GPSOLO July - August 2008
Admissions Contracts for Senior Housing Facilities
You’re meeting with Mrs. Robinson, a long-standing, recently widowed older client of yours, to discuss, once again, drafting an advance directive and updating her will. She mentions to you that she’s thinking about moving to that nice, new senior retirement community, the one where her best friend Betty moved after her husband died, but she’s not really sure what to do. She tells you that when she went to visit Betty, this nice lady in a lovely suit gave her these papers to read. But she confesses to you that she’s not really up for all that fine print. She hands you the papers and asks you to please look at them and advise her on what to do. You know the place. You drive by it all the time on the way to the golf course, but that’s all you know. Time for a crash course on senior housing.
Housing Options for Seniors
Seniors have many options when looking for retirement housing, depending upon where they live, the level of services and activities they need or desire, and their financial situations. These options include senior retirement communities and continuing care retirement communities. For those who need additional health and supportive services, supportive housing options include assisted living facilities, residential care facilities, adult foster care, and nursing homes facilities. Residents entering any of these facilities are required to sign admission contracts that address the provision of services, their financial responsibilities, and the quality of care and services provided by the facility. This makes understanding the terms and conditions of the contracts extremely important. Bancroft House, the facility that Mrs. Robinson is considering, is a continuing care retirement community. You start your studies there.
Continuing Care Retirement Communities
A continuing care retirement community (CCRC) offers residents a comprehensive, lifetime range of services, including housing, residential services, supportive services, and nursing care. CCRCs require payment of an entry fee (some of which may be refunded when the contract is terminated) before new residents move in, as well as payment of monthly fees. CCRCs offer residents a continuum of housing options on the same campus, ranging from independent living units to assisted living facility units and skilled nursing care units, giving residents the opportunity to move from one level of care to another as their needs change while remaining in the CCRC and paying a fixed cost. CCRCs vary in the range of services they offer, but they generally include a set number of meals per month, housekeeping services, property maintenance, transportation, emergency help, linen services, recreational and social activities, personal care (help with dressing, bathing, toileting, mobility, and other activities of daily living), as well as nursing and other health services. All have nursing facilities that residents may use for short- and long-term care.
Resident in a continuing care retirement community contracts in advance for a lifetime commitment from the CCRC to care for them, regardless of their future needs. Prices depend on the amount of care provided, the type of contract, and the unit’s size and geographic location. Entry fees can be as high as $500,000, with monthly fees ranging from $500 to $5,000. CCRCs also may offer a tax benefit to residents as a portion of each resident’s entrance fee, and monthly fees may qualify as a deductible medical expense for income tax purposes. In essence, a CCRC resident pays for tomorrow’s housing costs and medical expenditures at today’s rates. In contrast, persons who move into an assisted living facility have no such contract; they move into the assisted living facility when necessary, begin to pay at that point, and are dependent on current market rates. Most CCRCs have assisted living facility units within them—units that provide residents a combination of housing and supportive services. The distinction between CCRCs and freestanding assisted living facilities is not in the actual services provided but in the method and responsibility for payment. Prior to entrance, the CCRC may require that applicants meet both financial and health requirements.
Continuing Care Retirement Community Contracts
Residents entering continuing care retirement communities sign an admissions contract that provides residents with lifetime housing, health, and supportive services and nursing care, usually all in one location, enabling residents to remain in a familiar setting as they grow older.
There are three types of CCRC contracts: extensive, modified, and fee-for-service. These three contracts differ according to the type of housing, services, amenities, and care the individual community provides to residents.
• Extensive (Type A). Residents pay a substantial one-time, up-front entrance fee and monthly fees to cover the house or apartment, services, and all the assisted living or nursing care residents will need for the rest of their lives. Monthly fees may increase slightly over time to reflect normal operating costs and inflation adjustments. A long-term care insurance component is an integral part of this type of contract, called a “lifecare” contract in some states.
• Modified (Type B). Residents pay an entrance fee (also substantial, but less than the one that would be charged under a Type-A arrangement) and monthly fees to cover the apartment, services, and a specific number of days of assisted living or nursing care. Generally, there is not a substantial increase in monthly payments other than adjustments for normal operating costs and inflation. Once the limit under the contract is reached, residents pay the standard market rate or discounted daily rate for assisted living or nursing home care.
• Fee-for-service (Type C). Residents may or may not pay an entrance fee. The monthly fees cover the apartment and other included services. The resident must pay the full cost of assisted living or nursing services that the resident may require. This option may be attractive if a long-term care insurance policy is in effect to cover these expenses.
Evaluating an Admissions Contract
Consider the questions below when evaluating housing admission contracts with your clients. A facility’s responses to these questions should be contained within the terms of its contract or specifically incorporated by reference to facility policies. It is unlikely that any facility’s contract will answer all of these questions, although it is advisable that it does.
Questions regarding the background, solvency, and expertise of the provider:
- What is the provider’s background and experience? The provider is the person or entity legally and financially responsible for operating the facility. Many CCRCs advertise being affiliated with sponsoring organizations that may not have legal or financial obligations to the community.
- . Is the provider financially sound, and does the provider maintain sufficient cash reserves to protect against unexpectedly high operating costs? Ask a professional to review the organization’s financial statements, including statements of financial position, operations, and cash flow. Does the CCRC have the financial resources to ensure its ability to provide services and maintain the property now and in the future?
- Is the CCRC accredited by the Continuing Care Accreditation Commission of the Commission on Accreditation of Rehabilitation Facilities? Quality assurance in retirement communities is the primary purpose of the Continuing Care Accreditation Commission (www.carf.org), the only accreditation program for CCRCs. The CCAC accreditation process is voluntary, but the standards exceed most state minimum statutory requirements. The commission accredits communities meeting strict criteria in the areas of finance, governance and administration, resident life, and health care.
- If the facility is not state regulated, how does the facility ensure the quality of its care and services? Some objective standards of quality of care should be incorporated into the contract, such as the minimum qualifications of the staff and levels of staffing, representations that the facility or relevant part of the facility are Medicare or Medicaid certified or licensed by the state, or assurance that staff are trained and supervised by a reputable provider organization or other agency.
Questions regarding state regulations and requirements:
- Does state law require the CCRC to deliver a disclosure statement to a contracting party? Disclosure statements contain information about the financial status and operation of the facility and generally provide information in the following areas: names and addresses of all persons responsible for the operation of the facility; the facility’s associations, if any, with religious, charitable, or other nonprofit organizations; a description of all fees and charges residents are required to pay, including entrance and monthly fees and an explanation of the manner in which these fees may be adjusted; and financial statements showing assets, liabilities, and operating expenses of the provider.
- Does state law provide for cancellation or rescission of the contract within a specific number of days? Some state laws regulating CCRCs permit cancellation of the contract within a limited number of days of signing of the contract.
- Are levels of care provided by the facility licensed or certified under applicable state statutes regulating continuing care retirement communities, assisted living, and nursing home care? Check with the state office on aging and state licensing agency, and request copies of the most recent inspections.
Questions regarding fees and accommodations:
- If there is an entrance fee, how much is it, and what are the terms for obtaining a refund? Entrance fees vary significantly. Determine if the facility accepts transfer of non-cash assets as entrance fees. Ask about the facility’s policy for issuing a refund regardless of whether the facility or the resident initiates the termination.
- What is the monthly fee? When can it be increased, and by how much? Is notice to the resident required?
- What happens if a resident cannot afford higher fees? Some facilities may offer residents financial help if they become unable to pay.
- Can services be changed? To what extent does the facility have the right to cut back, change, or eliminate services?
- Do the fees change when the resident’s living arrangements or level-of-care needs change?
- How much say does the resident have in choosing where to live? How large are available living units? Can the resident remodel or redecorate?
- What if the marital status of a resident changes? Will payments change or will the resident be asked to move if there is a change in status or if a friend or family member moves into the unit? The consequences of changes in household composition should be clearly spelled out.
- What happens if spouses require different levels of care?
- What are the restrictions on visitors?
Questions regarding services and health care:
- What housing and recreational services and activities are included in regular monthly fees? The critical goal is clarity about the specific services included under the contract: How, when, and by whom will the services be provided and at what additional charge, if any? Be sure to ask specific questions about coverage, limitations (based on cost, time, or number of visits), responsible party, or extra costs for the following amenities and services: meal plans, special diets or tray service, utilities charges, cable television and Internet, unit furnishings, unit maintenance, linens and personal laundry services, housekeeping services, recreational and cultural activities, transportation, security system, and personal property insurance.
- What health and personal care services are included in regular monthly fees? Again, seek clarity about what health and personal care services are included under the contract and what services may be available at extra cost to the resident. Examples of health and personal care services to ask about are pre-admission medical assessments, acute health care services, physician visits, medication administration, nursing facilities services and access in the event a bed is unavailable, nursing services including private–duty nursing, dental services, vision and eye care services, personal care services (assistance with eating, dressing, bathing, toileting, and mobility), homemaker or companion services, prescription drugs, medical equipment and supplies, and an emergency call system.
- What about preexisting conditions? Does the facility limit its responsibility for treatment of certain health conditions or preexisting conditions?
- Who pays for health care? Does the facility participate in Medicare or Medicaid? Does the facility require residents have Medicare coverage or other private insurance or participate in a special group insurance program for residents?
- Who decides that a resident needs more care, and on what grounds? What are the criteria and procedures for determining when a resident needs to be transferred from independent living to assisted living, a nursing care unit, or an entirely different facility? The transfer issue is one place where the CCRC business model of providing a continuum of care intersects with state and federal Fair Housing Laws and aging–in–place concepts.
- Does the facility limit the amount of care an individual can receive in an independent living apartment or who may provide it? The use of outside service providers is another place where the CCRC business model intersects with state and federal Fair Housing Laws and aging–in–place concept.
Questions regarding the rights of residents:
- How are residents informed about the community’s financial status and other administrative and governance issues?
- Can residents participate in facility management and decision making? Is there a resident council? What input do residents have in activity and meal planning and house rules?
- What if a resident wants the facility to make an exception to a policy or to routine scheduling?
- What are the grounds for terminating a contract against a resident’s wishes? Is there a right to appeal? Does state law provide for “just cause” requirements for involuntary termination?
- Are the general operating rules reasonable? What rules cover the facility’s day-to-day operation? Are they expressly incorporated into the contract? Are they reasonable? What happens if a resident breaks a rule? Can the resident appeal?
- Is there a procedure for addressing resident complaints and a policy against retaliatory conduct? How are complaints and disputes handled?
- What happens if a resident is injured? Does the contract release the facility from liability for injury resulting from negligence? A resident should avoid agreeing to such waivers.
Here’s to You, Mrs. Robinson
Mrs. Robinson returns to your office a few weeks later. She reports that she and her daughter have talked, and that she is ready to sign her advance directive. She also reports that she’s visited Betty again and wonders if you’ve looked at the papers she left you about Bancroft House. Today, she feels old and is grateful that her husband has left her financially secure. You pull out your reading glasses, put them on, and begin reviewing the terms of the contract with Mrs. Robinson.
Holly Robinson is Associate Staff Director of the ABA Commission on Law and Aging. She may be reached at email@example.com. This article was adapted from the A BA’s Legal Guide for Americans over Fifty (second edition, 2006), pages 212 to 217. The author gratefully acknowledges former and current staff members of the ABA Commission on Law and Aging who wrote the original checklist for evaluating continuing care retirement community contracts.