The bankruptcy filings of several continuing care retirement / life plan communities has gained the attention of the Wall Street Journal, prompting a letter to the editor from LeadingAge defending the senior living model.
A June article in the national media outlet highlighted the losses that residents and their heirs sustained in the wake of several CCRC bankruptcy filings. In many cases, residents who sold their homes or used their life savings to pay entrance fee deposits they thought were refundable saw those dollars evaporate in bankruptcy cases.
At least 14 CCRCs across the nation have filed for bankruptcy since March 2020, according to a Wall Street Journal review of court filings and Gibbins Advisors, a healthcare restructuring advisory firm. Many residents who paid hefty entrance fees now expect to recover only a fraction of their money. Entrance and other fees vary by community type.
Approximately 1,900 CCRCs operated across the country, with 623,000 residents, as of 2023, according to National Investment Center for Seniors Housing & Care data cited by the media outlet. Residents sometimes put down entrance fee deposits ranging from about $200,000 to more than $1 million. New residents’ deposits pay for former residents’ refunds under certain CCRC models.
When those CCRCs file for Chapter 11 bankruptcy protections, however, there are no new resident deposits coming in, and other debt — including bondholder and mortgage loans — are paid before any remaining assets trickle down to residents and their families.
Earlier this spring, residents of Friendship Village of Schaumburg, IL, discovered they would receive approximately 10% of their deposits in the wake of the CCRC’s bankruptcy filing.
‘Highly idiosyncratic’
In a letter to the editor published last week, LeadingAge President and CEO Katie Smith Sloan noted that CCRC bankruptcies are rare: less than 1% of CCRCs have gone bankrupt since 2020. She also called those bankruptcies “highly idiosyncratic, with unique circumstances that aren’t endemic to the CCRC model.”
Sloan also said that robust resident protections exist. For instance, some states, she said, require CCRCs to maintain escrow accounts for entrance fee refunds, debt service and operating expenses, and some states require CCRCs to submit to periodic actuarial and in-depth financial reviews to protect against losses.’’
Many CCRCs “voluntarily engage in these and other fiduciary practices,” the CEO added.
LeadingAge Director of Life Care Communities Services and Policy Dee Pekruhn also provided commentary about those protections in the original article, adding that engaging in a CCRC contract is a “major decision” for residents, who should seek input from a legal or financial adviser before signing a CCRC contract.
