Continuing Care Retirement Communities
Frequently Asked Questions
What is a Continuing Care Contract?
A continuing care contract is an agreement between a person 60 years or older and a continuing care provider. The contract includes a promise to provide a range of services at a CCRC for a period longer than one year in exchange for payment. Usually, but not always, the promise is effective for the life of the resident. Most continuing care contracts call for payment of an entrance fee and monthly fees. It is the promise to provide care, not the method of payment, which defines a continuing care contract. A continuing care contract may consist of one or a series of agreements.
What is a Life Care Contract?
A life care contract is a specific type of continuing care contract which includes all of the following promises by the provider to a resident:
- To provide all levels of care, including acute care and physicians' and surgeons' services;
- To provide that care for the resident's life;
- To provide a comprehensive continuum of care, including skilled nursing, under the ownership and supervision of the provider on, or adjacent to, the premises;
- That no change will be made in the monthly fee based on level of care or service; and,
- To subsidize residents who become financially unable to pay their monthly care fees.
What Types of Contracts are Available?
The terms and services provided under a continuing care contract vary significantly at different CCRCs. Some CCRCs may offer more than one type of contract. For example, contracts can differ in terms of costs and payment methods, services and service provisions, and memberships and proprietary interests. In addition, refundable and non-refundable contracts may be offered. A continuing care contract is a legal agreement between a resident and a CCRC provider. In general it provides for living accommodations and related services, including health care services, over the long term.
Who Monitors Providers and Communities?
- Due to the length of time covered by continuing care contracts, as well as the substantial payments made by residents, the Legislature has enacted state laws requiring providers to meet certain financial and disclosure requirements.
- The California Department of Social Services (CDSS) is the State agency responsible for approving, monitoring, and regulating providers. Two branches within CDSS participate in this function.
- Local Community Care Licensing District Offices continually monitor CCRCs to ensure compliance with California's Community Care Licensing Laws regarding physical plant, accommodations, care and supervision, and quality of service.
- The Continuing Care Contracts Branch has the primary responsibility for overseeing continuing care contract providers. This branch evaluates provider applications to determine the financial feasibility of proposed communities and monitors the development of projects. Then, on an ongoing basis, the performance and financial condition of each provider is evaluated to assess their ability to fulfill contractual obligations to residents.
- Advice is received from the Continuing Care Advisory Committee. The members of this committee are experienced in the continuing care industry and are appointed by the Governor and the Legislature to assist the Continuing Care Contracts Branch.
How Does a Provider get Permission to Enter into Continuing Care Contracts?
- Before a provider can enter into continuing care contracts, an application for a Permit to Accept Deposits/Certificate of Authority must be filed with CDSS, Continuing Care Contracts Branch. This office evaluates the financial, actuarial and marketing feasibility of proposed projects. A Permit to Accept Deposits is issued if an applicant has demonstrated viable marketing plans, sound operating strategies and adequate long term financial strength to CDSS. Such a permit allows the applicant to collect deposits from depositors (potential residents) and place them in an escrow account.
- During this time, CDSS monitors the projects' presale and construction activities, and controls the deposit escrow account. Escrow funds may be released to the Provider when certain conditions and sales targets have been satisfied.
- After construction is completed and the applicant has met all licensing requirements, the Community Care Licensing District Office issues a Residential Care Facility for the Elderly (RCFE) License.
- When the applicant meets its sales projections and continues to demonstrate financial viability, the Continuing Care Contracts Branch issues a Provisional Certificate of Authority for one year. That certificate authorizes the provider to enter into continuing care contracts with residents. At the end of that year, if the provider is in compliance with all statutes relating to CCRCs, a Certificate of Authority is issued.
How Does the CDSS Determine if a Facility is Financially Sound?
- Once a provider is issued a Certificate of Authority to enter into continuing care contracts, audited financial statements and reserve reports must be submitted to CDSS on an annual basis.
- Various financial reserve requirements are mandated by the continuing care contract statutes. These reserves help to assure that providers will remain able to meet its immediate financial obligations. Providers must recalculate reserves each year and submit reports to CDSS with their annual audited financial statement.
- Audited financial statements must be prepared by an accountant who has been licensed by the California State Board of Accountancy as a certified public accountant. The audit of the financial statements must be in compliance with the latest edition of the American Institute of Certified Public Account's industry audit guide for the provider of health care services.
- The CDSS reviews the annual audited financial statements. In the event the Department determines that a provider is in unsound financial condition, CDSS has statutory authority to require the provider to take corrective measures. When a provider fails to comply with the statutory requirements, CDSS may levy administrative fines, file liens on property, seek a court appointed administrator to take over operation of an ailing community or take disciplinary action against the provider.
Important Contract Information
- The statutes governing continuing care contracts require specific disclosures in continuing care contracts between providers and residents. Each contract in use at a community must first be reviewed for statutory compliance and approved by CDSS.
- Provisions in continuing care contracts may vary significantly from community to community. For example. Contracts can differ in terms of costs and payment methods, services and service provisions, memberships and propriety interests, and provision for refunds of entrance fees.
Before You Sign…
It is important to remember that the authority to enter into continuing care contracts granted by CDSS does not represent an endorsement of the community nor a guarantee of performance by the provider to fulfill contractual obligations.
Prospective residents should seek financial and legal advice and carefully consider the risks, benefits, and costs of a continuing care contract before signing a contract.