CCRC Insolvency

RetMD21

Thinks s/he gets paid by the post
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NYT has a nice article "When the Retirement Community Goes Bankrupt" When the Retirement Community Goes Bankrupt
IDK if there is a free way to access it.

A couple is 3 years into residence at Harborside in Port Washington NY which is in bankruptcy proceedings. At 85 yo they paid $840,000 upfront with a monthly flat fee of $6000 and promise of return of half of the upfront fee on death. State regulators didn't approve sale to national chain. They have a quote from a law professor saying that residents are unsecured creditors and are at the bottom of the list in bankruptcy. The article goes on today that actual failures are rare. Many states don't require reserves.

I am interested because MIL's CCRC is not doing well. She is in hospice so we are pretty sure that the facility will outlast her. The quality of care has declined and we think they have started taking Medicaid to boost revenue and occupancy.

CCRC's have worked out for a lot of folks but I am skeptical. The National Continuing Care Resident's Association has a consumer guide that emphasizes the importance of looking at the organization's financial stability before signing on.

https://s3.amazonaws.com/ClubExpres...de.pdf&Signature=VLyQ2T+tx3+zNZC6mnaXrapFLcM=
 
Yes, this is a real concern that can easily be overlooked. It's not hard to determine their financial stability, but it does take a bit of digging.
I know that the ones I'm looking at are very solid, but there was another that I had considered and when I got into the details I had some misgivings about it. Still reasonable, but it moved down in my short list.
 
When I consider what it costs to live in a facility with decent care, I'm always shocked when I hear of a bankruptcy. How could they take in that much up-front money, charge that much per month, pay most of their people min-wage and STILL go bankrupt??

It makes me think that someone is pocketing a lot of money someplace, but I have nothing to base that on except the huge amount of money involved. YMMV
 
When I consider what it costs to live in a facility with decent care, I'm always shocked when I hear of a bankruptcy. How could they take in that much up-front money, charge that much per month, pay most of their people min-wage and STILL go bankrupt??

It makes me think that someone is pocketing a lot of money someplace, but I have nothing to base that on except the huge amount of money involved. YMMV
I think some of your assumptions are wrong.
At the CCRCs on my short list, they consistently rank high on "best places to work" lists, so they're paying far above minimum wage. They also have many employees who have been there for many years.
 
NYT has a nice article "When the Retirement Community Goes Bankrupt" When the Retirement Community Goes Bankrupt
IDK if there is a free way to access it.
...
If you have an online NYT subscription, you can "share full article", which is the tab at the beginning of the article that looks like a wrapped Christmas present. Tapping on that gives you a link that you can copy and post here. Then people can tap on your link here and bypass the paywall for that article. I think you can share ten articles a month.
 
This article ( The Looming Crisis in Continuing Care Retirement Communities (CCRCs) | Toptal® ) says that, while CCRCs are effectively insurance products as well as care facilities (and residential real estate), they are only really regulated as care facilities. The author opines that they should be regulated as insurance policies/annuities in addition to as care facilities. He has a point, seems to me.
 
Agreed - one paragraph neatly summed it up (bolding is mine):

The challenge for the industry and the way it has evolved is that these implied insurance products have not been actuarially underwritten, and the available assets of the sponsors (CCRC operators) are typically insufficient to account for many of the long-term financial obligations that are inherent to these contracts. Instead, operators rely on high current cash flows derived from entry fees, ready access to the tax-exempt bond markets, and going-concern GAAP accounting to finance their operations and capital expenditures.

Ponzi, anyone?
 
I think some of your assumptions are wrong.
At the CCRCs on my short list, they consistently rank high on "best places to work" lists, so they're paying far above minimum wage. They also have many employees who have been there for many years.
I'm going by what I learned about the unit my parents lived in but that was 20 years ago, so things may have changed. Now, I'm talking about the "aids" and not the nursing staff. I hope you are right. I wouldn't want those j*bs (at any price) but especially not the unskilled positions.
 
If you have an online NYT subscription, you can "share full article", which is the tab at the beginning of the article that looks like a wrapped Christmas present. Tapping on that gives you a link that you can copy and post here. Then people can tap on your link here and bypass the paywall for that article. I think you can share ten articles a month.
Lets give it a try: Here is the article.

Yikes, the subject couple put down $840,000 even though the place had filed for bankruptcy twice and was in the news for financial problems. State regulators failed to approve a sale to a national chain that would have kept the joint open. That's troubling too.
 
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.....It's not hard to determine their financial stability, but it does take a bit of digging......
I suspect that your reviews were sufficient. Unfortunately, I'm not confident that my reviews would be adequate.

From the article, supposedly the Curtis's reviewed the finances, although we don't really know what that means,
But Bob Curtis and his sons, both in finance, consulted accountants and even interviewed the chief financial officer of the Harborside’s parent company.


For me, I think the best approach is to buy in as late as possible. I know others think this is a horrible idea, but it does have the advantage of a shorter time window for problems to develop.
 
Agree w/above....

Even if the financial situation is stellar at buy-in, 10 years later could be quite different....
 
Are Fitch ratings any good? The one I looked at lats month quoted a high Fitch rating. Buy-in is "only" $135,000, so less is at stake but still scary. They also have a lower buy-in option with a refund that gradually decreases to zero after a period of years. Well, the one I'm checking out tomorrow has already informed me that there are financial entry requitements. I'll ask for theirs, too!
 
Before I would buy into one of these non-transparent outfits, I would need to see the current balance sheet, income statement, cash flow analysis and the last few years of federal and state tax returns. Even then, it is a risk going forward. Just interviewing their financial folks is a conflict of interest. But that's just me.
 
Before I moved to my CCRC I had a lawyer and CPA look at all the financials and the paperwork. My CCRC does not give a refund so that helps the balance sheet. Also we have 600 people on the waitlist so that helps too.
 
Same thing happened here in IL a few years ago, we almost got caught in it as were at it for FIL , had interviewed and everything. They even phoned us just a month before bankruptcy to urge us to move in.
Deposit at that time was ~$500K.

They never let on things were close to bankruptcy, they even lied to say we should take a room as they had one open recently and could squeeze us in... even though they were supposed to have a waiting list..

People are hoping to get back 10 cents on the dollar.

 
For me, if I ever end up in a CCRC, I would not go with a Type A, instead I will pay as I go. It does not matter that it costs me twice the monthly fees or more. If I don't like one outfit, I can easily move to another one.
 
For me, if I ever end up in a CCRC, I would not go with a Type A, instead I will pay as I go. It does not matter that it costs me twice the monthly fees or more. If I don't like one outfit, I can easily move to another one.
But in my area even the pay as you go have substantial entrance fees and require medical and cognitive tests before you are admitted. So not easy to move from one place to another
 
For me, if I ever end up in a CCRC, I would not go with a Type A, instead I will pay as I go. It does not matter that it costs me twice the monthly fees or more. If I don't like one outfit, I can easily move to another one.
That's my feeling. If it starts to go south, I want out of there. And it sounds like the buy-in fee should be something I can lose without it jeopardizing my retirement plans. I'm assuming I could write it off on my taxes as a bad debt, which might take some of the sting out of it.
 
A friend of mine had a stroke rendering him almost blind and paralyzed two years ago. His family found a nice 8 - 10 person assisted living place near his house and he spent his last year + there having wonderful care. I believe the place was pay as you go place that cost about $5K per month.

There are alternatives to the giant facilities that cost a ton with big entrance fees. You just have to know what you want and NEED at the time. And, with the large amount of people turning 65 these days, more and more facilities are being built.
 
We have a group LTC policy through my mega corp that we hope will pay for our LTC care. We have enough investments if we need to pay ourselves. It would reduce our kids inheritance if we needed to use it. We’re not looking for one of the CCRC places that require a large entry fee even if they claim it’s refundable. We’ll pay as we go.
 
When it was time for my mom to got into a facility (memory care) she had talked about a CCRC... WAY too expensive upfront cost... and the monthly costs were as high as the pay as you go places...

AND, it might be hard to move her if we deemed the service to be bad... who knows what a few years can do...

I am with aja... pay as you go.. and a small place..
 
When it was time for my mom to got into a facility (memory care) she had talked about a CCRC... WAY too expensive upfront cost... and the monthly costs were as high as the pay as you go places...

AND, it might be hard to move her if we deemed the service to be bad... who knows what a few years can do...

I am with aja... pay as you go.. and a small place..

I agree with the pay as you go tactic- I don't want to pay big $$ at the front end in return for a promise of LTC that I may not need or may be sub-par or gone due to bankruptcy when I need it. The place I looked at last month has LTC but they charge a much higher monthly amount ($13K/month compared to $5-$6K for most living units with services included). If I need it, I'll make the decision (with DS and DDIL) then. That facility would refund 90% of the $135,000 buy-in fee but I do plan to ask for several years of financials. If I have questions I have two brothers who are accountants.

I like the "frills". I'm still very mobile and will use the bike/walk path, the Fitness center, Happy Hour (they have it every night but maybe not every night!), Bible study, etc. They also have regular transportation to the local bank (not needed) and shopping. I want to be able to give up my driver's license when the time comes without losing my mobility.
 
Athena, I see you are still very mobile and physically fit from your posts and travel adventures. I don't quite understand why you are considering an expensive place at your stage of life?

Near me, a new (one year old) absolutely beautiful apartment complex (55+), fully equipped (pool, exercise facility, meeting areas, library, theater, etc), and other amenities, has been built and it house maybe 200 very nice apartments. I've been over there several times and scoped it out, talked to the residents (singles, widows, couples) and I believe I will move in there when I am sick of taking care of my 4 bedroom house.

It's next to their (Grace Corp) assisted living facility and their independent living facility. Rents are $1500 - $2200 per month with a year lease. This place is for active people and I have been to a few "events" and dances that have been put on by management. It's a good way to slide into old age.

Here's a link to the complex (as an example). Something like this might be a good alternative for you being so active and travelling a lot:

 
I read engineernerd’s link about CCRC financing. I don’t know what the solution.

MIL’s facility has been around for over 50 years and had been quite successful. I think the world has changed and they are having trouble adapting. They started as a traditional independent living/ custodial nursing home CCRC with type A contracts only. I don’t think there was any competition. They had age and health criteria for entry since the model needed a lot of assisted living folks in the mix. Eventually they added some nice upscale detached units and then an assisted living wing. From what I can tell the AL business was operated as a separate division without type A contracts. 15 years ago when MIL moved in and before the AL was built or even announced, it was specifically excluded from her type A contract. IDK where they got the money for the construction but I wouldn't be surprised if they dipped into reserves.

At one time the facility had extras like an activity director and a full time nurse available to residents. Even pre-pandemic they started trimming some of those things not specifically in the contract. The lifecare residents didn’t like it but were stuck (no refunds after 4 months.) At some point they started admitting people without type A contracts. To compete with newer (type C contracts?) independent living places the monthly fee was lower and, of course, there was no massive buy in charge.

During the pandemic they lost a lot of residents and their monthly payments without any easy way to replace them. Job opportunities improved for low wage workers and many moved on. Although the facility increased wages it is a more competitive market. There have also been issues with skilled managers. The volunteer non-profit board ended up giving a management contract to a company based out of town. Food service was contracted.

At one point we learned that the nursing home area had very few residents. Probably not enough to operate efficiently. We thought it might close. Now it is full mostly with “outsiders.” Although there wasn’t an announcement to residents the assumption is that Medicaid is accepted.

I think social changes have contributed to the CCRC’s problems. With an increase in education and two income households there is a preference to live in a few areas of Michigan. Cities away from those places are less attractive. The availability of home health services and food delivery makes institutional care less necessary. MIL has noted that over the last few years a lot of older sicker folks entered independent living with a fair number of their pictures moving from the glass case of new arrivals to the in memoriam list rather quickly. Assisted living is cheaper than traditional nursing home care and disrupts the independent/dependent binary that existed for years.

MIL and FIL (RIP) made their decision based on the information available. I have been trying to explain to the young folks that it was reasonable. In retrospect, her nursing home level care will be brief and the cost will be much less than the initial CCRC move in fee. FIL used none of the life care benefit at all.
 
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