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Will CCRC Residents Be Granted The Power to Insure Life Care?

By Lillian L. Hyatt, M.S.W. and a Resident of a CCRC


Excerpted from the Summer 2009 The CANHR Advocate newsletter

In Today’s troubled times, all organizations handling money have problems. For a number of years, CCRCs have been accumulating monetary reserves, some more successfully than others. Since California law gives little control over CCRC reserves to the residents who contributed the money, boards of directors are in control of large sums of money. The recent downturn in the financial markets caused many of these CCRCs heavy investment losses running into tens of millions of dollars. These difficult times have led to the question of how much financial control the residents should have and if there are limits to the fiduciary powers of the boards of directors. In this give-and-take, a law firm representing one not-for-profit CCRC Corporation has even contended that most CCRCs had their roots in religious organizations and their boards still carried the burden of charitable ends despite their having been disconnected from religious organizations by contract and state law.

Loud objections are coming from the CCRC Corporation “Front Porch” that controls the largest number of facilities in California. Front Porch argues that AB 1169 (Ruskin) is intended to give control of the financial operations of the CCRCs to the residents of each facility. Front Porch also maintains that the California Continuing Care Residents Association (CALCRA) wishes each dollar generated from a facility should be dedicated to that facility. They point to the following bill language: “A disclosure that resident funds, including, but not limited to, entry fees, monthly fees, and other fees, will not be transferred to any other entity and will not be expended for any purpose than for the benefit of the residents shall be included in the continuing care contract.” The providers’ trade association, Aging Services of California, opposed this bill on the same grounds. This bill is, in fact, intended to place a limit on an entity’s ability to utilize a CCRC reserve to fund other non-CCRC-related programs or projects. The bill requires that the resources accumulated from continuing care contracts will not be transferred to any other entity and will not be expended for any purpose other than for the benefit of the CCRC residents. Opponents argue that this would prevent an entity that owns CCRCs from using those CCRC reserves for other “charitable purposes,” such as development of affordable housing.

The bill’s author and sponsors respond that providers are free to use other funds for such purposes; but using CCRC reserve funds for non-CCRC related activities would be tantamount to forcing an “inappropriate, involuntary contribution on the residents.” And, such a contribution may well constitute a palpable risk in the long run. In addition, such an action most probably violates an IRS ruling requiring that CCRCs operate “at the lowest feasible cost including appropriate reserves.” Front Porch also argues that the definition of “reserves” in this bill is inappropriate to the extent that it includes the “excess of assets over liabilities as reserves.” CALCRA responds that every organization must have a contingency reserve to meet unforeseen losses such as during a recession when boards investments value drop precipitously. CALCRA explains that the intent of this bill is transparency and accountability concerning CCRC’s reserve.

The experience of Sunrise Senior Services, which runs 435 senior communities in the U.S., Canada, Germany and the UK, can serve as a warning, as the canary in the coalmine does. Recently under investigation by the Securities and Exchange Commission, having stopped all new construction and furiously working to stave off bankruptcy, Sunrise is still marketing residences to the public. If uninformed seniors looking for long term care life-style buys into a Sunrise facility, what does the future hold for them?

(Ms. Hyatt is a resident of a CCRC and AARP Policy Specialist on CCRCs)