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Continuing Care Retirement Communities

by Ira M. Leff, Esq.

May 18, 2009

I have a client who is interested in moving to a Continuing Care Retirement Community (CCRC). A CCRC is a living arrangement where an independent resident can live-out the rest of his life. If he needs assisted living or nursing home care the CCRC provides it. My client found one that he likes in Gainesville, Georgia, and asked me to advise him about it.

There are a few different types of CCRC arrangements. The one in Gainesville requires an initial entrance fee of about $300,000, and then monthly fees of about $4,200 (for two people). During the first 120 days after moving in the entrance fee is refundable. After that it is partially refundable for the next eight years if the resident moves out, but it is not refundable if the resident dies. After the eight years, the resident has no equity in the unit when he vacates it.

Notwithstanding this enormous up-front cost, the CCRC does not guaranty that all care will be provided on the beautiful Gainesville campus. If the nursing home or personal care home there runs out of beds, the CCRC has the right to place the resident in another licensed facility. The CCRC also has the right to determine the level of services that it provides in exchange for the monthly fee. Additional charges may be made for ancillary services.

The CCRC disclaims all responsibility for responding to medical emergencies! And all disputes must be settled by arbitration under rules of the National Health Lawyers Association.

Obviously, there are several major risks in entering into a contract like this. The resident assumes the mortality risk. If both husband and wife die on day 121, they will have spent $316,800 for four months rent! There is the risk that the CCRC will go bankrupt. In effect, the CCRC is a long-term care insurance company with only about 500 lives. If more than the anticipated number of residents need expensive long-term care at the same time, bankruptcy is a real possibility. And there is the risk that the resident will be placed elsewhere for care which defeats the whole purpose of purchasing the unit.

It seems inequitable that the resident is expected to assume so much risk and the CCRC is not willing to guaranty much of anything. I am in the process of negotiating on behalf of my client now. I will let you know how it comes out.

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