Consumer Protection Issues for Massachusetts CCRC Residents


Introduction
 

Continuing care retirement communities (CCRCs) appeal to seniors who would like the security of round-the-clock assistance in a residential, non‑institutional environment.  They offer peace of mind and the promise of being able to “age in place.”  CCRCs provide a continuum of residential and support services from independent living through nursing care. CCRC residents agree to pay a substantial entrance fee plus adjustable monthly fees.  

There are no federal laws or regulations concerning CCRCs.  Massachusetts CCRCs are subject to certain disclosure requirements, but no state agency has enforcement authority over CCRCs.  This outline discusses the legal requirements for Massachusetts CCRCs, mandated consumer disclosures, admission agreement requirements, and residents’ rights, including protection from arbitrary eviction. 
 
Consumer Protection Issues     

In a 2010 Special Committee on Aging investigation of the CCRC industry, Senator Herb Kohl (D-Wisc) commented, “Entering into an agreement with [a CCRC] can pose financial risk.  If these companies are going to take the life savings of seniors, they need to be able to guarantee that they will be around to provide the lifetime of care they promise.”  Kohl called on state regulators to “beef up their oversight” of CCRCs.  The Committee identified several major concerns for potential CCRC residents:
  • Unstable financial conditions that can lead to cash flow problems or bankruptcy for CCRCs.
  • A provider’s inability or refusal to refund entrance fees to residents who leave.
  • Failure to provide clear information about the provider’s financial strength to prospective residents.
  • Questionable policies governing transition to a higher level of care and the resulting fee increases.

In a July 2010 report, the General Accounting Office highlighted the financial risks to prospective CCRC residents and the importance of consumer protections at the state level for CCRC residents. 
A nonprofit industry organization, the Commission on Accreditation of Rehabilitation Facilities (CARF), is the only organization that accredits CCRCs nationwide.  CARF requires an on-site survey by a team of peer surveyors to review the provider’s business practices, financial statements, quality of care and other issues.  About 18% of CCRCs nationwide are accredited by CARF. 
 
Areas of concern include protecting residents’ investment by reviewing the provider’s financial strength, the treatment of the entrance fee if the resident needs Medicaid coverage, , and the issues of  residents’ rights, particularly the protections against arbitrary discharge and transfer. 
 
1.  Legal Requirements for Massachusetts CCRCs

Massachusetts CCRCs are subject to a statute entitled "Sale of Life Leases and Long-Term Leases in Nursing Homes, Retirement Homes and Homes for the Aged," General Laws Chapter 93, Section 76.  A copy of the statute is attached for reference.  The law imposes disclosure and admission agreement requirements on CCRC providers.  Violations of this statute constitute unfair and deceptive acts or practices under the Massachusetts Consumer Protection Act (General Laws Chapter 93A), and knowing and wilful violations permit a plaintiff to recover multiple damages, costs and attorneys' fees.The statute defines "continuing care" as board and lodging, together with health related services, pursuant to a "contract effective for the life of the individual or for a period in excess of one year."  G. L. c. 93, §76(a).  An "entrance fee" is "an initial or deferred transfer to a provider of a sum of money . . . made as full or partial consideration for acceptance of a specified individual as a resident of a [continuing care] facility." Fees payable on a periodic basis are not considered entrance fees, nor is an application charge, provided that the application charge does not exceed four times the periodic fee. A provider who charges an “entrance fee” for “continuing care” is subject to the CCRC statute. Massachusetts CCRCs are required to make certain disclosures to residents and prospective residents and to EOEA.  Providers must also include certain standard provisions in their admission agreements.
  
2. Mandated Disclosures

Massachusetts CCRC providers must make certain disclosures to prospective and current residents, as well as to EOEA.  The required resident disclosures include identification of the provider and its officers, directors, trustees, or managing or general partners; a description of the provider's business experience; a description of the physical property of the facility; and the provider's certified financial statements.  G.L. c. 93, §76(b).  The disclosure statement must be delivered no later than the signing of the admission agreement, or the transfer of money or other property on behalf of a prospective resident, whichever occurs first, and must include a copy of the facility's contract.CCRC providers are required to file the following documents with EOEA:  a) the disclosure statement required under Section 76(b); b) the facility's admission agreement; c) any available advertising or promotional material used in marketing the facility; and d) a copy of the facility's building permit.  G.L. c. 93, §76(d).  If any of these materials change, the facility must also file the new materials with EOEA within 30 days. EOEA makes the providers' information available to the public so that prospective residents can make informed choices about care alternatives.  However, EOEA has no enforcement powers and is not authorized to take action against a CCRC provider for an alleged violation of a resident’s rights. 
 
3.  Requirements for Admission Agreements

Admission agreements for CCRCs must contain certain standard provisions, including the following:
  • A resident may rescind the contract at any time before occupying a living unit in the facility, and is entitled to a refund of all deposits, less certain specified costs.
  • If the unit is not available for occupancy on the date agreed upon in the contract, the contract is automatically canceled, unless the resident and the provider agree otherwise in writing.  If the contract is automatically canceled, the resident is entitled to a refund of all deposits, less certain specified costs. 
  • If a resident dies before occupying a living unit, the contract is automatically canceled and the resident’s legal representative is entitled to a refund of all deposit, less certain specified costs.
  • The entrance fee minus no more than one per cent for each month of occupancy shall be refunded to the resident when the resident leaves the facility or dies.
  • A description of the services provided at the facility, including the extent to which medical care is furnished, and specifying which services are included in the basic contract and those made available at extra charge.
  • A description of all fees required of residents, including the entrance fee and periodic charges, if any.  The description must include a statement of the fees if the resident marries; the circumstances under which the resident is permitted to remain in the facility in the event of  the resident’s financial difficulties; the conditions under which the unit may be made available by the facility to a different resident other than on the death of the original resident; and the manner by which the provider may adjust fees and the limitations on such adjustments, if any.
  • The health and financial conditions required for an individual to be accepted as a resident and to continue as a resident once accepted.
  • The provisions, if any, to provide reserve funding or security to enable the provider to fully perform its obligations, including the establishment of escrow accounts, trusts or reserve funds, the manner in which such funds will be invested and the names and experience of persons who will make the investment decisions.
  • The omission of any of the required provisions entitles the resident to rescind the contract and obtain a full refund of the entrance fee. 
When a client is considering entering a CCRC, it is important to make sure that the facility has given all required disclosures, including the provider’s financial statements and fee schedules.  In reviewing the agreement, some of the important provisions include the terms governing:
  • the conditions for refunding the entrance fee
  • changes in household composition (what happens if a resident marries?)
  • a description of support services and fees and the qualifications of care providers
  • the terms of nursing home admissions (including Medicare and Medicaid eligibility issues)
  • insurance requirements (e.g., long-term care insurance, homeowners’ insurance)
  • what happens if the resident’s assets are depleted
  • the extent of resident participation in management
  • waivers of liability
The provider’s policies on transfers and discharge are of tantamount importance to CCRC residents.  After all, their goal is to “age in place.”

4.  Transfer and Discharge of CCRC Residents

CCRC agreements should include specific criteria for transferring a resident and should state who will be involved in making this decision and how residents can appeal the determination if they disagree with it.  Except in the case of an emergency, the determination should involve an interdisciplinary team and include the participation of residents and their representatives.  The facility should provide an appeals process with independent review of the transfer decision. Although decisions about transferring a resident are critical to a resident’s sense of control and independence, CCRC contracts often address these issues in vague language or leave decisions to the unfettered discretion of the CCRC administration.  For example, one new CCRC in the Boston area has an agreement that gives its “care team” sole discretion to move residents from one level of care to another.  Its agreement states: "You may be required to relocate to the assisted living, [nursing facility], . . . or to another health care setting . . . if in the opinion of the [provider’s] Care Team . . . any of the following circumstances exists:  1) your condition or needs require that you relocate . . .; 2) your behavior or physical or mental condition endangers or is detrimental to your life, health, safety or well-being or that of another person, or causes an unreasonable and ongoing disturbance at the Community; 3) you require care that cannot lawfully be provided to you in your residence or care that [provider] is unable to or does not routinely provide in your residence; or 4) your relocation to a hospital or other health care setting is appropriate, and the Community does not have such health care support available."Another agreement states: "Resident agrees to provided an updated medical history to [provider] every twelve (12) months or when a major health change has occurred, whichever is earlier.  [Provider], in its sole discretion, will determine, after consultation with Resident, whether additional healthcare services are necessary for Resident’s continued well-being in the present Living Accommodation. Resident agrees to contract and pay for any additional services in order to remain in the Living Accommodation." Based on contract provisions such as these, CCRCs may take the position that they can discharge or transfer residents without complying with summary process requirements or nursing home discharge rules.  This is untrue, whether the resident is in the independent living, assisted living, or nursing facility setting:
 
  • With respect to CCRC independent living units, the provider may not require a waiver of rights to judicial process under the state’s summary process law.  Van Bennekom v. Brooksby Village, Inc., Northeast Housing Court No. 03-CV-00135 (January 31, 2005).  
  • Residents of Assisted living units in a CCRC should be offered the same protections under summary process. However, the Massachusetts ALF ombudsman does not consider that it has authority over ALFs in a CCRC.
  • By letter dated May 31, 2005, CMS Division of Nursing Homes made it clear that nursing facilities in CCRCs were subject to the federal nursing home consumer protection laws (42 U.S.C. § 1396r).  Under the terms of the Attorney General’s regulations, CCRC nursing facilities are also subject to the state’s regulations as well.  940 CMR 4.00. 

Conclusion

Some Massachusetts CCRCs charge entrance fees of well over $500,000, and the industry is virtually unregulated.  Nevertheless, prospective CCRC residents do not always consult with an attorney before signing their admission agreements. When they do, they may be surprised to find out what the agreements require.  For example, a client was disconcerted to find that his CCRC contract included this clause:  “Resident will maintain a current durable power of attorney in a form acceptable to [provider] and will provide a copy of such document to [provider].  [Provider] retains the right to institute guardianship proceedings if Resident is unable to care for his/her person or property, and has not designated someone to do so.  Resident will be responsible for the cost of such proceedings.”Prospective CCRC residents may want to consider seeking the assistance of a financial professional for help in evaluating a provider’s financial strength.  They should also consider consulting with counsel to review  the treatment of entrance fees and other terms of the admission agreement.  Although the agreements are typically contracts of adhesion, in some instances, residents may be able to negotiate over the contract terms.  At a minimum, a prospective resident needs to be able to make an informed decision before signing an entrance agreement.  

Resources – CCRCs

American Association of Homes and Services for the Aged – consumer guide to CCRCs.  http://www.aahsa.org/uploadedFiles/providers/CCRC/CCRCcharacteristics_final.pdf

CARF International (founded in 1966 as the Commission on Accreditation of Rehabilitation Facilities) – A nonprofit industry organization that publishes a Consumer Guide to Understanding Financial Performance and Reporting in Continuing Care Retirement Communities. www.carf.org

Jack A. Eiferman, Continuing Care Retirement Communities and Assisted Living Communities in Massachusetts, Estate Planning for the Aged or Incapacitated Client in Massachusetts, Chapter 23 (MCLE 2002). 

Massachusetts Executive Office of Elder Affairs (EOEA) – provides consumer information on CCRCs on its website.  The Community Care Ombudsman, who handles calls from CCRC residents, is Erin Ferguson.  617-727-7750. 

U.S. Government Accountability Office, Continuing Care Retirement Communities Can Provide Benefits, But Not Without Some Risk (June, 2010) http://www.gao.gov/new.items/d10611.pdf

Ziegler, a specialty investment banking firm serving healthcare, senior living, religion, and education sectors, has a report on the analysis of financial ratios and trends for accredited CCRCs.  http://www.ziegler.com/insights/?cat=Publications

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