Thursday, December 12, 2013
Lemington Home for the Aged was a nonprofit nursing home in Pittsburgh with a long history, beginning, as one court described, with its "first incarnation [as] 'The Home for the Aged and Infirm Colored Women,' incorporated and dedicated on July 4 1883." The Home was founded by the daughter of an African-American abolitionist from the area, in recognition of the care needs of "Aunt Peggy," an aging friend and former slave.
Unfortunately, by the late 1980s, the Home's finances were in trouble, triggering attempts to modernize, move to a larger facility, and other steps taken in an effort to get the Home back on sound footing. Some of the Home's financial history is captured in a early dispute over Medicaid with the state department of welfare in the '90s. In 2005, however, the Home filed a "voluntary Chapter 11 petition in the United State Bankruptcy Court for the Western District of Pennsylvania." The court approved closure of the Home and transfer of its residents to other facilities.
In the ongoing bankruptcy case, unsecured creditors initiated an adversary proceeding against several of the Home's former officers and directors. In 2010, the District Court granted the defendants' motion for summary judgment, finding that the "business judgment rule" and the "doctrine of in pari delecto" precluded liability on the facts alleged. The case seemed to be over, resolved by deference often accorded to nonprofit operations, especially as to "volunteer" directors or trustees.
The Third Circuit disagreed, however, and, in a precedential ruling, remanded for trial. The Circuit found that genuine issues of material fact existed as to whether the defendants, by continuing to operate the Home once bankruptcy was recognized as inevitable, breached fiduciary duties. The appellate court focused on allegations the individuals:
- failed to exercise requisite care,
- failed to be reasonably diligent, or
- "fraudulently contributed to the deepening of the debtor's insolvency."
The application of the deepening insolvency theory was a matter of first impression for Pennsylvania.
As reported by TribLive, in March 2013 an 8-person jury awarded the Home's unsecured creditors a total of $5.75 million in damages. The award included compensatory damages in the amount of $2.25 million against 15 of the 17 defendants, plus individual allocations of punitive damages against 2 former officers and 5 of the 13 individual former directors.
In May 2013, the District Court denied the defendants' post-trial motions for judgment as a matter of law, new trial or remittitur. In concluding there was sufficient evidence to support punitive damages against the Board members, the District Court observed in part:
"As to the five Director Defendants against whom punitive damages were levied, all of them were responsible for the Home's oversight. Evidence was presented that they were aware that Defendant Causey [a corporate officer] was not sufficiently performing her job as nursing home administrator but none of the Directors took any action to remove her from that position.... The jury heard testimony that the Board never chose to seek bids on the Home from organizations that specialized in nursing home turnaround and that no due diligence book was ever created for potential buyers.... The Home continued to accrue debts after these actions were taken, which Defendants reasonably should have known would damage the Home's prognosis."
The defendants' latest appeal to the Third Circuit is now pending (Docket No. 13-2707).
The outcome of In Re Unsecured Creditors of the Lemington Home for the Aged would appear to have potentially interesting implications for other sectors of the long-term care industry. For example, elderly residents of CCRCs, who have often paid large fees to cover future care or have paid "refundable" entrance fees, are usually unsecured creditors. The question of "deepening insolvency" and fiduciary duties to creditors might, therefore, affect the interests of a group that could appear particularly sympathetic to a jury.
This is an interesting case that bears watching for the outcome on appeal.
Sunday, December 8, 2013
Recently I was invited to give the keynote address for an annual meeting of MaCCRA, the Maryland Continuing Care Residents Association, held at Vantage House in Columbia, Maryland. As always happens, I learned a great deal from the opportunity to meet with individuals who care deeply about their communities and want to see them continue to succeed. Maryland is home to some 37 Continuing Care Retirement Communities (CCRCs), with close to 20,000 residents.
MaCCRA has a long and especially interesting history of advocating for appropriate protections for current and future residents of Continuing Care Retirement Communities. Most recently, between 2008 and 2012, MaCCRA supported a series of legislative efforts, including some that were ignored or soundly defeated, but culminating in passage of Senate Bill 485 and House Bill 556 in 2012 that amended of Maryland's CCRC oversight laws (Md. Code. Ann. Hum. Serv. Sections 104-1 et seq.). For example, the amendments require:
- greater disclosure of how entrance fees will be used or held, including a requirement of express disclosure about whether fees will or can be used for purposes unrelated to the community;
- greater disclosure of ownership interests in the community;
- disclosure of annual budgets (not just financial statements);
- increase of operating reserves from 15% of net operating expenses to 25%, with a ten-year phase-in; and
- certain restrictions on encumbrances of operating reserves
Such successes have required perseverance, with MaCCRA playing an important role in educating residents across the state as well as legislators. Indeed, MaCCRA understands that grass root movements alone may not be enough, and the organization has worked for twenty years with an experienced lobbyist, thus helping to assure institutional memory while working in small and large ways to urge greater accountability by providers.
One of the questions I frequently am asked during interactions with CCRC resident groups around the country is whether the most appropriate administrative unit of state government to provide oversight is the department of insurance. My response is that the name on the door is not as important as the state's commitment to hiring knowledgeable individuals with finance-specific training and who are not captives to the industry, regulators who are willing to take a balanced approach to oversight. The current operation of the unit of Maryland's Department of Aging charged with oversight of CCRCs strikes me as providing a good example of that commitment.
MaCCRA is a chapter of the National Continuing Care Residents Association (NaCCRA); during my visit to Maryland I learned that a MaCCRA member was an early leader in forming NaCCRA.
Tuesday, December 3, 2013
USA Today continues reporting on criminal misuse of resident funds held in accounts at nursing homes, pointing to the lack of clear laws requiring faculities to conduct audits or other oversight systems for resident accounts:
"Federal law provides the regulatory framework for the nation's 16,000 nursing homes, which have to meet an array of standards to participate in Medicare and Medicaid. Federal rules do not require audits for resident trust fund accounts, and most states take the same approach.
The U.S. Centers for Medicare and Medicaid Services, the federal agency responsible for nursing home regulation, is considering whether additional oversight is needed to address theft and mismanagement of residents' funds.
'We are aware of this situation and are reviewing the (inspection) procedures used to detect these kinds of problems,' agency spokesman Aaron Albright said when asked about USA TODAY's findings. 'CMS takes safeguarding nursing home patients very seriously.'"
Thursday, November 28, 2013
Devolution, the process in the United Kingdom by which Scotland, Wales and Northern Ireland are enacting domestic laws and policies separate from the laws of England, has opened important opportunities to consider the needs of older persons.
Over the Thanksgiving weekend, I'm in Northern Ireland, working with great colleagues at Queen's University Belfast, on two projects commissioned by the Commissioner of Older People Northern Ireland (COPNI). One team is working on elder abuse and the other project focuses on social care, with each team employing comparative analysis from the U.S., Canada, Ireland, India and other nations in framing proposals for future laws or policies to be recommended for adoption in Northern Ireland.
Wednesday, November 27, 2013
About 80% of Continuing Care Retirement Communities (CCRCs) in the U.S. operate as 501(c)(3) tax-exempt organizations. Over time, what were once fairly humble establishments with strong church or fraternal organization ties, have expanded to serve the needs and interests of their clientele. In some instances, the facilities and amenities are now distinctly "high end," operating with lighter affiliations to religion or other charitable groups. Increasingly, for-profit management companies are hired to provide the day-to-day services.
Understanding the reasons to exempt CCRCs from federal income taxes takes a bit of history. For example, in 1972, the IRS issued Revenue Ruling 72-124, noting that providing for the "special needs of the aged has long been recognized as a charitable purpose" for Federal tax purposes. As such, a CCRC was viewed as relieving the distress of aged persons by providing for the primary needs of such individuals for housing, health care, and financial security. Thus, a CCRC could be treated as tax exempt under Section 501(c)(3) of the Code as an organization organized and operated exclusively for charitable purposes.
State and local tax authorities, however, may employ a more exacting standard on CCRCs in order to qualify for charitable tax exemptions, including property tax exemptions. For a thoughtful analysis of the different standards, see "The Commerciality Doctrine as Applied to the Charitable Tax Exemption for Homes for the Aged - State and Local Perspectives," by Professor David Brennan (Kentucky Law), published in Fordham Law Review in 2007, and still very relevant.
Saturday, November 23, 2013
After P.S. Ramachandran turned 80, he and his wife decided it was time to stop living alone. Rather than take the traditional path of moving in with their son, the Ramachandrans chose an option once rare in India: a retirement community. “We wanted to be independent,” said Ramachandran, now 85, a former government official who moved to the Brindavan Senior Citizen Foundation’s retirement village overlooking the Nilgiri hills near Coimbatore city in southern India. “We have company and everything we need here, and activities to keep us busy as long as we’re physically able.”
Rising wealth from the region’s rapid growth in recent decades is changing the way many Asians grow old, breaking up the traditional family unit as children move to the cities or go abroad in search of better-paid jobs. The change is a new source of business for companies from India’s Tata Housing Development Co., Malaysia Pacific Corp. and Singapore’s ECON Healthcare Group, which are constructing retirement villages for the wealthy that offer cafes, tennis courts and yoga. The developers are following companies from adult-diaper makers to holiday operators that have swooped in on Asia’s silver economy, catering to the region’s growing cohorts of over-60s.
Excluding Japan, the market will be worth about $2 trillion by 2017 -- more than the current Indian economy -- according to Singapore-based market researcher Ageing Asia Pte. Filial Piety “Filial piety is still big in Asia, but it has less of a role now,” said Janice Chia, founder and managing director at Ageing Asia. “My grandparents were satisfied with staying home, watching a bit of TV, walking in the park and looking after the grandkids. But my parents want to travel, keep their minds active and don’t necessarily want to live with their children.”
Friday, November 22, 2013
A fascinating article in The Gerontologist analyzes Naturally Occurring Retirement Communities (NORCs) and a similar community-based model for aging in place, known as the Village. Frankly, it was only recently that I realized these labels may be used for developments with different identities.
Researchers in social work, welfare and public health programs at Rutgers, Berkeley, Michigan, and Maryland surveyed program leaders representing 69 Villages and 62 NORCS in early 2012, gathering data on services, activities, beneficiaries and funding sources.
Their analysis, presented in "A Tale of Two Community Initiatives for Promoting Aging in Place: Similarities and Differences in the National Implementation of NORC Programs and Villages," suggests that while both programs "aim to promote aging in place by offering a diverse range of supports and services to older adults within a locally defined geographic area," the means by which they achieve their aims differ. For example, "NORC programs reported offering more traditional health and social services, had more paid staff, and relied more on government funding than Villages."
The article also identified topics for further study, including the potential for longitudinal studies. Regional differences may also exist. "For example, NORC programs in New York likely differ in some ways from NORC programs nationally, given different organizations overseeing their development, . . . as well as distinct public policies defining the programs and eligibility criteria."
As a bit of history, Beacon Hill Village in Boston was begun in 2001 by a group of seniors who wanted to remain at home as long as possible in their neighborhood. An early model for NORCs is widely attributed to a co-op in New York City, begun in 1986 with support from private philanthropy and local government funding.
Thursday, November 21, 2013
Via the Center for Medicare Advocacy:
Late November is often a time for gatherings with family and friends – Thanksgiving and Hanukkah, soon followed by Christmas and the New Year. Nursing home residents often want to participate in these gatherings but may worry that they will lose Medicare coverage if they leave the facility to do so. Residents and their families can put their minds at ease. According to Medicare law, nursing home residents may leave the facility for holidays without losing their Medicare coverage. However, depending on the length of their absence, beneficiaries may be charged a "bed hold" fee.
The Medicare Benefit Policy Manual recognizes that although most beneficiaries are unable to leave their facility, "an outside pass or short leave of absence for the purpose of attending a special religious service, holiday meal, family occasion, going on a car ride, or for a trial visit home, is not, by itself evidence that the individual no longer needs to be in a SNF for the receipt of required skilled care."
A facility should NOT notify patients that leaving the facility will lead to loss of Medicare coverage. The Medicare Benefit Policy Manual says that such a notice is "not appropriate."
Tuesday, November 12, 2013
A new report highlighting the need for urgent action to improve residential aged care includes case studies of people being shackled, assaulted, sedated against their wishes and turned into "zombies". Australian of the Year and Alzheimer's Australia national president, Ita Buttrose, today launched the report calling for good quality residential aged care to be the norm. Quality of Residential Care: the Consumer Perspective acknowledges there are dedicated, compassionate people who work hard to provide quality care but notes there are instances of poor quality care. In 2012 there were more than 220,000 people in Australia in residential aged care in more than 2700 facilities across the nation.
"What worries me is that a minority of facilities are not providing good care, and that residents are not being respected and, in some cases, are subjected to physical or psychological abuse," Buttrose said. "Since becoming president of Alzheimer's Australia many consumers have shared disturbing stories with me of physical, psychological and sexual abuse, inappropriate use of restraint, unreported assaults and people in extreme pain at end of life not having access to palliative care. "The objective of the report developed by Alzheimer's Australia is to articulate the concerns of consumers, set out for discussion possible strategies to address them and to seek a higher priority for tackling them.
"It proposes strategies to bring providers, staff and consumers together to address the systemic issues in the aged care system that have led to breakdowns in quality care. Funding issues are important but equally so are the leadership and culture that respects the rights and dignity of older people. Common decency and respect costs nothing."
Source: Brisbane Courier Mail
Irving Levin Associates hosts commercial webcasts on industry perspectives in M & A and finance in health care and senior housing. On Thursday, November 14, they are offering a webcast (1:00-2:30 p.m. Eastern) on "Assisted Living Facilities: Buying, Selling and Valuing."
As part of the marketing, Levin reports that in 2012, commercial transactions for "assisted living communities set a new pricing record at an average price of $164,000 per unit, which topped the previous record set in 2007." Further, Levin reports:
"Many factors enabled this to happen such as a drop in cap rates, an increase in lenders in the market, higher quality properties and portfolios in the market and many more aggressive buyers, including the smaller REITs and private equity firms. . . . There is a fear that with so much new development in certain markets, and with new developers entering the market, the assisted living sector may be faced with another round of overbuilding."
Sounds like an interest set of issues for discussion by the panel, as investors continue to look to retiring boomers for market inspiration.
Monday, November 4, 2013
In a lengthy article, Pro Publica (in collaboration with Frontline) discusses quality of care problems along with the history of assisted living regulation. As an additional resource, Pro Publica also has developed a state-specific summary of key assisted living regulations.
In addition, California Advocates for Nursing Home Reform released a report on problems in California's assisted living facilities. The report's recommendations for reform include adoption of a tiered level of care system, annual inspections, and an on-line consumer information system.
The Assisted Living Consumer Alliance played a role in each of these examinations. ALCA board members Eric Carlson, Toby Edelman, Richard Mollot and Lori Smetanka each were quoted in the Pro Publica quality of care article. ALCA board member Jody Spiegel was part of the CANHR team that produced the report on California assisted living.
Albuquerque Real Estate Appraiser David Pearson shared a recent issue of Seniors Housing Research Report from Marcus & Millichap, focusing on commercial real estate development trends in the second half of 2013. The report observes that overall "demand for seniors housing units is intensifying thanks to a rapidly improving housing market. . . . In fact, occupancy in both independent living and CCRCs is anticipated to rise this year, spurring rent growth in both product types."
In certain areas of the country, including the southeast and Texas, new development may be slowed by the still soft market for recently constructed facilities. Interestingly, the report predicts growth in dementia care units, while at the same time predicting occupancy rates for traditional "skilled nursing" facilities will continue to decline. As Shakespeare might observe if he were writing today, "would a nursing home by any other name smell as sweet?"
Thursday, October 31, 2013
Part of my recent legal research and writing focuses on state regulation, accountability, and resident rights at Continuing Care Retirement Communities or CCRCs. In one of my early articles I wrote about what I thought might be a niche for elder law attorneys who could advise prospective CCRC residents about the ins and outs of CCRCs, particularly on contracting issues.
Turns out a Financial Planner and CPA have decided to make a business out of offering advice to consumers on CCRCs. Recently I had the chance to talk to Brad Breeding (the financial planner) and Ken Taylor (the accountant). The idea started when they were getting questions from clients about CCRCs near their base in North Carolina and realized there was a wider consumer market for critical information. In 2009 they started working on a web-based consulting tool for prospective CCRC residents and others who are thinking about retirement options.
The resulting company is LifeSite Logics, offering "a central database of objective data" about CCRCs across the country. Sounds like Brad and Ken have the start on a strong data set, and are already offering comparable data on several hundred CCRCs. The search price is about $40. Most important, the two seem determined to stay objective about their data points; they report they aren't backed by any CCRC operators or developers.
In addition, their LifeSite Logics website offers some free background and educational documents on CCRCS, including some information on contract (A, B, C or "other") types.
I have to say I've often thought "A, B & C" labels are potentially confusing to the public. This is especially true for the financial risks assoicated with "refundable fee" contracts which may look to the average consumer like "life-care" contracts that are usually associated with the "A" label, but are closer to "Type C" fee-for-service contracts when carefully analyzed. Further, these letters are not "grades" for the facilities or contract types, another point of potential confusion.
Good luck, Ken and Brad, on a promising start for what looks to be a very consumer-friendly product.
Wednesday, October 30, 2013
At their annual meeting this week in Dallas, LeadingAge celebrated the good works of another nonprofit, the Hearth program in Boston, Massachusetts, awarding Hearth one of their top awards for "Excellence in Leadership."
Hearth is dedicated to "the elimination of homelessness among the elderly through housing, outreach and advocacy." They identify strategic goals, including increasing the supply of permanent, affordable and supportive housing in Greater Boston, as well as support for national initiatives directed to end elder homelessness. Hearth also facilitates elders' access to specific services, including legal services. Hearing about their projects, going back to 1991, was definitely a feel good moment at the conference.
Monday, October 28, 2013
The fall meeting of the National Continuing Care Residents' Association (NaCCRA) in Dallas on October 27 was attended by CCRC residents from at least a dozen states, including Arizona, California, Connecticut, Florida, New Jersey, North Carolina, Oregon, Pennsylvania, Texas, Virginia, Washington, and D.C.
The morning workshop focused on "Imagining CCRCs of the Future," starting with round table discussions that identified 25 topics deemed important to the future of the industry, including planning for consumers who may have less financial resources while also seeking greater services; interest in building more diverse communities; and the importance of training for emerging leaders. From the broad list, the group identified 7 priorities for NaCCRA in the coming year and beyond, accompanied by specific action recommendations. Stay tuned!
In the afternoon, members of NaCCRA were part of a panel discussion on "Resident Engagement" led by Ron Herring, the President-Elect of NaCCRA. The panelists were Ellen Handler, President of ORANJ, the residents' organization in New Jersey; Marilyn Kennedy, Chief Operating Officer for Episcopalian Senior Communities in the San Francisco area, and Mary Ann Colwell, a resident at St. Paul's Towers, one of Episcopalian Senior Communities' CCRCs.
Handler presented highlights from successful advocacy on the part of the New Jersey group in achieving state legislation requiring resident membership on governing boards of CCRCs, and, most recently, mandating threshold rights for residents in "independent living." Kennedy and Colwell talked about the 10 year history of progress in their communities, building multiple pathways for residents to participate in the life of their communities, including working with provider representatives to plan for the future. Kennedy discussed the role of California state law that helped to frame the provider/resident discussions.
The audience included provider representatives. During the Q & A that followed the panelist presentations, the interaction generated observations about effective roles for residents on governing boards and key board committees (such as finance and quality), including success stories from communities. Several people remarked on the "process" of resident engagement, as it takes time for true engagement to become engrained as the culture of the community.
The NaCCRA meeting was part of the opening day action at the national meeting of LeadingAge, the national trade group for nonprofit senior living providers, which runs through October 29.
Friday, October 25, 2013
This weekend I'm heading off to Dallas for a quick visit, to help with a Sunday workshop for the good folks at NACCRA, the National Continuing Care Residents' Association. Then I get to attend part of the LeadingAge Annual Meeting & Expo that runs from October 27-30.
I have to say I've been a bit overwhelmed with the email traffic from participants at the LeadingAge Expo (next time I'll be more careful about what boxes I check on the registration forms). But, it is always good to see an industry from different perspectives and to get outside the "academic" world for a broader view. I'm also looking forward to catching up with friends, including Trisha Cowart, who will be presenting on "Surviving the Medicaid Maze," on Tuesday, October 29, speaking from her experiences the last few years as an attorney representing long-term care providers. Trisha and I co-authored a book on Financial Abuse and Exploitation (Bisel 2011) and she's a cherished former partner from the Penn State Elder Protection Clinic.
I'm also looking forward to seeing some of the high-tech developments in long-term care I've been reading about. More after I return.
Monday, October 21, 2013
On October 16, New Jersey Governor Chris Christie signed into law a detailed "Bill of Rights" for residents of New Jersey's Continuing Care Retirement Communities (CCRCs).
Key features of the law (S2052/A3132) include:
- clarification of the circumstances under which residents can be transferred from independent living to skilled care,
- the right for prospective residents to have at least 30 days to review mandatory disclosure statements before signing the admission agreement, and
- further specification of the state's right to enforce the law, including sanctions or fines.
The new legislation serves to amend New Jersey's Continuing Care Retirement Community Regulation and Financial Disclosure Act, N.J. Stat. Ann. Sections 52:27D-330 through 360. The law was first enacted in 1986, becoming effective in March 1987.
My first reading of the final legislation suggests it covers rights about which even the most paternalistic provider would agree.
ORANJ, the Organization of Residents Associations in New Jersey, was very active in raising resident concerns during the several year process that led to the bill's passage.
Hat tip to David Hibberson for keeping us up-to-date on New Jersey developments. Congratulations to New Jersey CCRC residents on their hard work.
Friday, October 18, 2013
Another consequence of tough financial times is the unaffordability of professional long-term care. But in Greece, that phenomenon has an additional component, as families apparently need the elder's pension to make ends meet in the family home. Pennsylvania Elder Law attorney Dionysios C. Pappas (great name, right? Although we all call him "Dennis"), shared an article from Greece, "Care Homes See Mass Exodus," and suggested these key excerpts:
“…Grandma and grandpa’s pension has become the main source of income for thousands of Greek families struggling with unemployment, along with rising living costs and taxes. This shift has been accompanied by a mass evacuation of retirement homes across the country as elderly family members move in with their children and grandchildren in order to make ends meet…”
“…Greece has around 200 nursing homes for the elderly, half of which are private facilities while the other half are run by nongovernmental organizations and the Orthodox Church. Their total capacity is estimated at 15,000 people…before the crisis, these facilities were operating at 100 percent capacity. Today, however, this has dropped to 80 percent as one-fifth of their patients have
“…Taking elderly relatives out of retirement homes has become something of a 'solution’ to the unemployment problem…Most of the unemployed people in this country are surviving on the pensions of their parents or grandparents anyway rather than on their unemployment benefits. If unemployment continues to rise, then so will the evacuation of nursing homes…”
Thanks, Dennis, for providing this comparative information on caregiving.
Wednesday, October 16, 2013
community-based services, better balance services from institutional to non-institutional settings, and promote affordable, accessible housing.”
Earlier this year, Congress passed the Reverse Mortgage Stabilization Act of 2013, and under this legislation the Federal Housing Administration (FHA) was directed to make key changes in the reverse mortgage program, also known as the "Home Equity Conversion Mortages for Seniors" program. FHA has issued several advisories to Lenders, Financial Counselors and Borrowers (links to recent "Reverse Mortgage Cautions" available here).
During my years in Penn State Law's Elder Protection Clinic, we often were frustrated by reverse mortgages. We saw clients who had taken out the mortgages without guidance on whether there was enough money to keep the home afloat, especially when equity was stripped to pay for daily living expenses, but there still wasn't enough money to pay real estate taxes. The mortgages sometimes delayed the client's departure from the home -- but not by much. Sometimes clients came to the Clinic in time for a discussion about whether selling the home would be a more effective solution to serious money problems, combined with moving into a more affordable rental. But, of course, pride and affection for the homestead, combined with the illusion of easy money, could be strong motivation, stronger than practical advice.
Will the FHA changes be effective to promote sound use of reverse mortgages?