By Steve Moran

Jack Cumming is nearly, but not quite, alone in publicly calling for more accountability with respect to the financial health and transparency of the life plan / CCRC sector of our industry. But he is right. Take a look at this article about Friendship Village of Schaumburg, where dozens of families are being stiffed for millions of dollars, and others will have to wait more than 15 years to get a full return of their deposits.

The typical response has been along the lines of …

  • The number of failures is so so low that we have nothing to worry about.
  • These communities are run by not-for-profit organizations, and because they are not-for-profit, they are more kindhearted and more trustworthy with residents’ funds.
  • Because they are mostly owned by not-for-profits, there is more money available to take care of residents, making them more trustworthy.
  • More regulations will simply make it harder for companies to care for residents and increase costs.

The Truth

Here is the truth:

  • CCRCs have a unique duty to their residents, many of whom have handed over nearly all or a huge percentage of their life savings with the promise that they will be taken care of until they breathe their last breath. This trust is more sacred because these residents are old enough that they have no opportunity to go back to work and rebuild their lost wealth.
  • There are many CCRCs — and many (most) for-profit and not-for-profit organizations operating CCRCSs — that are financially healthy and where residents are well protected. If you are part of one of those organizations, the bad ones should make you really mad, because they make YOU look bad.
  • For many years there were almost no failures, and when the failures happened, part of the restructuring always included making resident deposits whole.
  • The pandemic accelerated problems, but it is not the reason for them. While there have been a few cases of fraud, the problems are mostly bad leadership, bad financial planning, and ignored actuarial principles and realities.
  • Back in the early days, residents did not live as long as they often do today, and the churn-generated flow of new entrance fees has declined significantly.

The Industry

Mostly, not-for-profits have stayed above the fray when it comes to the recent bad publicity about nursing homes and assisted living, but they shouldn’t. Collectively senior living has a serious reputation problem with much of the public, and it is not like people are saying, “I love and trust not-for-profit senior living but not for-profit senior living.” This reputational challenge is the one thing we should all be working on together.

More Regulation or Something Else?

I am not a big fan of more regulation. Regulations tend to be expensive and often end up having more terrible unintended consequences — and at the same time not effectively accomplishing the intended goals. What we need is an independently developed, actuarially sound set of standards backed by annual audits. Well-run, healthy CCRS would then be able to certify that they meet those standards. This would allow the public to make an informed choice about what they were getting into.

Frankly, it is somewhat baffling why the industry is so reluctant to support something like this.