✨ Pricing; Costs; Finances

As a smallish (approx 200 IL residents plus 48 Health Care beds for Mem Care, AL, and SNF) non-profit, single site CCRC built and owned by a regional hospital system, it started out as just equalized pricing Life Care, offering a choice between zero refund over a period of 4 years or 50% or 90% refund contracts. Over the years a fee-for-service contract option was added, but fee-for-service contracts did not have a refund option.

After 14 years, the hospital owner outsourced management to a senior living group, and that group purchased us five years after managing us. Shortly after the purchase, our new owners discontinued the offering of any refund contracts, stating that the ones still on the books were underfunded. Upon inquiry, this "discovery" was made after the purchase, NOT during the previous 5 years of management.

So this means the current choice for incoming residents is whether they desire Life Care of fee-for-service --- the former still being equalized pricing Life Care, not "traditional" Life Care -- meaning those in Health Care pay the same monthly amount that is discounted, no matter what size of unit they moved from and no matter whether they went into Assisted Living, Memory Care, or the SNF. This standard amount goes up each year. Those Life Care residents who choose to stay in their IL unit with home care must arrange for that home care on their own, from "outside" approved, licensed home care agencies. To me, that's sort of a Catch 22 -- they pay extra in entry fees and monthly fees for Life Care that gives a discount in Health Care, but the Life Care resident has to be in a bed in Health Care for that Life Care benefit.

Back to refundable entry fees --- it's pretty rare for a state to require escrowing the refund amounts, with contracts stating that the refund will be paid when a vacated unit is occupied (the entry fee paid by the newcomers providing the cash to make the refunds). This situation makes a resident with a refund contract an unsecured creditor.... a critical classification in a bankruptcy. When this happened in Texas, two residents were named to the bankruptcy court's Unsecured Creditor Committee, to serve with trade vendors whose invoices hadn't been paid. (Bondholders (secured creditors) had their own committee.)

Bottom line: contracts can "morph" over time, it sounds like the trend is to move away from refund contracts.

"The New York Times has published several articles discussing the complexities and risks associated with refundable entrance fees in Continuing Care Retirement Communities (CCRCs), also known as life plan communities."

Too much for me to summarize here, but the information you seek is readily available through ai searches. These articles reference the pros and cons of the refundable fees and lays out the hurdles that may impede such a refund. Like everything else, it is more complex than it appears.



Maura

At my nonprofit CCRC, which just rolled out the last building, the return on the deposit is 90%.

The entrance fee has been increasing since I moved in 6 years ago. It is now twice as high.

My community is an Erickson Senior Living community.

Charles Nadler

Wind Crest CCRC (Erickson Senior Living)

Highlands Ranch, Colorado

Not only can the new resident expect/hope to earn more, but they also retain control of the investment and have the ability to withdraw all or part from time to time if needed. And, if they don't have the full amount as liquid, they can still sign the contract.

I'm curious about this trend to offer both refundable and non-refundable entrance fees for the same unit. What's management's logic of calculation for the relative pricing? It's less cash in their control, which is not desirable for them. Why are they even doing it?

My for-profit CCRC resets entrance fees based on market conditions frequently. We have two refund options: zero and 80%. If a resident elects the 80% option, the entrance fee is approximately 60% higher than would be paid under the zero option. Any refund is a function of the actual entrance fee paid, not the current market rate. Entrance fees, net of any refund, accrue to ownership. They constitute ownership's return on invested capital.

My for-profit CCRC has two options for entrance fees: zero refund or 80%. The overwhelming majority of new entrants are choosing the zero option. While entrance fees vary by unit model, location and view all the refundable entrance fees are approximately 60% higher than the zero option. Residents seem to be deciding they can earn more on the difference.

Examining the role of refundable Entry Fees in Community finances at my CCRC formed as a regular LLC (not a non-profit). Under our Residency Agreement the Members of the LLC have complete discretion to set all the terms of admission to the Community, including Entry.Fees (and Refund percentages). In your Community do the “Resale” Entry Fees exceed the Refunds paid to the prior occupants? If so what (if at all) does your Residency Agreement provide about the excess (in a mature Community likely the result of inflation)?

thanks,

Bill Antheil

The entry fee at Applewood (part of Loomis Communities in Massachusetts) was 90% refundable for many years. After a number of years with 95-99% occupancy, new applicants to Applewood were offered 80% refundable. The two other Loomis communities continue to offer 90% refundable. I'm curious about the most common refundable fees for independent living communities across the US. I know that declining refundables have become popular (and are offered at Applewood) but what are communities offering for "straight" refundables?