Tuesday, July 29, 2014
From Senior Housing News, comes the word of River Terrace Estates, a nonprofit Continuing Care Retirement Community (CCRC) in Bluffton, Indiana, that filed for protection in bankruptcy court on July 22. Unlike some Chapter 11 reorganizations for CCRCs, River Terrace is not a "new" construction, having opened in 2004. However, as with newer operations that came on line just as the 2008 financial crisis hit, River Terrace reports being impacted by the recession, reportedly a hard hit for housing in Northern Indiana. As described in Senior Housing News, one potentially unique aspect of the River Terrace financing issues is the source of the loans it carried:
"Contrary to some CCRCs that rely heavily on institutional investments, River Terrace Estates’ financing encompasses roughly 1,400 individuals who own RTE bonds. As a result, the CCRC determined that Ch. 11 was the only feasible method to restructure the bonds. In connection with the filing, the CCRC has already filed a plan of reorganization in order to expedite the process, River Terrace Estates stated in a news release.
'Because we have some 1,400 bondholders, we decided the best way to give them a voice in this process is to ask them to vote on a two-part plan so we know their intentions,' Stewart said. RTE bondholders will be asked to vote on whether they want to keep their bonds for the long-term based on the community’s recent progress, or market the CCRC to validate its value."
According to news reports, either way, "bondholders will take a serious haircut, perhaps recovering only 53% in a bond exchange or $0.46 on the dollar in the sale of the facility, a hard hit on predominantly non-institutional investors," according to George Mesires, a lawyer with the finance and restructuring team for a Chicago law firm, quoted in Senior Housing News and on the firm's website.
Another potentially unique feature will be River Terrace Estate's plan for going forward with a different payment model for new residents. Rather than paying an entry fee described as $55k to $100k, new residents can pay a "nonrefundable communtiy fee of about $30,000, accordiong to figures provided" by a spokesperson quoted in Senior Housing News.
This summer has brought news of other financial struggles for CCRCs, including the June Chapter 11 filing by Texas-based senior living company Sears Methodist Retirement Systems, and the Chapter 11 filing by a New York life care community, The Amsterdam on July 23. The ability of CCRCs to emerge successfully from similar reorganizations in the past has often depended on new operating partners and restructuring of loans, but also on the ability of the companies to reassure future residents of appropriate protection and use of "large" upfront fees.
As we reported previously, Congress passed the "Reverse Mortgage Stablization Act" in August of 2013. In both state and federal legislatures, a new law's title may over-promise and under-deliver. With respect to reverse mortgages, Public 113-29 gave authority to the Secretary of Housing and Urban Development (HUD) to establish, by "notice or mortgagee letter, or any alternative requirements" deemed ncessary "to improve the fiscal safety and soundness of the program," and the latest in a series of HUD requirements takes place, as detailed below, on August 1.
From a consumer perspective, one concern has been reported attempts by mortgage companies to "foreclose" on mortgages where the "borrowing spouse" has died but his or her "non-borrowing, surviving spouse" was still in the home. Other concerns have focused on "defaults" triggered by failure of a borrower to pay real estate taxes or utilities, thus suggesting continuing vulnerability of the elderly borrower to financial insolvency despite receiving cash from the reverse mortgage. Taking out a reverse mortgage without careful planning for necessary home-related payments means the borrower can lose the equity in the home, equity that could have been put to better use by selling the home. As reported here, suits have challenged application of payment due status in such fact patterns.
In June, the Department used its "Mortgagee Letter" authority to issue its latest in guidelines intended to better protect prospective borrowers of the risks of reverse morgages, including requirement that the mortgage companies make clear to borrowers the following:
- FHA insures fixed interest rate mortgages, as well as annual and monthly adjustable interest rate mortgages;
- The borrower has the ability to change the method of payment under the reverse mortgage ARM products at any time provided funds are available;
- Fixed interest rate mortgages are limited to the Single Disbursement Lump Sum payment option where there is a one-time draw at loan closing and no future draws post loan closing;
- Adjustable interest rate mortgages provide for five, flexible payment options, and allow future draws;
- The amount of funds available to the mortgagor is currently determined by the age of the youngest mortgagor, and
- The disbursement of mortgage proceeds during the first twelve-month disbursement period is subject to an initial disbursement limit as determined by requirements set by the Secretary.
In April, the Department issued "Mortgagee Letter 2014-07" to establish, effective August 1, that "the due and payable status will be deferred for as long as a Non-Borrowing Spouse continues to meet all the qualifying attributes...." The nonborrowing spouse has 90 days after the death of the borrowing spouse to "establish legal ownership" or other legal right to remain in the home.
Monday, July 28, 2014
Recently a former law student who is considering a career change asked me about elder law, wanting to meet with me to discuss what is involved. I'm happy to chat any time with current and former students, especially about elder law, but this time my advice was simple: "Drop everything and go to Pennsylvania's 2014 Elder Law Institute." Indeed, this year saw some 400 individuals attend.
Important to my advice was the fact that ELI is organized well for both "newbies" and more experienced practitioners. After the first two-hour joint session, over the course of two days there are four sessions offered every hour. One entire track is devoted to "Just the Basics" and is perfect for the aspiring elder law attorney. Indeed, I usually sponsor two Penn State law students to attend. As in most specializations, in elder law there will is a steep learning curve just to understand the basic jargon, and the more exposure the better.
One of my favorite sessions is the first, "The Year in Review," a long tradition at ELI and currently presented by Marielle Hazen and Rob Clofine. Marielle reviews new legislation and regulations, both at the state and federal level, while Rob does a "Top Ten Cases" review. Both speakers focus not just on what happened in the last 12 months, but what could or should happen in the future. They frequently pose important policy perspectives, based on recent events.
Among the highlights from the year in review session:
- Analysis of the GAO Report on "Medicaid: Financial Characteristics of Approved Applicants and Methods Used to Reduce Assets to Qualify for Nursing Home Coverage" released in late June 2014. Data collection efforts focused on four states and reportedly included "under cover" individuals posing as potential applicants. The report summarizes techniques used to reduce countable resources, most occuring well within the rules and thus triggering no question of penalty periods. Whether Congress uses the report in any way to confirm or change existing rules remains to be seen.
- A GAO Report on Medicaid Managed Care programs, also released in June, concluding that additional oversight efforts are needed to ensure the integrity of programs in the states, which are already reporting higher increases in outgoing funds than fee-for-service programs.
- The need to keep an eye open for Pennsylvania's Long Term Care Comission report, expected by December 2014. Will it take issue with the Governor's rejection of the Affordable Care Act's funding for expansion of Medicaid?
- Report on a number of lower court decisions involving nursing home payment issues, including a report on a troubling case, Estate of Parker, 4 Pa. Fiduciary Reporter 3d 183 (Orphans' Court, Montgomery County, PA 2014), in which a court-appointed guardian of the estate of an elderly nursing home patient "agreed" to entry of a judgment, not just for nursing home charges, but also for pre- and post-judgment interest, plus attorneys' fees for the nursing home's lawyer of almost 20% of the stipulated judgment, in what was an uncontested guardianship.
In light of the number of nursing home payment cases in Rob's review, perhaps it wasn't a surprise that my co-presenter, Stanley Vasiliadis, and I had a full house for our session on "Why Am I Being Sued for My Parents' Nursing Home Bill?" We examined how adult children (and sometimes elderly parents of adult children in care) are finding themselves the target of collection efforts by nursing homes, including actions based on theories of breach of promise (contract, quatum meruit, and promissory estoppel), fault (common law fraud or statutory claims of "fraudulent transfers), or family status, such as statutory filial support.
The extensive course materials from all of the presenters, both in hard copy and electronic formats, are available for purchase directly from the Pennsylvania Bar Institute.
July 28, 2014 in Current Affairs, Elder Abuse/Guardianship/Conservatorship, Estates and Trusts, Ethical Issues, Federal Cases, Health Care/Long Term Care, Housing, Legal Practice/Practice Management, Medicaid, Medicare, Programs/CLEs, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Sunday, July 27, 2014
The Amsterdam, also known as Amsterdam House at Harborside, has been marketed as the "first and only" life care community in Nassau County. It now also appears to be the first CCRC in that county -- and perhaps in the state of New York -- to seek the protection of the bankruptcy court. The company filed under Chapter 11 for "Reorganization" on July 23, 2014.
As reported in Newsday on July 23:
"An upscale retirement community in Port Washington has filed for bankruptcy protection after failing to get all of its bondholders to support a debt restructuring. The Amsterdam at Harborside sought protection in federal court from its creditors under Chapter 11 of the U.S. Bankruptcy Code. Executives at the not-for-profit said Wednesday that it would not close and there are no plans to fire any of the 173 employees. In a court filing in Central Islip on Tuesday, the continuing-care complex said its liabilities and assets were both in the range of more than $100 million to $500 million."
According to news reports, The Amsterdam was opened in 2010, near the peak of the recession, a tough time for many CCRCs. It is a "refundable entrance" fee model, with entrance fees ranging from $500,000 to $1.6 million, with a reported 85% occupancy status. Newsday also reports that "under the proposed restructuring plan, [company spokespersons said] the retirement community would honor the contracts of existing residents, continue to refund residents' money when they no longer live there, and maintain the current fee structure."
Update: Senior Housing News describes the filing as a "pre-negotiated chapter 11 bankruptcy petition to restructure an estimated $220 million in debt."
Thursday, July 24, 2014
The CarTalk Guys on National Public Radio have a crazy tradition of breaking their one hour radio program into "three halves" (okay, they have a lot of crazy traditions -- I'm focusing on just one). In that tradition, I'd been thinking about how the practice of "elder law" might also have three halves, but then I realized that perhaps it really has five halves. See what you think.
- In the United States, private practitioners who call themselves "Elder Law Attorneys" usually focus on helping individuals or families plan for legal issues that tend to occur between retirement and death. Many of the longer-serving attorneys with expertise in this area started to specialize after confronting the needs of their own parents or aging family members. They learned -- sometimes the hard way -- about the need for special knowledge of Medicare, Medicaid, health insurance and the significance of frailty or incapacity for aging adults. They trained the next generations of Elder Law Attorneys, thereby reducing the need to learn exclusively from mistakes.
- Closely aligned with the private bar are Elder Law Attorneys who work for legal service organizations or other nonprofit law firms. They have critical skills and knowledge of health-related benefits under federal and state programs. They also have sophisticaed information about the availability of income-related benefits under Social Security. They often serve the most needy of elders. Their commitment to obtain solutions not just for one client, but often for a whole class of older clients, gives them a vital role to play.
- At the state and federal levels, core decisions are made about how to interpret laws affecting older adults. Key decisions are made by attorneys who are hired by a government agency. Their decisions impact real people -- and they keep a close eye on the financial consequences of permitting access to benefits, even if is often elected officials making the decisions about funding priorities. I would also put prosecutors in this same public servant "Elder Law" category, especially prosecutors who have taken on the challenge of responding to elder abuse.
- A whole host of companies, both for-profit and nonprofit, are in the business of providing care to older adults, including hospitals, rehabilitation centers, nursing homes, assisted living facilities, group homes, home-care agencies and so on -- and they too have attorneys with deep expertise in the provider-side of "Elder Law," including knowledge of contracts, insurance and public benefit programs that pay for such services.
- Last, but definitely not least, attorneys are involved at policy levels, looking not only to the present statutes and regulations affecting older adults, but to the future of what should be the legal framework for protection of rights, or imposition of obligations, on older adults and their families. My understanding and appreciation of this sector has increased greatly over the last few years, particularly as I have come to know human rights experts who specialize in the rights of older persons.
Of course, lawyers are not the only persons who work in "Elder Law" fields and it truly takes a village -- including paralegals, social workers, case workers, health care professionals, and law clerks -- to find ways to use the law effectively and wisely. Ironically, at times it can seem as if the different halves of "elder law" specialists are working in opposition to each other, rather than together.
My reason for trying to identify these "Five Halves" of Elder Law is that, as with most of us who teach courses on elder law or aging, I have come to realize I have former students working in all of these divisions, who began their appreciation for the legal needs of older adults while still in law school. Organizing these "halves" may also help in organizing course materials.
I strongly suspect I'm could be missing one or more sectors of those with special expertise in Elder Law. What am I forgetting?
Monday, July 21, 2014
Leslie Frances, Associate Dean for Faculty Research Development at University of Utah Law, has an interesting post on the Health Law Prof Blog about challenges to states that have failed to provided Medicaid coverage for needs of residents in "assisted living," as opposed to "skilled nursing" care settings. Here are two such cases she describes:
First, Idaho providers of supported living services brought suit in 2009 challenging the Idaho legislature’s failure to appropriate sufficient funds. The state’s rate-setting study had recommended a substantial increase in funds, but the legislature did not approve the increase. The district court granted summary judgment to the providers and the 9th Circuit affirmed in a very brief opinion in April 2014. The district court’s reasoning, upheld by the 9th Circuit, was that the Medicaid Act requires state rates to be “‘consistent with efficiency, economy, and quality of care and … sufficient to enlist enough providers’ to meet the need for care and services in the geographic area. 42 U.S.C. § 1396a(a)(30).” Exceptional Child Center v. Armstrong , 2014 WL 1328379 (April 14, unpublished). Purely budgetary reasons such as those cited by Idaho do not suffice to meet this standard. Last week, Idaho appealed the 9th Circuit decision to the Supreme Court.
Second, independent living centers in Southern California have brought suit challenging California’s method for enrolling dual eligibles into managed care programs. Such efforts, touted as improving care coordination, come under criticisms that they are instead merely methods of cost control that will result in the loss of essential services. The plaintiffs are Communities Actively Living Independent & Free, the Westside Center for Independent Living, and Southern California Rehabilitation Services, Inc.; they seek to enjoin what they contend is California’s confusing notice to dual eligible about their impending reenrollment and how to opt out of it. Westside Center for Independent Living vs. California Department of Health Care Services, Cal. Civil No. 34-2014-080001884 (filed July 2, 2014).
My own state of Pennsylvania is one of the states that has, in theory, obtained approval from HHS to use Medicaid in assisted living facilities, but even after several years, funding has not been implemented. Across the state line in New Jersey, low income/asset residents in assisted living are eligible to apply for Medicaid.
Sunday, July 20, 2014
The growing significance and scope of "elder law" is demonstrated by the program for the upcoming 2014 Elder Law Institute in Philadelphia, Pennsylvania, to be held on July 24-25. In addition to key updates on Medicare, Medicaid, Veterans and Social Security law, plus updates on the very recent changes to Pennsylvania law affecting powers of attorney, here are a few highlights from the multi-track sessions (48 in number!):
- Nationally recognized elder law practitioner, Nell Graham Sale (from one of my other "home" states, New Mexico!) will present on planning and tax implications of trusts, including special needs trusts;
- North Carolina elder law expert Bob Mason will offer limited enrollment sessions on drafting irrevocable trusts;
- We'll hear the latest on representing same-sex couples following Pennsylvania's recent court decision that struck down the state's ban on same-sex marriages;
- Julian Gray, Pittsburgh attorney and outgoing chair of the Pennsylvania Bar's Elder Law Section will present on "firearm laws and gun trusts." By coincidence, I've had two people this week ask me about what happens when you "inherit" guns.
Be there or be square! (Who said that first, anyway?)
July 20, 2014 in Advance Directives/End-of-Life, Elder Abuse/Guardianship/Conservatorship, Estates and Trusts, Ethical Issues, Federal Cases, Federal Statutes/Regulations, Health Care/Long Term Care, Housing, Legal Practice/Practice Management, Medicaid, Medicare, Programs/CLEs, Property Management, Retirement, Social Security, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)
Wednesday, July 16, 2014
An interesting moment for me at the 2014 Internatonal Elder Law and Policy Conference at John Marshall Law School in early July occurred when I asked several speakers from China to comment on recent reports suggesting "filial support" or "family support" is attracting interest of legislators, courts and older persons in China. For example, I shared with them the text, in English and Chinese, from Chinese Law Prof Blog on "Controversy Over Elder Law in China," that included news reports on consideration of laws in Shandong province in northeastern coastal China. If passed the laws would appear to require adult children to maintain "their parents' standard of living at a level at least equal to their own."
My question sparked a vigorous debate among the Chinese participants and quite a few chuckles from the audience as we tried to keep up with the translators. Over the course of the next two days Professor Lihong Tang from the law school at Fuzhou University in Fujian Province, Professor Chey-Nan Hsieh from Chinese Culture University in Taiwan, and Professor Xianri Zhou of South China Normal University School of Law in Shanghai attempted to help me understand. Here is my understanding of several points made during our discussion, a conversation we have agreed to continue via email:
- The population of individuals aged 65 and older in China is already 119 million. From my separate research I know that the older population is projected to continue to grow at a rate of 3.2 percent per year. The percentage of the population deemed older is also increasing, and according to some reports, it is projected to hit 1/6th of the total population by 2018 and possible as high as 1/5th of the total population by 2035. In other words, as Professor Tang explained, at some point in the relatively near future the total number of elderly in China could exceed the total population -- young, middle-aged and old -- of the U.S.
- With these population statistics in mind, they advised caution in making any judgments or predictions about trends based on a single case decision or from news stories reporting about any single family controversy involving support. And of course, this point is valuable to remember in all legal research, but the importance (and challenge) of having an adequate empirical base in China may be even more significant.
- Court actions to mandate younger family members to care for their elders are not a major trend in China. Rather, they emphasized that most families voluntarily provide the majority of care and financial assistance needed by their elders.
- There are efforts to create a stronger public system of income support where necessary to meet basic needs.
- Recent news reports (that received high profile attention in the U.S., such as this 2013 report on CNN) about a Chinese law that would mandate that adult children also "visit" their elderly parents were focusing on a "proposed" law, not one that was enacted.
In addition to my on-going discussion with the law professors at the conference, Yihan Wang, Senior Judge in the People's Court of the Jing'an District in Shanghai, gave a fascinating presentation on "The Path of Judicial Protection of the Rights and Interests of the Elderly in China." He has served for many years as a judge, and is currently in charge of "civil trials, commercial trials, finance trials and elderly trials" in his judicial district in Shanghai. He explained that an "elderly judicial tribunal" was established in 1994, for civil cases in which one or both parties is aged 60 or more. His court recognizes that older adults may have unique needs for legal assistance in disputes, including a potential need for free legal representation or guidance.
After the presentation of his paper via a translator, Judge Yihan Wang provided me with a copy of the English language translation of his paper. Thus, I was able to both hear and read about his examples of cases that have occurred in the Shanghai court:
"For one example, in the disputes of sale contracts of real estate, some adult children sell their parents' apartment and violate their parents' residency by stealing their parents' identification -- or make them sign the contract with the older person is unconscious. In [some] cases, the judge will judge the contract as valid to protect the third-parties' legal rights according to the Property Law. However, in cases involving the older [person], judges will consider more about the buyer's duty of care and the residency rights of the senior. They will be more cautious and much more strict to confirm the effectiveness of the contract. Mainly to protect the older people's residency right."
In contrast to my on-going discussion with the three Chinese law professors who emphasized the voluntary nature of assistance provided by families to their elders, Judge Yihan Wang's paper suggested that some level of litigation or claims review does occur over the issue of "family support," including what he described as efforts to "remind the adult children of their duty." His paper reported that "statistics show that 56% of the claiming alimony cases are closed by conciliation. In most of these cases, after the trials, children go to visit their parents automatically and the family relationship is improved." He emphasized that for older adults, "conciliation not only protects their legal rights and interests, but also maintains their family relationship and brings their children home."
Judge Yihan Wang's paper, in translation, concludes with these words: "China's 5,000-year-old culture emphasizes respect for the elderly, pension, help age virtues, which [are] absorbed by Chinese law and policy concerning the elderly, reflected in the Chinese judicial practice and become the judicial characteristics on protection of the rights and interests of the elderly in China."
Thus, I can see that my efforts to understand the role of "filial support" or "family support" laws in China will continue, especially as it appears that there may be regional differences in how any such laws are used or needed. In most countries I have studied, voluntary assistance, both practical and financial, flowing from adult children to elderly parents, is the norm. What I find interesting is the question of to what extent is "voluntary" filial assistance also encouraged, mandated, or subject to enforcement by laws. Is the 5,000 year tradition of filial piety under sufficient pressure in the 21st century that law is necessary?
Tuesday, June 24, 2014
The U.S. Department of Health and Human Services’ Administration for Community Living (ACL) is proud to announce the release of a new online learning tool: Building Respect for LGBT Older Adults. The tool is designed to increase awareness of the issues faced by lesbian, gay, bisexual, and transgender (LGBT) individuals living in long term care (LTC) facilities.
After completion of the online training, program participants will be prepared to:
- Increase visibility of the issues facing LGBT individuals in LTC facilities.
- Provide easy access to information on serving LGBT individuals in LTC facilities.
- Encourage LTC facilities to provide opportunities for staff to take the online training.
- Change the way individuals and facilities approach older LGBT adults.
The Building Respect for LGBT Older Adults tool was developed in collaboration with the HHS Office of Public Affairs, the Centers for Medicare & Medicaid Services, and the ACL-funded National LGBT Resource Center, with input from aging and LGBT advocates.Read more.
Additional LGBT Resources for the Aging Services Network
Since 2010, the ACL Administration on Aging has funded Services and Advocacy for Gay, Lesbian, Bisexual and Transgender Elders (SAGE) to develop and operate the National Resource Center on LGBT Aging (NRC), the country's first and only technical assistance resource center aimed at improving the quality of services and supports offered to LGBT older adults. This resources clearinghouse website was recently revamped and includes great local and national resources, as well as a new database of all the organizations that have received one of NRC’s trainings. Also, the NRC’s most popular guide, A Practical Guide to Creating Welcome Agencies is now available in Spanish titled Servicios Inclusivos Para Personas Mayores LGBT. Request a copy today!
Also, read the Presidential Proclamation -- Lesbian, Gay, Bisexual, and Transgender Pride Month, 2014.
Friday, June 20, 2014
I'm at the mid-point in a three-week period of fairly intense focus on elder protection issues.
Last week, I accepted the invitations of Dickinson Law alum Bob Gerhard and Judge Lois Murphy to join them at the Montgomery County Elder Justice Roundtable to discuss practical concerns about elder abuse at the local level. Bob and I conducted two sessions on Powers of Attorney.
This week, I've had the privilege of being part of working sessions of the Pennsylvania Supreme Court's Elder Law Task Force. Judge Murphy, right, is also a part of this effort. A fascinating mix of trial and appellate level judges, district attorneys, legal aid specialists, solo practitioners, "big firm" lawyers, court administrators, state officials, protective service case workers, social workers (and a couple of us academic types) spent two intense days discussing a year's worth of research on how better to serve the interests and needs of adults who may be at risk of neglect or intentional harm, including financial abuse. Guided by the charge of Justice Debra Todd of the Pennsylvania Supreme Court, we're looking to issuance of a comprehensive report and recommendation for actions, probably in the early fall 2014.
Next week, I land in Belfast, Northern Ireland for several days of working group meetings on law and aging topics. On Tuesday, June 24, I am part of a research team's Roundtable discussion on recommendations regarding "social care" for older persons. hosted by the independent Commissioner of Older Persons in Northern Ireland (COPNI). Our team leader for that project is Dr. Joseph Duffy of Queen's University Belfast. The following day, I will attend the COPNI's launch of "Protecting our Elder People in Northern Ireland: A Call for Safeguarding Legislation in Northern Ireland." Commissioner Claire Keatinge and her team have been tireless in pursuing a full agenda of safeguarding, care and dignity goals for seniors. Last winter I worked on research findings and recommendations with team leader Dr. Janet Anand, also of Queens University Beflast, that served as a base for the Safeguarding Law proposals. These two projects have involved amazingly talented scholars from diverse backgrounds, including social work and law in Scotland, England, Wales, Australia and, of course, both the north and south of Ireland. The truth is that I've been an avid "student" during my opportunities in Northern Ireland, often facing the reality that those on the other side of the Atlantic are ahead of the U.S. in thinking about key concepts, especially "social care" goals. I look forward to more work, writing several follow-up articles in collaboration with team members as a result of the rich research environment of the last year.
Following this schedule, I'm probably going to take a break from "daily" blogging for a few weeks. I fear my brain may explode if I don't give it a bit of a rest, and I hear the green hills and fields of Ireland calling to me.
June 20, 2014 in Current Affairs, Elder Abuse/Guardianship/Conservatorship, Ethical Issues, Health Care/Long Term Care, Housing, Property Management, Social Security | Permalink | Comments (0) | TrackBack (0)
Wednesday, June 18, 2014
Last week's news of a Chapter 11 Bankruptcy proceeding in the Texas-based senior living company Sears Methodist Retirement Systems, Inc. (SMRS) has once again generated questions about "entrance fees" paid by residents at the outset of their move to a Continuing Care Retirement Community (CCRC). CCRCs typically involve a tiered system of payments, often including a substantial (very substantial) upfront fee, plus monthly "service" fees. The upfront fee will carry a label, such as "admission fee" or "entrance fee" or even entrance "deposit," depending on whether and how state regulations require or permit certain labels to be used.
As a suggestion of the significance of the dollars, a resident's key upfront fee at a CCRC operated by SMRS reportedly ranged from $115,000 to $208,000. And it can be much higher with other companies. So, let's move away from the SMRS case for this "blog" outline of potential issues with upfront resident fees.
Even without talking about bankruptcy court, for residents of CCRCs there can be a basic level of confusion about upfront fees. In some instances, the CCRC marketing materials will indicate the upfront fee is "refundable," in whole or in part, in the event the resident moves out of the community or passes away. Thus, residents may assume the fees are somehow placed in a protected account or escrow account. In fact, even if the upfront fee is not "refundable," when there is a promise of "life time care," residents may assume upfront fees are somehow set aside to pay for such care. How the facility is marketed may increase the opportunity for resident confusion. Residents are looking for reassurances about the costs of future care and how upfront fees could impact their bottom line. That is often why they are looking at CCRCs to begin with. "Refundable fees" or "life care plans" can be important marketing tools for CCRCs. But discussions in the sales office of a CCRC may not mirror the "contract" terms.
One of the most important aspects of CCRCs is the "contract" between the CCRC and the resident. First, smaller "pre move-in" deposits may be paid to "hold" a unit, and this deposit may be expressly subject to an "escrow" obligation. But, larger upfront fees -- paid as part of the residency right -- are typically not escrowed. It is important not to confuse the "escrow" treatment of these fees. Of course, the "hold" fee is not usually the problem. It is the larger upfront fees --such as the $100k+ fees at SMRS -- that can become the focus of questions, especially if a bankruptcy proceeding is initiated.
The resident's contract requires very careful reading, and it will usually explain whether and how a CCRC company will make any refund of large upfront admission fees. In my experience of reading CCRC contracts, CCRCs rarely "guarantee" or "secure" (as opposed to promise) a refund, nor do they promise to escrow such upfront fees for the entire time the payer resides at the CCRC. In some states there is a "reserve" requirement (by contract or state law) for large upfront fees whereby the CCRC has a phased right to release or use the fees for its operation costs. Thus, the contract terms are the starting place for what will happen with upfront fees.
Why doesn't state regulation mandate escrow of large upfront fees? States have been reluctant to give-in to pressure from some resident groups seeking greater mandatory "protection" of their upfront fees. There's often a "free enterprise, let the market control" element to one side of regulatory debates. On the other side, there is the question of whether life savings of the older adult are proper targets for free enterprise theories. Professor Michael Floyd, for example, has asked, "Should Government Regulate the Financial Management of Continuing Care Retirement Communities?"
My research has helped me realize how upfront fees are a key financial "pool" for the CCRC, especially in the early years of operation where the developer is looking to pay off construction costs and loans. CCRCs want -- and often need -- to use those funds for current operations. and debt service. Thus, they don't want to have those fees encumbered by guarantees to residents. They take the position they cannot "afford" to have that pool of money sitting idle in a bank account, earning minimal interest. This is not to say the large entrance fees will be "misspent," but rather, the CCRC owners may wish to preserve flexibility about how and when to spend the upfront fees.
The treatment of "upfront fees" paid by residents of CCRCs also implicates questions about application of accounting and actuarial rules and principles. That important topic is worthy of a whole "law review article" -- and frankly it is a topic I've been working on for months.
In additional to looking for actuarial soundness, analysts who examine CCRCs as a matter of academic interest or practical concern have looked at whether CCRC companies and lenders may have a "fiduciary duty" to older adults/residents, a duty that is independent of any contract law obligations. Analysts further question whether a particular CCRC's marketing or financial practices violate consumer protection or elder protection laws.
There can also be confusion about what happens during a Chapter 11 process. First, during the Chapter 11 Bankruptcy process, a facility may be able to honor pre-bankruptcy petition "refund" requests or requests for refund of fees for a resident who does not move into the facility. Second, to permit continued operation as part of the reorganization plan, a facility will typically be permitted by the Court to accept new residents during the Chapter 11 proceeding and those specific new residents will have their upfront fees placed into a special escrow account, an account that cannot be used to pay the pre-petition debts of the company.
But what about the upfront fees already paid pre-petition by residents who also moved in before the bankruptcy petition? Usually those upfront fees are not escrowed during the bankruptcy process. Indeed, other "secured" creditors could object to refunds of "unsecured" fees. The Bankruptcy Court will usually issue an order -- as it did in SRMS's bankruptcy court case in Texas last week -- specifying how current residents' upfront fees will be treated now and in the future. A bit complicated, right? (And if I'm missing something please feel free to comment. I'm always interested in additional viewpoints on CCRCs. Again, the specific contract and any state laws or regulations governing for handling of fees will be important.)
Of course, this history is one reason some of us have been suggesting for years that prospective residents should have an experienced lawyer or financial consultant help them understand their contracts and evaluate risks before signing and again in the event of any bankruptcy court proceeding. "Get thee to a competent advisor." See also University of New Mexico Law Professor Nathalie Martin's articles on life-care planning risks and bankruptcy law.
As I mentioned briefly in writing last week about the SMRS Chapter 11 proceeding, CCRC operators have learned -- especially after the post-2008 financial crisis -- that the ability of a CCRC to have a viable "second chance" at success in attracting future residents will often depend on the treatment of existing residents. Thus, one key question in any insolvency will be whether the company either (a) finds a new "owner" during the Chapter 11 process or (2) is able to reorganize the other debts, thereby making it possible for the CCRC company to "honor" the resident refund obligations after emerging from the Chapter 11 process.
During the last five years we have seen one "big" default on residents' upfront. refundable entrance fees during the bankruptcy of Covenant at South Hills, a CCRC near Pittsburgh. A new, strong operator eventually did take over the CCRC, and operations continued. However, the new operator did not "assume" an obligation to refund approximately $26 million in upfront fees paid pre-petition by residents to the old owner. In contrast, Chapter 11 proceedings for some other CCRCs have had "gentler" results for residents, with new partners or new financial terms emerging from the proceedings, thereby making refunds possible as new residents take over the departed residents' units.
For more on how CCRC companies view "use" of upfront fees, here's a link to a short and clear discussion prepared by DLA Piper law firm, which, by the way, is the law firm representing the Debtor SMRS in the Texas Chapter 11 proceeding.
June 18, 2014 in Consumer Information, Federal Cases, Federal Statutes/Regulations, Health Care/Long Term Care, Housing, Retirement, State Cases, State Statutes/Regulations | Permalink | Comments (1) | TrackBack (0)
Monday, June 16, 2014
Recently Artis Senior Living CEO Don Feltman joined CEOs from 10 other high profile corporate employers, such as Coca-Cola, Tyson Foods, and Loews Hotels & Resorts, to urge Congress to fix the "broken" immigration system, to permit expanded lawful avenues for foreign-born workers in the U.S. In their June 10 letter, they write in part:
All our companies rely on legal immigrants working alongside Americans to keep our businesses growing and contributing to the economy. This is a reality driven by demographics. In 1950, more than half of America’s workers were high school dropouts willing to do physically demanding, low-skilled work. Today, the figure is less than 5 percent. But our businesses still need less-skilled workers – and the need will only grow in years ahead. Baby boomers are retiring: 10,000 older workers are leaving the workforce every day. And after a long downturn, most of our operations are expanding and looking to hire workers.
The problem: there is virtually no legal way for less-skilled foreigners without family in the U.S. to enter the country and work in year-round jobs – effectively no temporary or permanent visas available for non-seasonal workers. Congress has an obligation to fill this gap – we need a visa program for less-skilled foreign workers seeking year-round jobs. Employers should have to try to hire Americans first. But if they can’t find enough U.S. workers, they should be able to hire foreign workers quickly, easily and legally.
Sunday, June 15, 2014
According to news reports, on June 10 Sears Methodist Retirement System, Inc. filed a voluntary petition in bankruptcy court in Texas, seeking relief under Chapter 11. Apparently the private company, organized as a nonprofit that currently operates eleven senior living properties in Texas, including Contining Care Retirement Communities (CCRCs), Assisted Living facilities and Veterans homes, is seeking to reorganize some $160 million in debts. The multi-company operation provides housing and services to some 1,500 residents. A detailed early report by Peg Brickley at Daily Bankruptcy Reports explains the initial relief sought:
The Texas nonprofit organization is asking the U.S. Bankruptcy Court in Dallas to authorize it to quickly borrow $600,000 from existing bondholders, warning that it would be forced to cease operations without access to the funds.
"Such an abrupt cessation of the...businesses would have devastating effects on the residents at the senior living facilities such debtors own and/or operate, including leaving many residents without food, medical supplies, and the health and support services that they require," Chief Restructuring Officer Paul B. Rundell said in court papers.
"In fact, many residents may be forced to immediately relocate, causing extreme hardship and putting both their lives and health at risk," added Mr. Rundell, of Alvarez & Marsal's Healthcare Industry Group.
Sears Methodist blamed the declining property market for some of its troubles. Older people are having trouble selling their homes and liquidating their stock portfolios to raise the money for the upfront payment to get into the senior-living communities, according to court papers.
I would expect some of the SMRS properties to be financially stronger than others, and thus could be spun off or taken over by other senior living operators, perhaps those with expertise in the specific type of property. When CCRCs are involved, residents have often paid very large "entrance" fees and must continue to pay substantial monthly service fees. Even when their entrance fees are described as "refundable," CCRC residents are usually treated under bankruptcy law as "unsecured" creditors and thus become especially nervous during the proceedings.
Over the last several years, I've seen growing recognition that reassurance of existing residents, if possible, is critical to the continuation of the CCRC as a viable operation once it emerges from bankuptcy. Fortunately, despite continuing ups and downs (downs and ups?) in senior living markets since the 2008 financial crisis, the market has seen fairly strong players emerging. There is also better appreciation for appropriate -- and inappropriate -- levels of risk and the importance of maintaining resident confidence over the long-term.
Friday, June 13, 2014
Dedham, Massachusetts, established as a town in 1636 just to the west and south of Boston, has a long history, including an interesting early debate on governance, as suggested by one protest. According to historian and University of Chicago Law School Professor Geoffrey R. Stone, a group of local Dedham citizens erected a "liberty pole" in protest of the evils of the Federalist government, with a placard reading:
"No Stamp Act, No Sedition Act, No Alien Bills, No Land Tax, downfall to the Tyrants of America; peace and retirement to the President; Long-Live the Vice President."
Wishing "happy retirement" to the then-president, John Adams, was not a message of good will or appreciation.
In light of this history, a modern debate in Dedham caught my eye, involving opposition to construction of a senior living community in a residential neighborhood of that town. As reported in a local Dedham news source:
"'Can you imagine waking up in the morning … there’s a house next door with 72 people in it with a very large staff and a whole lot of friends visiting?' Paul Reynolds said at a May 13 Dedham Zoning Board of Appeals meeting. 'If it could happen in this neighborhood where we can change the rules and change the definition of what single family is, where else could that happen?'
Artis Senior Living officials applied a month ago for a special permit that would allow the company to build an Alzheimer's and dementia care facility at 255 and 303 West Street—two residential properties on 7.71 acres that include conservation land. The ZBA decided to continue the hearing after several precinct one residents objected.
The Virginia-based company had initially proposed to build a 37,000 square foot, single story facility and about 21 feet tall. However, representatives presented a slightly different footprint last week after the board and residents raised concerns regarding the size of the property at an April 22 meeting."
In deference to the opposition, the developers changed the design, from a one story complex to a two story building centered on the 7 acre plot, thus allowing a greater buffer zone of more than 300 feet (that's a football field, right?) between the buildings and any of the closest neighbors.
The protests apparently continue, however, thus demonstrating that in additon to opposing prisons and half-way houses for drug treatment, Not-In-My-Back-Yard" or NIMBY movements can target seniors. John Adams would appreciate the history, perhaps.
Tuesday, June 3, 2014
Do you remember "separate" assisted living and nursing home operations with the names of Kindred, Sunrise, Brookdale, Holiday Retirement and Atria? Perhaps you haven't noticed, but Ventas has either acquired or taken significant ownership positions in all of these operations, as Ventas seeks to offset lower rates paid by Medicaid/Medicare with higher income from "private pay" operations. Here's Ventas' news release on its most recent acquisitions, and here's a McKnight News piece on the impact. While I don't teach M & A courses, for those of us interested in financing issues for long-term care, I have to think that it is a good idea to keep an eye on what is happening with consolidation of senior living providers.
Thursday, May 29, 2014
Law & Society Association's Annual Meeting is always a feast -- with hundreds of presentations and papers, often with cross-discipline themes and presenters. This year's four day program starts today in Minneapolis. On tap are three elder law-themed sessions hosted by Aging, Law & Society. The session on "Rethinking Elder Law's Rules & Norms" will be chaired by Nina Kohn, Syracuse University.
Scheduled paper presentations include:
- Adult Protective Services and Therapeutic Jurisprudence, by Michael Schindler, Bar-Ilan University;
- Age, Gender and Lifetime Discrmination against Working Women, by Susan Bisom-Rapp, Thomas Jefferson School of Law and Malcolm Sargeant, Middlesex University Business School;
- Effective Affective Forecasting in Older Adult Caregiving, by Eve Brank and Lindsey Wylie, University of Nebraska-Lincoln;
- Sexuality & Incapacity, by Alexander Boni-Saenz, Chicago-Kent College of Law;
- Beyond the Law: Legal Consciousness in Older Age Care Contexts, by Sue Westwood, Keele University
Nancy Knauer of Temple Law School is chairing the session on "Accessing and Experiencing Jusice in Older Age." Presentations include:
- From Vienna to Madrid and Beyond, by Israel Doron, University of Haifa;
- Lessons from Detroit: Retiree Benefits in the Real World, by Susan Cancelosi, Wayne State University Law School;
- Older Persons Use of the European Court of Human Rights, by Benny Spanier, Haifa University;
- Crossing Borders and Barriers: Assessing Older Adults' Access to Legal Advice in the Search for Effective Justice, by Katherine Pearson, Penn State University Dickinson School of Law, Joseph Duffy, Queens University Belfast, and Subhajit Basu, University of Leeds
A workshop on "Ethics of Care and Support in Law and Aging," to be chared by Sue Westwood, Keele University, includes:
- Aging with a Plan: What You Should Consider in Middle Age to Plan for Caregiving and Your Own Old Age, by Sharona Hoffman, Case Western Reserve University;
- An Ethic of Care Critique of the UK Care Bill/Act, by Sarah Webber, University of Bristol;
- Both Property and Pauper: Slaver, Old Age, and the Inverted Logic of Capitalist Exchange, by Alix Lerner, Princeton University;
- Responding to Financial Vulnerability: Advances in Gerotchnology as an Alternative to the Substitute Decision Making Model, by Margaret Hall, Thompson Rivers University and Margaret Easton, Simon Fraser University
An international cast of characters, yes? More soon, with details from the front.
Tuesday, May 27, 2014
Continuing Care Retirement Communities (CCRCs) utilize a variety of payment arrangements to attract potential residents. One option popular prior to the 2008 recession was a "100% refundable entrance fee" model, where the new resident was promised return of his or her upfront entrance fee upon "termination," subject to certain conditions, usually including re-occupancy of the unit in question by a new resident. During good financial times, this refund option benefited both parties. The company could rely on a quick "resale" of the unit, either for the same or a higher entrance fee. Thus the company often took the position it was able to "use" the original resident's entrance fee immediately, subject to any state regulations for mandatory reserves or other repayment guarantees or restrictions.
But who bears the risk of a downturn in the senior living market, especially the dramatic downturn that accompanied the 2008-2010 recession?
In Stewart v. Henry Ford Village, Inc., the issue was whether a departing resident must accept the company's offer of a lower refund, tied to what any new resident would pay as an entrance fee to reside in that unit. The difference was hefty, as the resident had paid $137k in 1998 when she moved in, but when she left the community in 2010, comparable units were reportedly going for $89k.
In a rare court decision analyzing a refundable fee, the Court of Appeals for Michigan ruled that the parties' contract language controlled, and in this contract the contract did not provide for a lower refund amount. Further, the company's obligation to comply with the contract terms was subject to an implied obligation of good faith (a Contract Law concept my students would, I hope, recognize!) to promptly market and "resell" the unit, thus suggesting a CCRC would not be in good faith for delaying a unit's resale as a negotiation tool. Here is the heart of the court's analysis:
"Given the totality of the circumstances, the status of the parties, and the rights and obligations as set forth in the Agreement, the Disclosure Statement, and the [state's Living Care Disclosure Act] we find no support for the conclusion that plaintiff should or is obliged to bear the risks of a declining real estate market. To the contrary, those risks would seem properly to fall to defendant. By way of example, when a lessee properly complies with his or her lease in vacating a rental property, the lessee bears no responsibility for the fact that the landlord may need to lower the rent to attract a subsequent tenant. Rather, it is the landlord alone who must bear the consequences of the existing market risks. Additionally, plaintiff notes that if the unit was subsequently reoccupied with a higher entrance deposit, defendant would not furnish additional monies to plaintiff. Defendant has not suggested otherwise.... It strikes us as incongruous, as unsupported contractually, and as of questionable good faith (without adequate disclosure), that plaintiff be held to bear the risks of a declining real estate market without the ability to reap the rewards of a booming one."
In the "unpublished" (and therefore nonprecedential) opinion, the Michigan appellate court remanded for an evidentiary hearing. The ruling demonstrates the importance of the contract language, state regulations, and, I suspect, the likelihood that future refundable fee CCRC contracts will provide clearly that refunds will be tied in whole or in part to "resale" amounts, at least for any so-called 100% refundable fee agreements.
It should also be noted that refundability of admission fees is potentially a separate issue from actuarially sound practices for CCRCs in the handling of such fees. Along that line, I note that one of the residents who pioneered concerns about financial soundness in CCRCs, Charles Prine of Pittsburgh, passed away recently. Mr. Prine's articulate advocacy included testimony before the Senate Special Committee on Aging. Chuck will be missed.
Friday, May 23, 2014
John Marshall Law School and Roosevelt University, both in Chicago, and East China University of Political Science and Law in Shanghai, are jointly sponsoring an International Elder Law and Policy Conference in Chicago on July 10-11.
Keynote speakers include Professor Israel Doron of the University of Haifa in Israel and Dr. Ellinoir Flynn and Professor Gerard Quinn, both from National Unviersity of Ireland, Galway School of Law.
Scheduled panel topics include:
- Dignity and Rights of the Elderly
- Elimination of Age Discrimination
- Caregivers and Surrogate Decision Makers
- Social Security, Pensions and Other Retirement Financing Approaches
- Prevention of Elder Abuse
- Access to Justice
Here's the link to the Registration website.
Friday, May 16, 2014
As readers may have noticed, I've been a long-time "student" of Continuing Care Retirement Communities (CCRCs), drawn to the industry because of its vibrancy and dynamic approach to senior living. Along the way, I've come to know the many strengths -- and occasional weaknesses -- of individual operations, and the importance of resident engagement to long-range success. One of my resident contacts shared with me a new PBS NewsHour spotlight on university-connected CCRCs, with a prime focus on Oak Hammock, a community developed under the auspices of the University of Florida. Universities can offer a unique draw for alums and other college grads, including retired faculty, who value continued educational opportunities.
Here's the link to "Why More Seniors Are Going Back to College -- to Retire."
Although short (about 8 minutes), I find the piece to be balanced, especially in that it hints at the financing terms often needed to make such communities attractive and therefore viable. Some of the people interviewed explain the need for sophisticated mangement to counsel university-based programs, as development of CCRCs can be quite different than simply building a senior's version of "dorms." My own university stumbled a bit at the starting gate in its early efforts to get a community fully occupied, with the 2008 recession added to the challenges.
Thanks, Karen, for sending us the link!
Thursday, May 15, 2014
Maryland Elder Law and Disability Law specialist Ron Landsman provides a thoughtful analysis of use of trusts, especially "special needs trusts," to assist families in effective managment of assets. His most recent article, "When Worlds Collides: State Trust Law and Federal Welfare Programs," appears in the Spring 2014 issue of the National Academy of Elder Law Attorneys (NAELA) Journal. Minus the footnotes, his article begins:
"'Special needs trusts,' which enable people with assets to qualify for Supplemental Security Income (SSI) and Medicaid, are the intersection of two different worlds: poverty programs and the tools of wealth management. Introducing trusts into the world of public benefits has resulted in deep confusion for public benefit administrators. . . . The confusion arising from the merger of trust law with public benefits is sharply drawn in the agencies' [Social Security Administration (SSA) and Centers for Medicare and Medicaid Services (CMS)] attempts to define what it means for a trust to be for the sole benefit of the public benefits recipient. Public benefits administrators have focused on the distributions a trustee makes rather than the fiduciary standards that guide the trustee. The agencies have imposed detailed distribution rules that range from the picayune to the counterproductive and without regard, and sometimes contrary, to the best interests of the disabled beneficiary."
Drawing upon his experience in drafting trusts for disabled persons, Ron takes on the challenge of explaining how and where he sees the agencies' focus on "distribution" as misguided. He contends, for example:
"The [better] task for CMS and SSA [would be] to use their authority to develop standards and guidelines that utilize, rather than thwart, competent, responsible, properly trained trustees as their partners in making special needs trusts an effective tool in serving the needs of people with disabilities. If this were done properly, capable trustees would be the allies of the federal and state agencies in the efficient use of limited private resources. Beneficiaries would live better, more rewarding lives to the extent that resources can make a difference, at a lower cost to Medicaid, with a greater possibility of more funds recovered through payback."
Ron is detailed in his critique of agency guidelines and manuals, and he provides clear examples of his "better" sole benefit analysis.
May 15, 2014 in Estates and Trusts, Federal Cases, Health Care/Long Term Care, Housing, Medicaid, Property Management, Social Security, State Cases, State Statutes/Regulations | Permalink | Comments (0) | TrackBack (0)