Continuing-care retirement community choice requires diligence

The quality of the food, the variety of the entertainment, and the price of a haircut at a continuing-care retirement community (CCRC) are easy to evaluate.

But assessing whether a continuing-care retirement community will have the financial resources to care for you for the rest of your life - the promise CCRCs make - is a much more onerous task.

New Jersey, Pennsylvania, and other states do little more than provide a list of authorized CCRCs, publish a booklet of recommended questions for prospective residents to ask CCRC management, and require the CCRCs to disclose certain information.

"Although the CCRC industry caters to customers who have reached a vulnerable stage of life, there is a surprising lack of regulatory oversight to ensure that expectations can be fulfilled," said Jack B. Cumming, an actuary and research director at the National Continuing Care Residents Association.

Cumming, 78, who lives in a CCRC in Carlsbad, Calif., said he believed CCRCs were the most dependable way for responsible people to provide for their old age, but he warned that the CCRC shopper's motto has to be "buyer beware."

Modern CCRCs are rooted in religiously affiliated old folks' homes. The idea was that if the elderly turned over their assets to the charitable institution, they would be taken care of until they died.

Today, CCRCs involve payment of an entrance fee and monthly fees that vary depending on the type of contract.

Under the most popular, so-called life care contract, a form of insurance, the community is obligated to provide accommodations starting with independent living and including assisted living and nursing-home care if needed.

Southeastern Pennsylvania has long been a hotbed for CCRCs. Foulkeways at Gwynedd in Montgomery County was among the first in the nation when it opened in 1967.

ACTS Retirement-Life Communities Inc., in West Point, and Kendal Corp., of Kennett Square, are among the 10 largest tax-exempt CCRC operators in the nation, according to an industry report, LeadingAge Ziegler 150, for 2014.

The five-county Philadelphia region is home to 87 CCRCs, according to the Pennsylvania Insurance Department, which tracks them. By comparison, in all of New Jersey there are just 27 CCRCs, the Department of Community Affairs said.

"Pennsylvania has had what I would call pretty balanced legislation and regulation of CCRCs," said John Diffey, president and chief executive of Kendal. Lower taxes also have helped the region attract retirees to area communities, Diffey said.

He has a list of questions for retirees to ask of any CCRC, starting with whether the community is accredited by the Continuing Care Accreditation Commission. Only 17 of the region's CCRCs are accredited.

It's also important, Diffey said, to have a financial adviser review audit statements, Form 990 tax returns for nonprofits, and actuarial statements.

"CCRCs are very different in that some have pretty high entry fees, lower monthly fees, and then no appreciable increase in expense. Others have lower entry fees, possibly higher monthly fees, and some additional costs when one goes to different levels of health care."

"There's no one-size-fits-all way of looking at their financial health through one lens," Diffey said. That's why Kendal does not provide the financial ratios that would allow prospective residents to compare CCRCs, he said.

Regulators in Pennsylvania and New Jersey offer little help beyond requiring CCRCs to provide disclosure statements.

That document must include a description of the facilities, the number of residents, ownership information, a history of monthly fee increases, and the organization's audited financial statements.

The disclosure statement - which in the case of Brittany Pointe Estates, an ACTS community in Lansdale, is 70 pages long - does not include information that would allow anyone without financial expertise to compare the CCRC to others or to industry benchmarks, such as days of cash on hand.

"It's a disclosure system, not a substantive regulatory system for the most part in Pennsylvania," said Katherine C. Pearson, a professor at Dickinson School of Law who specializes in elder law.

The industry is generally financially healthy and has good prospects thanks to the wave of baby boomer retirements, according to a recent report by Fitch Ratings. But that doesn't mean it doesn't have financial weak spots.

Cadbury Senior Living in Cherry Hill, for example, is in technical default on its bonds. That occurred after the Quaker nonprofit was hit particularly hard by the recession, which made it harder for seniors to sell their houses, but Cadbury has never missed a bond payment or any other payment, said Arnold Wiener, chief financial officer.

"We have had a very strong year with move-ins," Wiener said.

In Philadelphia, Deer Meadows Retirement Community, a nonprofit CCRC with roots stretching back to 1869, went through a Chapter 11 bankruptcy last year and is now owned by a private for-profit.

"Eventually, they are going to turn us strictly into a nursing home, but they promise to take care of us as long as we're here," said Elizabeth Worsinger, 87, who said she pays $3,300 a month on top of her $165,000 entrance fee.

The biggest complaints at monthly residents' meetings since Investment 360 L.L.C., of Lakewood, N.J., bought Deer Meadows for $30.25 million in the fall center on the food, which comes from a new vendor, Worsinger said.

"The food could be a little better," she said.

A continuing-care retirement community (CCRC) differs from an active-adult community or assisted-living facility because it promises a continuum of care, including nursing homes, in one location. That makes it crucial to pick a CCRC that is financially healthy.

John Diffey, CEO of CCRC operator Kendal Corp. in Kennett Square, offered these suggestions for documents to request and questions to ask:

Request copies of the organization's audited financial statements and its Form 990 tax returns (in the case of a nonprofit). Have them reviewed by a financial expert.

What is the organization's actuarial ratio? In other words, how much money does it have to cover anticipated expenses?

Find out what the CCRC's bond rating is, if it has one. If it recently sold bonds, have a financial adviser review the offering statement.

How many years has the CCRC been in business at that site and elsewhere? Has the organization ever been in bankruptcy at any of its locations?

Who is on the board of directors?EndText