Bankruptcies Hit Retirement Communities
The recession is hitting elderly people where they live, literally. Financial problems have been mounting at a number of assisted-living and continuing-care communities, forcing some facilities into bankruptcies and inflicting new worries on residents and their families who thought their life plans were comfortably set. In recent weeks, Erickson Retirement Communities, which manages 19 continuing-care retirement communities in 11 states, declared bankruptcy. Sunrise Senior Living Inc. posted a quarterly loss of $82 million and announced plans to sell off 21 of its assisted-living communities. Nationally, smaller retirement communities are raising their prices, changing the way they operate, selling themselves off to bigger chains, or getting out of the business altogether. Many companies say they can’t make a profit—or even succeed on a nonprofit basis—in an environment that combines the high cost of caring for elderly residents, restrictive Medicaid budgets, tight credit markets and fewer residents willing and able to pay top dollar for their care.
When a facility fails, it can have myriad effects on the residents. The good news is that no one gets kicked to the curb–at least not right away. “Nobody has ended up on the street, which is a primal fear when you’re dealing with these places,” says Jason Frank, an elder-law attorney in Baltimore. “But their fees can skyrocket, and they can become unaffordable. Then they can kick you out for nonpayment.” In some cases, residents may find that the sizeable deposits they made to get their apartments in the first place have disappeared. (Continuing-care communities like Erickson’s typically charge deposits of $150,000 or more, and assure residents that they can stay on the campus for the rest of their lives regardless of how their needs change, and that the deposits will be refundable to themselves or their heirs when they leave or die. But residents typically also have to pay monthly fees for care, and those fees can continue to increase. Assisted-living facilities like Sunrise generally require no deposits but charge a monthly pay-as-you-go-plan.) That’s what happened to the 170 people who lived in Covenant at South Hills in Lebanon, Pa. Their deposits went up in smoke when their facility was sold in bankruptcy to Concordia Lutheran Ministries, which did not take on that liability. Several are now suing B’nai Brith Housing, the original operator of Covenant.
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