When a retirement community goes bankrupt

Three years ago, when Bob and Sandy Curtis moved to a continuing care retirement community in Port Washington, NY, they thought they had found the perfect solution for senior care.

In exchange for a hefty entry fee — about $840,000, funded by the sale of the Long Island home they’ve owned for nearly 50 years — they’ll spend the rest of their lives at Harborside . They chose an agreement with several options that set the monthly payment at about $6,000 for the two and return half of the entry fee to their estate upon their death.

“This is the final chapter,” Mr. Curtis, 88, said. “That’s my deal.”

CCRCs, or community life plans, provide increasing levels of care on a single campus, from independent and assisted living to nursing and care homes. Unlike most senior living facilities, most are non-profit.

More than 1,900 CCRCs serve about 900,000 Americans, according to LeadingAge, which represents nonprofit senior housing providers. Some communities offer lower repayments, many avoid purchase fees altogether and operate like rentals, and others are hybrids.

For the Curtises, Harborside was promising. Mr. Curtis, an industrial engineer who works as a consultant, has taken a nice one-bedroom apartment in the independent living wing. “It was a vibrant community,” he said. “Food. Amenities. A gym.”

Every day he spends time with Sandy, 84, who lives in the building’s memory care facility, riding the elevator. The staff there “treat Sandy with love and care,” Mr. Curtis said. “It would be great if it continued.”

But in 2023, Harborside, for the third time since opening in 2010, declared bankruptcy. Services and jobs have declined, residents and families say. A group of about 65 residents, most of them in their 90s, have hired lawyers, but are still uncertain whether they will get the restitution that their contract calls for.

“Everybody was panicking,” said Ellen Zlotnick, whose parents also live separately at Harborside’s independent nursing and memory facility. Their contract specifies a 75 percent refund. “There are groups of people who move, and others who refuse to move.”

Databases tracking bankruptcies and foreclosures in large buildings are sparse. Dee Pekruhn, who manages life plan community policy at LeadingAge, said there have been “very few examples of actual bankruptcy,” although there have been some close calls recently.

But Lori Smetanka, executive director of the National Consumer Voice for Quality Long-Term Care, said state and local ombudsmen are reporting “infrastructure problems that are underfunded.”

The most recent crisis was the closing of Unisen Senior Living, a CCRC in Tampa, Fla. After filing for bankruptcy for the second time last spring, more than 100 residents were forced to leave.

In Charlotte, NC, in 2023, state officials stepped in to oversee a long-established CCRC known as Aldersgate, which had been struggling financially for years. The government approved a “corrective action plan”, and Aldersgate avoided bankruptcy. But refund payments are still months behind schedule, and government audits continue.

In Steamboat Springs, Colo., a CCRC called Casey’s Pond entered the courthouse last summer. Since being sold to a non-profit health care system, it will continue to operate – but only after two municipalities, local foundations and hundreds of members raised $30 million to save it.

Other types of housing may also be closed. About 1,550 nursing homes will close between 2015 and mid-2024, according to the American Health Care Association.

But when CCRCs fail, residents and families face not only the physical and psychological trials of transition, but the possibility of losing their lives.

In bankruptcy, people getting refinances are “at the very bottom of the list” among creditors seeking payoffs, said Nathalie Martin, a law professor at the University of New Mexico who wrote about the undrafted CCRC.

Creditors secured with insurance have the first step in collecting their debts, followed by lawyers, accountants and agents.

Because the CCRC residents who were promised repayment are unsecured borrowers, “the residents are in a very vulnerable position, and they don’t know it,” Ms. Martin said. Without reimbursement, they may not be able to pay for care elsewhere if they have to move.

In Harborside, stores previously offered to national chains kept the facility open and reimbursed residents who moved out or died. That deal expired last fall when the state refused to ratify it.

“It’s unfortunate that the Health Department allowed this to happen,” said Elizabeth Aboulafia, an attorney representing some Harborside residents.

Now a Chicago investment firm, Focus Healthcare Partners, wants to buy Harborside and close all the buildings except for private residences, which would be rentals. (Focus said it plans to apply for state licensing for health care and memory aids. Approval could take several years.)

A skeptical federal bankruptcy judge questioned the offer last month and urged the parties to strike a deal that protects residents.

“We sympathize deeply with the residents,” Focus co-founder Curt Schaller said in a statement. He added that “we cannot undo the money that others have thrown away that led to this bankruptcy.”

Harborside’s attorney said he could not comment pending litigation. The next bankruptcy hearing is February 12th.

Although the federal government oversees nursing homes within CCRCs, their living arrangements and other contracts are subject to state law. Many require various disclosures to the resident or monitor the terms of the contract.

But few command what Ms. Martin sees as crucial to securing returns: savings. If they have to, “when you pay these big fees, you’re required to put money into your future care,” he explained.

A few states, including California, Florida, New Mexico and – especially – New York, require savings, “but as we have seen, this does not prevent communities from withdrawing such funds and filing the bankruptcy however,” Ms. . Martin added via email.

“We need our regulatory agencies to pay more attention,” said Ms. Smetanka of The National Consumer Voice, referring to state regulators and the federal Centers for Medicare and Medicaid Services.

“The licensing agency should bring in a forensic accountant to review the books. There should be better control. “

Additional regulations do not sit well with the real estate industry. “The more we regulate and make it more expensive, the less we can house people,” said Robert Kramer, co-founder of the National Investment Center for Seniors Housing & Care.

The reserve requirement, he said, means “far fewer CCRCs will be built — and the people who move in will have millions of dollars in wealth.”

One solution for senior care buyers: Choose a CCRC that operates as a lease, without expensive purchases or repayments. This path makes financial failure more dangerous, even if it means that the monthly expenses increase with the increase in care.

Industry sources encourage potential residents to carefully investigate financial stability and applicable state laws, and to have an attorney or financial advisor review the agreement.

“Harborside has been in the news for years — it’s no secret,” Mr. Kramer said.

To help, the National Continuing Care Residents Association has published a consumer guide. CARF International and MyLifeSite also provide guidance for consumers.

But Bob Curtis and his son, both majoring in finance, consulted with accountants and even interviewed the Harborside company’s chief financial officer. . But here they are.

Mr. Curtis attends all bankruptcy hearings via Zoom. If he loses his refund, “Where will Sandy go?” he wonders. “How will he manage? How are we going to pay for it?”