“When moving into a retirement community, seniors now dig into the facility’s ins and outs, instead of settling into the nicest campus.”
–Kevin Keller, Denver Post, Researchers Learn about Senior Citizens by Staying at Boulder Retirement Home, June 3, 2016
More than ever before, prospective residents of retirement communities are doing their due diligence before making a decision. This is particularly true when it comes to continuing care retirement communities (CCRCs or “life plan communities”), which often require an entry fee–along with ongoing monthly fees–in exchange for priority access to assisted living and healthcare services when needed. Many CCRCs are considered high-end and offer a broad range of resort-style services and amenities. However, prospective residents are reluctant to make such a big financial and lifestyle commitment without first having a solid understanding of the organization’s contract specifications and financial viability.
Examining the details of a CCRC contract
To help you better understand what to look for when researching a continuing care retirement community, I generated an online profile at www.mylifesite.net for a CCRC provider on the East Coast. Instead of using the real name of the community, I will refer to it Salty Winds Retirement Community. Salty Winds is a not-for-profit provider with approximately 250 independent living residences, 50 assisted living residences, and 55 skilled nursing care residences. Here are just a few of the things that a resident should understand about Salty Winds:
The report shows that Salty Winds offers a lifecare contract only. This tells me that the fees paid by residents at Salty Winds will remain relatively level over their lifetime, regardless of how much care may be needed in the future. However, there are variations of lifecare contracts, so a prospective resident should understand the specific details about how fees could change over time. (More on this shortly.)
I also see on the report that the entry fee is 90 percent refundable. This means that if the resident moves out, or in the event of death, 90 percent of the entry fee will be returned. There are a few important questions that someone should consider as it relates to this refund, much of which is covered in My LifeSite’s report. For example, does the residential unit have to be re-occupied by a new resident before the refund will be paid? In the case of Salty Winds, the contract states that refunds will be paid within 30 days once a new entry fee has been received and the unit is re-occupied. This could certainly take some time, depending on the demand for the residence at the time.
Other questions to ask would be whether residents, or their heirs, are required to continue paying the monthly fees until the unit is re-occupied, and whether the refundable amount could be impacted if pricing changes and new residents pay a lower entry fee. Also, does the provider set aside any funds in reserve to help pay entry fee refunds in the event that the residence is not re-occupied in a timely manner?
According to My LifeSite’s profile, entry fees at Salty Winds start around $270,000, and monthly fees start around $3,500. In the case of couples, there is a second person entry fee, as well as second person monthly fees, although these fees are much lower than the base (first person) rates. The report also shows that monthly fees have increased about 4 percent per year over the past five years. This is in line with industry averages but is important to know for budget planning purposes.
Another important aspect of pricing to consider is how the monthly fees could be impacted if a resident moves from independent living into assisted living or skilled nursing care, either on a temporary or permanent basis. In the case of Salty Winds, the language reads something like this:
A single resident in need of temporary care will continue to pay the same monthly fee as charged for the independent living unit plus additional costs for extra meals not included in the monthly service fee. Upon transfer to permanent care, the resident will surrender the living unit and pay the current monthly fee for a one-bedroom deluxe apartment for assisted care, or the current monthly service fee for a two-bedroom traditional apartment for skilled care, plus charges for two additional meals per day.
We can see here that monthly fees will not necessarily stay exactly the same under this particular lifecare contract. The fee that a resident ultimately pays for care services could be higher, or lower, than what they were paying while living independently, depending on the size and corresponding cost of their independent living residence. In terms of double occupancy, the report goes on to describe the contract language relating to a situation where one resident is independent and the other requires care services.
In-home care & healthcare
Salty Winds is a Medicare-certified community, but it is not Medicaid-certified. Consumers should understand the difference between these two programs and the impact that access to each, or lack thereof, could ultimately have on the availability of care services and the corresponding out-of-pocket cost.
The report from My LifeSite also pulls language from the contract regarding in-home care. Prospective residents need to know the rules or restrictions on hiring private-duty care in case they should ever desire to do so. In the case of Salty Winds, the contract says that residents are actually eligible to receive up to an hour of care per day, provided by staff of the community, at no additional charge for up to 90 days. After 90 days, it drops to 30 minutes per day. However, the contract does not specifically address hiring private-duty care, so this is something a prospective resident should ask about.
Although it is far from a complete analysis of a provider’s total financial picture, My LifeSite’s profile report shows a few of the basic financial ratios that can offer a starting point into analyzing the community’s finances. In the case of Salty Winds, the report shows that the organization has an adequate amount of cash on hand, compared to industry averages, and also has good debt service coverage. However, profitability is actually negative.
Of course, Salty Winds is a not-for-profit organization, so not being profitable is okay, but over time, the organization needs to make enough money to cover expenses. As long as negative profitability is only a short-term situation, it is probably okay since there is adequate cash and debt coverage. But this should not become a longer-term trend. This is something a prospective resident should ask in order to learn more about the history and outlook.
The fine print
There are a lot of factors to consider when shopping for a CCRC–location, amenities, quality–but it is also critical that you fully understand the type and cost of care you will receive under the community’s contract. Too often, we put our signatures on dotted lines without fully reading and understanding the minute details of the document we are signing…we’ve all done it. But when it comes to selecting your CCRC, it is imperative that you read and truly understand ALL of the fine print on your contract before agreeing to put your name on that signature line.
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