term Care Planning
  • Special Needs Planning
  • Financial Planning
  • Personal Injury Settlement Consulting
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