I spoke with someone recently who is a resident of one of the Continuing Care Retirement Communities in our area (sometimes referred to as “CCRC’s” or “Life Care Communities”). I asked him why he chose  that particular community and he responded that it was because of a  golf package they offer with membership. I have to say that his answer caught me a bit off guard. Okay, I completely understand that for someone who really enjoys golf this is a nice benefit but surely there was  more to his decision, right?

A couple of weeks later I met with a local elder care attorney to tell her about our business and how we help people make the right decisions when it comes to choosing a CCRC. When I told her about the gentleman who said his decision was based on the golf benefits offered she quickly exclaimed, “What happens when he can’t play golf any longer?”

Her response was spot-on. As an elder law attorney she has seen what can happen when poor decisions are made or, perhaps, when a lack of thought and planning goes into making big life decisions. If you have ever visited a Continuing Care Retirement Community you know that most are very nice. I have heard them described as living at a country club or a resort hotel and they offer wonderful amenities. It is easy for a prospective resident to get caught up in these amenities, and all of the exquisiteness of the independent living stage, without thinking through the really important details that need to be considered.

Ultimately, the main purpose of the CCRC is, as the name implies, to provide continuing care as the resident progresses through stages of care. CCRC’s are unique from other retirement communities primarly because they operate under this “continuum of care concept.” Yet, it seems that very few prospective residents think about the care that will be available when they need it when, in fact, this is probably where most of the attention should be given.

Consider a situation where a couple moves in to a CCRC in their early 70’s. They are very active and still very healthy. However, 10 years later the husband begins developing dementia and the wife is no longer able to get around without assistance. At that point, the exquisite amenties will not matter nearly as much. What will matter is that the couple payed several hundred thousand dollars, plus monthly fees, to make sure the appropriate level of care would be there for them when they needed it most. Neither they, nor their adult children, would want anything less than the best level of care. If it turns out that the care provided is not what they hoped they may be stuck in a situation where they cannot move without losing their entire entrance fee.

Moving to a CCRC is a big decision. It is a significant financial and lifestyle commitment that is probably unique from any other decision you have ever made. Please be sure to do the appropriate research and think through the long-term aspects of your decision.If you desire to have professional guidance from a totally objective resource about the details you need to consider please contact us at 877-699-2272 or locally at 919-773-2386. You may also send an email to info@carolinacontinuingcare.com or visit our website at www.carolinacontinuingcare.com.

Whether you are a prospective resident of a Continuing Care Retirement Community (CCRC) or already a resident of one, the financial stability of the community should be well examined. After all, moving to a CCRC is a major financial and lifestyle commitment and it is important to know that the community will be there when you need it most.

The economic downturn has brought this issue to the forefront as evidenced by the recent Chapter 11 filing of a major CCRC developer out of Maryland, Erickson Retirement Communities. According to “The Bond Buyer” Erickson is the developer of 19 CCRC’s throughout the U.S. and at the time of filing had over $500 million of outstanding debt on various properties. Despite discussions and negotiations with its creditors Erickson was unable to reach an out-of-court agreement. http://www.bondbuyer.com/issues/118_203/Erickson-Retirement-Bankruptcy-1002845-1.html.

Like any other business you might give your money to it is important to do the appropriate research. Of course, there is ultimately no way to guarantee that your CCRC will always remain financially stable but there are a number of  things you can look for that will likely increase the odds that it will.

Before getting to a few helpful hints there are some things you should understand about CCRC finances in general. First, the accounting for CCRC’s is rather unique from that of most business. Many of the communities accept a large entrance fee up- front, although only a portion of it will be considered income in the first year while, the remainder will be considered deferred income.

Second, there are various types of contracts among communities and the accounting will be handled differently depending on the type of contract. (I will address these contracts in a future post.)

Finally, many communities offer refund options, which further confuses the process. These differences in contract types and refund options also makes it very difficult to do an “apples-to-apples” comparison of the finances among different communities.

Despite the type of contracts and refund options your community offers there are a few common things to look for as a starting point:

1. Does your state have minimum reserve requirement? In the state of North Carolina all Continuing Care Retirement Communities are regulated by the department of insurance, which has strict minimum reserve requirements that each community has to meet.

2. Is the continuing care retirement community a “mature community” or a start-up? A mature community is typically considered to have been in existence for 8 years or longer. A start-up community may be managed very well but it does not have a track record and will usually face financial challenges that many mature communities are not contending with. Also, although the actual community you are considering may be newly developed there is a chance it may be owned by a parent company that has been in business for decades.

3. Is the CCRC accredited? The Commission on Accreditation of Rehabilitation Facilities/Continuing Care Accreditation Commission (CARF/CCAC) represents the only accrediting body just for CCRC’s. The retirement communities have to apply for accreditation so if a community is not accredited it does not necessarily mean that it isn’t in good financial standing. Additionally, the finances of the community are only one aspect of the accreditation process. Nonetheless, the commuities that have acheived accreditation have met the financial requirements of CARF/CCAC, which are rather rigid.

4. Has the community or its bonds been rated by one of the major rating agencies such as S&P or Fitch? If the community has issued bonds for start-up or for planned additions the rating agencies will rate the bonds and the bond is an indication of the financial stability of the community. The CCRC itself may also request to be rated. An investment grade rating will be considered favorable, although start-up communities will likely not recieve an investment grade rating.

5. Are the management team and board of directors proficient with varying backgrounds and strong business experience? Ultimately these two groups will be making the major decisions that affect your retirement community so experience and background are important.

6. Is there a history of high occupancy rates? Be sure to find out what the rate of occupancy has been over the past 18 months or so. Has it been consistent or growing? Have there been major changes in occupancy rates? If so, why? Occupancy rates are a major factor in the financial stability of CCRC’s.

7. Is the community able to generate cash flow from profitable operations, without the benefit of new advance fees or does the community rely on advance entrance fees as part of operating cash flow? Also, is there a heavy dependence on ongoing fundraising support or philanthropic contributions to subsidize operations and debt service? The ability to generate cash flow from operations sufficient to cover debt service will add another layer of financial security for the CCRC.

There are many other factors to consider that fall outside of the level of detail that I want to get into in this post, including financial ratios and actuarial projections. There is also an additional set of issues to address for start-up communities. My opinion is that is almost impossible to cover every base when it comes to determining the financial soundness of a CCRC. There are many, many moving parts. But if you know several pf the key items to look for you can go a long way in doing your due diligence.

Several of the above items, among many others, are discussed in the Fitch Ratings publication: “Rating Guidelines For Non-Profit Continuing Care Retirement Communities,” which can be found at www.fitchratings.com. If you would like to discuss CCRC finances in more detail feel free to contact our office at 877-699-2272 or if local you may call 919-773-2386. Also feel free to contact us via email at info@carolinacontinuingcare.com.

Brad C. Breeding, President

Carolina Continuing Care Planning, LLC.

Welcome to the official blog of Carolina Continuing Care Planning, LLC. We are excited to enter our first post on our new blog! We plan to post weekly so we hope you will visit often and let your friends and family know about us.

Since this is our first blog I would like to take this opportunity to tell you more about Carolina Continuing Care Planning, LLC and what you can expect from this blog.  Carolina Continuing Care Planning, LLC is a totally objective resource that provides in-depth and personal guidance to those who are considering a continuing care retirement community (also know as “CCRC” or “Life Care Community”) and other long-term care alternatives. With the baby boom generation approaching retirement, it has become increasingly clear to us that the interest in CCRC’s and other alternatives will continue to grow over the next couple of decades. The issue, however, is that there is a tremendous amount of confusion surrounding these communities and what to look for. We have dedicated hundreds of hours and significant resources towards researching details that many people may not be aware of, and we use this information to help them make choices that are best, both personally and financially, while also saving time, effort, and confusion.

Currently, most people who are considering a continuing care retirement community or senior living community typically seek guidance from a marketing representative of the community itself. Although this is an important step in the overall process, we feel that this step by itself lacks the level of objectivity that is critical when making a major life decision and a significant financial commitment. Therefore, as a central location for comprehensive and objective information, we want to serve as the first stop for those who think such a community may be appropriate for them. We will accept no advertising, compensation, or financial incentives from the communities.

Some of the aspects of the decision process that we walk our clients through are: residency and lifestyle considerations,  contract and fee structures, financial stability of the community, health care, and more.

With this blog you can expect to find helpful information about the above mentioned aspects of choosing a community and anything else that we feel you would benefit from reading about as it relates to this subject. Our goal is to be YOUR total resource for continuing care planning! For more information please visit our website at www.carolinacontinuingcare.com. Or, you may contact us directly at info@carolinacontinuingcare.com and by calling 919-773-2386. If you are out of town the toll free number is 877-699-2272.

Thank you for visiting our blog and we look forward to having you visit us again soon!