Background:

Continuing care retirement communities (CCRCs) are entities that provide care and housing to residents under a residency agreement that lasts for longer than a year. Care services may include nursing care, medical care, assistance with activities of daily living, and protection or supervision.

Since July 1, 2017, CCRCs have been required to register with the Department of Social and Health Services. To become registered, an applicant must submit information about the assisted living and nursing home components of the CCRC, copies of residency agreements, a copy of the current disclosure statement, copies of audited financial statements, and an attestation that the CCRC is in compliance with disclosure notification requirement. Disclosure requirements for prospective residents include information about the ownership; descriptive information about the facilities; policies regarding notifications of fee increases, changes in levels of care, and contract termination; a description of standard and supplemental services; and the most recent audited financial statements.

Residents of CCRCs are afforded several expectations that a CCRC must fulfill. These expectations include transparency in the financial stability of the facility, timely notification of developments affecting the facility, reasonable accommodations for persons with disabilities, the opportunity to participate in resident organizations, the opportunity to seek independent review of contracts and agreements, and the assurance that donations made by residents to the CCRC are voluntary.

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Summary of Substitute Bill:

Type A Contracts.

A "Type A contract" is defined as a care contract that includes a promise by a continuing care retirement community (CCRC) with a full continuum of care to provide or pay for routine services at all levels of care to a resident for the duration of the resident's life. Under a Type A contract, changes are not made in the monthly fee based on the level of care and provisions are included to subsidize residents who become financially unable to pay their monthly care fees.

Application to Become a Continuing Care Retirement Community.

Applicants for registration with the Department of Social and Health Services (Department) as a continuing care retirement community (CCRC) must submit copies of any service or care agreements used for nonindependent residents. Agreements must be clear and complete and detail the mutual expectations and obligations of the resident and the CCRC.

Applicants for registration as a CCRC must also submit a copy of the CCRC's most recent actuarial report if the applicant offers, or plans to offer, Type A contracts. The actuarial report must have been prepared within three years of the date of the CCRC's application for its current registration. The date for submitting an actuarial report may be extended up to five years if the CCRC's most recent financial statement shows a surplus and the CCRC's three most recent financial statements show positive operating earnings.

Continuing Care Retirement Community Disclosure Statements.

For fiscal years ending after January 1, 2019, CCRC disclosure statements must include whether, and in what manner, funds have been set aside for reserves or other contingent liabilities. In addition, financial statements must disclose management fees and other compensation paid by the CCRC to a management company that has controlled the CCRC during the two preceding fiscal years. The management fee disclosure must include a detailed summary of how the fees and compensation were spent by the management company. The detailed summary must include an itemization of expenditures that were not for the direct benefit of the CCRC or its residents and the amount of management and occupancy fees spent on payment of indebtedness to the management company.

Disclosure statements for CCRCs that offer Type A contracts must also include an actuarial summary of the CCRC's most recent actuarial report, including material actuarial assumptions. Residents and prospective residents of the independent living portion of the CCRC may receive a copy of the most recent full actuary report by submitting a written request. The CCRC shall redact any personal financial or health care information before providing the full actuarial report. A resident or prospective resident that receives the full actuarial report may only disclose it to other residents of the independent living portion of a CCRC and their legal, financial, and actuarial advisers.

Disclosure statement requirements apply to any entity that manages or operates, or has a significant role in the management or operation of, an entity that agrees to provide continuing care to a resident under a residency agreement.

Continuing Care Retirement Community Resident Expectations.

The expectations of residents of the independent living portion of a CCRC are expanded to include the expectation to be able to participate meaningfully in decisions affecting the resident's health, welfare, and safety. In addition, residents may expect that all agreements and transactions between the CCRC and a management company that controls the CCRC shall be priced at or below fair market value, be in the best interests of residents, and not substantially limit the CCRC's ability to exercise its rights under any agreement.

Residents may also expect residency agreements that provide for refundable entrance fees to assure that any refund due to a resident that leaves a unit shall be based on the entrance fee that the resident provided. A resident may expect that refunds of the entrance fees will be available if the resident physically leaves the CCRC or dies. Once five years have passed from the issuance of a certificate of occupancy, refunds must be paid no later than the earlier of two years following the resident's departure or death or when the unit is reoccupied and the resident no longer lives in the CCRC. Each CCRC must maintain a list of vacant units, the dates on which the units became vacant, and the prices of the units. Current and prior residents of the independent living portion of the CCRC may receive a copy of the list.

The CCRC must notify independent residents that audited actuarial evaluations are available within 30 days of delivery to the chief financial officer.

It is specified that, in addition to a resident's right to file a complaint, residents may pursue other legal remedies.

Pilot Project Related to Independent Residents of Continuing Care Retirement Communities.

The Department of Commerce and the nonprofit organization that provides long-term care ombuds services must conduct a two-year pilot project to allow the state Long-Term Care Ombuds to provide services to the residents of CCRCs in a county with over 1.5 million residents and a concentration of CCRCs. The pilot project shall:

identify, investigate, and resolve complaints from independent residents of CCRCs relating to acts or omissions that may adversely affect the residents' health, safety, welfare, rights, or financial well-being;
track and document the types of needs, complaints, challenges, and successes communicated to the Long-Term Care Ombuds by independent residents of CCRCs;
develop and offer educational information and resources for self-advocacy by independent residents of CCRCs; and
carry out other activities as appropriate.

By December 1, 2021, the Long-Term Care Ombuds must submit a report on the pilot project that describes the activities of the pilot project; evaluates the problems experienced by, and complaints made by independent residents of CCRCs; and provides any recommendations to improve and protect the health, safety, welfare, and rights of independent residents of CCRCs.

Substitute Bill Compared to Original Bill:

The substitute bill defines a "Type A contract" as a care contract that includes a promise by a continuing care retirement community (CCRC) with a full continuum of care to provide or pay for routine services at all levels of care to a resident for the duration of the resident's life. Specifies that under a Type A contract, changes are not made in the monthly fee based on the level of care and provisions are included to subsidize residents who become financially unable to pay their monthly care fees. The requirement that applicants for registration as a CCRC provide copies of the most recent actuarial report to the Department of Social and Health Services is limited to only those applicants that offer or plan to offer Type A contracts to residents. The requirement that CCRC disclosure statements include an actuarial summary is limited to only those CCRCs that offer Type A contracts to their residents.

The substitute bill eliminates the requirement that modifications to residency agreements and service and care agreements used for nonindependent residents be submitted to the Department of Social and Health Services within 60 days of implementation of the modification.

The substitute bill applies the requirement that refunds due to a resident be paid according to an established timeline to a CCRC once five years have passed from the issuance of a certificate of occupancy.

Staff Summary of Public Testimony:

(In support) This bill is trying to increase disclosure and introduce a mechanism for complaint resolution so that continuing care retirement home (CCRC) residents will feel more secure. This bill will bring more transparency to the CCRC model. This bill will help people feel secure in the investment that they are making in a CCRC. There needs to be more disclosure so residents can be assured that their life savings are secured. While no CCRC in Washington has failed resulting in a loss of money for residents, significant losses have been incurred and funding sources have come from outside parties. Residents' fees paid to a management company should be spent on their CCRC. Residents of a CCRC want to know where management funds go within a financial plan. This bill will require CCRCs to disclose whether they have any reserves so prospective residents can determine the suitability of their investment.

While some facilities do not have to worry about future medical costs, they still have capital costs and this would be covered in an actuarial report. An actuarial report looks out into the future for the physical plant and operational needs based on the future population. Many CCRCs are already required to do actuarial reports because of tax exempt financing. Residents of CCRCs want actuarial reports to make sure that the services that they are paying for now will be there in the future. The CCRC residents want to know what the assumptions are in the actuarial reports. Condominium homeowner associations are required to do periodic reserve studies to see if the monthly fees are adequate and an actuarial report serves the same purpose for a CCRC.

The residents of CCRCs would like to resolve any disputes as amicably as possible and the pilot project with the Long-Term Care Ombuds will do this. Other states have a role for the Long-Term Care Ombuds (LTC Ombuds) in CCRCs. This bill consolidates some of the work that the Long-Term Care Ombuds is already doing in the assisted living and skilled nursing components of CCRCs. The LTC Ombuds is very good at low-level problem resolution. This is a good bill to see if the LTC Ombuds can be useful when CCRC residents have an issue with the ownership or management. Since the LTC Ombuds is funded with state, federal, and local money, the pilot program will not have any cost to CCRC residents. Many seniors feel uncomfortable approaching management with complaints. There is a fear that if a conflict has to go to arbitration, the personal costs to a resident could be substantial. The LTC Ombuds has a calm presence that reduces tension and brings satisfactory solutions without involving attorneys.

(Opposed) While there are worries and fears from some residents about the ability of CCRCs to meet their needs, CCRCs have honored contracts and obligations. The CCRCs have acted responsibly with the overall viability of the community at the center of governance and decision making. While there is support for the general principles of transparency, the bill's details are troubling and may have unintended financial consequences to residents. Most of the information and reporting that this bill will require is already readily available to existing or prospective residents.

Actuarial reports are very complex and preparing a full report to be shared with residents may double the annual costs of the report. The bill's actuarial studies have no value for residents who have contracts to pay as they go and will drive up costs without providing any meaningful information to residents. An actuarial study is a redundant effort and expense for CCRCs that have auditors review and comment on the adequacy of reserves each year. Management operates with a high degree of planning for both current needs and future contingencies. This bill creates an additional layer of bureaucracy by placing an undue burden on the accounting staff.

This bill will increase costs or force a reduction in services. This bill will increase costs because actuarial studies cost $30,000 or more. A small number of CCRC residents from a few facilities have a perceived problem and are asking the majority of residents, who do not have a problem, to pay. This bill will increase monthly fees by adding the needless expense of an actuarial study that will be of no value to residents. The CCRCs are unique entities with different services, contracts, and amenities and this bill is a one-size fits all solution for a problem that does not exist for the majority of residents living in CCRCs. This bill is ambiguous, overly broad, and presents a real risk of unintended financial consequences that will increase the cost to residents.

There are less expensive ways to handle disputes than through the LTC Ombuds. The CCRCs have existed fine without an ombuds. The expansion of the LTC Ombuds does not provide value for the added cost. The LTC Ombuds was originally designed for long-term care residents who could not advocate for themselves, but the concept is not applicable to residents in independent living. There are already dispute resolution processes at CCRCs that work to resolve resident concerns through the use of resident councils. Residents have a number of opportunities for input and are not hesitant to share their opinions. Resident councils and surveys provide opportunities for input. Resident input is weighed by management and the board. This bill makes an assumption that seniors are not able to speak or advocate for themselves. Residents are intelligent and informed and not timid about bringing their concerns to management.

Summary of Recommendation of Committee On Appropriations Compared to Recommendation of Committee On Health Care & Wellness:

The term "Type A contract" is redefined to be a care contract for housing, residential services, amenities, and unlimited, specific health-related services to include an assisted living facility, a nursing home, or an in-home services agency.

The term "independent resident" is defined as a person who is a resident of a continuing care retirement community (CCRC), but who does not live in either the assisted living or nursing home component.

It is required that, as part of registration materials, actuarial reports must be submitted to the Department of Social and Health Services (DSHS) by CCRCs that do not offer Type A contracts if they have obtained the actuarial report within the previous three years.

The requirement that the CCRC redact residents' personal financial or health care information in its actuarial reports for the DSHS is removed.

It is required that refunds be paid on the thirtieth day after the resident's unit is reoccupied and the resident is no longer living in the CCRC, or two years following the resident's departure or death, whichever is earlier.

Independent residents of a CCRC have the expectation to receive, upon request, a copy of the current disclosure statement and any agreements recently filed with the DSHS.

The pilot project to have the Long-Term Care Ombuds investigate complaints by independent residents of CCRCs is eliminated.

Staff Summary of Public Testimony:

(In support) Continuing Care Retirement Communities (CCRCs) are places where people move, expecting it to be their last move. Most pay their lifetime savings to get in and pre-pay for future medical services. Often CCRC residents will need admission to higher levels of care, but are limited by the CCRC’s available capacity.

It is a good investment for the state to create a role for the Long-Term Care Ombuds for independent CCRC residents. The Long-Term Care Ombuds will provide an alternative, confidential way of managing conflict between independent CCRC residents and CCRC management that will alleviate resident concerns of retaliation or eviction. A pilot project in a single county does not warrant the $400,000 cost shown in the fiscal note.

It is important for CCRCs to undertake actuarial analysis.

(Opposed) Few good-faith amendments from the CCRCs have been incorporated. There is a concern among the CCRCs about driving up operating costs for CCRC residents. The language is vague and would be difficult to administer and is overly broad and subjective. For example, the Type A contract would not apply to any CCRC currently operating in Washington, and it will be difficult for CCRCs to itemize management fees.