A provision in state law cited in a class action lawsuit against a continuing care retirement community only applies to food-related fraud and, therefore, cannot be used by residents and families to secure entrance fee refunds, a court ruled Wednesday.

The refund provision in New Jersey’s Consumer Fraud Act is limited in scope and does not entitle the plaintiffs to full refunds of their entrance fees, monthly fees or services provided during their residence in the life plan community, the New Jersey Supreme Court ruled.

Princeton, NJ-based Springpoint Senior Living is accused of consumer fraud over allegations that it misrepresented the return of entrance fees once residents leave a CCRC. The lawsuit, filed in 2014, alleged violations of the state’s Consumer Fraud Act and the Continuing Care Retirement Community Regulation and Financial Disclosure Act. Springpoint asserted that the right to a refund under the state CFA only applies to a portion of the statute involving food served at restaurants, hotels or lunch counters.

“Those allegations [in the class action suit] pertain entirely to misrepresentations about fees charged by a senior living facility,” Justice Douglas M. Fasciale wrote in a unanimous opinion. “None of the plaintiffs’ allegations are related to misrepresentations of food.”

A Middlesex County Superior Court Judge denied a motion for partial summary judgment in December 2022, rejecting Springpoint’s argument that only the state health department had the right to file a lawsuit to obtain a refund of community entry fees. Springpoint appealed the decision to the state’s high court with the hope of clarifying the limited scope of the refund provision.

The New Jersey Supreme Court’s decision reversed the lower court ruling and remanded the case back to the trial court. DeSimone’s attorney told Law.com that class members would continue to pursue entrance fee refunds under the Continuing Care Retirement Community Regulation and Financial Disclosure Act. 

A Springpoint Senior Living spokeswoman told McKnight’s Senior Living that it was pleased with the state high court’s unanimous decision.

“The opinion clarifies the narrow scope of the Consumer Fraud Act’s refund remedy in the way that the legislature intended when it passed the law in 1980,” the spokeswoman said. “The well-reasoned decision faithfully adheres to the language and legislative history of the statute and resolves inconsistent interpretations by the lower courts.”

Filed in 2014 

William DeSimone filed the lawsuit in 2014 on behalf of his mother’s estate against Springpoint’s New Jersey-based CCRCs at Monroe Village, Springpoint at Montgomery, Springpoint at Crestwood, Springpoint at Meadow Lakes and Springpoint at the Atrium. 

According to court documents, Evelyn DeSimone had paid a $159,000 entrance fee for an independent living unit at Monroe Village. Before moving into her unit, however, she fell and broke her hip and was unable to move in. Instead, she remained in the community’s skilled nursing facility, where she lived until she passed away in April 2010.

After her death, according to the lawsuit, her estate received a refund that amounted to 50% of her initial entrance fee, less than the 90% refund that had been anticipated. 

The lawsuit alleged that Springpoint orchestrated a “bait and switch” scheme through misleading and deceptive advertising, along with “intentional misrepresentations” by sales personnel and an incomplete and misleading disclosure statement. 

The lawsuit also claimed that Springpoint failed to alert prospective residents that it was authorized to offer discounts on the subsequent re-leasing of units or to offer different payment options that effectively could reduce refunds.

The case was dismissed in 2014 for failure to state a claim on which relief can be granted, but it was reinstated in 2015 by an appellate court. The case was certified as a class action in 2021.A bill was introduced in the New Jersey legislature in February 2022 to require CCRCs to return refundable entrance fees to former residents or their estates within a year of the unit being vacated. If passed, the bill also would require that all CCRC agreements “be written in plain English and in language understandable by a layperson.”

Only not-for-profit hospitals and higher education joined life plan communities with “deteriorating” sector outlooks in Fitch Ratings’ 2024 Public Finance Compendium, published Monday. Such a rating indicates that Fitch anticipates that credit pressures will worsen this year amid persistent labor and cost pressures.

“While Fitch expects demographic trends to continue to support healthy demand, decelerating real estate price growth and cost inflation are significant headwinds that will continue to stall the sector’s recovery,” Fitch Senior Director Margaret Johnson stated.

Although healthy demand exists for CCRCs, other key drivers of credit quality, such as decelerating real estate price growth and inflationary operating expense pressures have not improved year over year, according to the credit ratings and analysis company. 

Last month, the McKnight’s Business Daily reported that, according to Fitch, the sector would have to demonstrate improvement in staffing numbers as well as the efficacy of measures leading to “stable” or “improving” ratings if it is to revise the outlook to “neutral.” Fitch repeated the sentiment in Monday’s report.

The sector would need to overcome labor challenges, show that higher-than-average rate increases are effectively counteracting inflationary cost pressures, and improve expectations for stable or improving real estate market performance, Fitch maintains.

The Centers for Medicare & Medicaid Services’ proposed minimum staffing ratios for nursing homes are expected to exacerbate staffing pressure, which would affect already increased operating costs as well as exacerbate the headwinds in the CCRC sector, the report noted.

Additionally, according to Fitch, keep an eye on mergers and acquisitions activity in the life plan community sector heading into 2024.

“Provider affiliations and industry consolidation are going to remain key themes as providers seek the benefits of economies of scale,” the report noted.

The difference could be seen greatest in the independent living segment, which saw a difference of 6.3 percentage points between CCRCs and non-CCRCs — that is, organizations that offer traditional stand-alone nursing care, assisted living and/or independent living — according to the data. The difference for assisted living was 4.4 percentage points; for nursing care, it was 1.2 percentage points.

Based on data from 1,164 not-for-profit and for-profit entrance-fee and rental CCRCs, the independent living segment of those communities had the highest occupancy (90.5%) in the third quarter, followed by their collective assisted living (87.5%) and memory care (86.5%) segments. 

“In terms of occupancy improvements from one year ago, the largest occupancy gains for both CCRCs and non-CCRCs were seen across memory care and nursing care segments, while the smallest gains were seen across independent living segments,” NIC Principal Omar Zahraoui wrote in a blog post. 

Highest occupancy regions 

Occupancy rates in the third quarter for not-for-profit CCRCs were strongest in the Mid-Atlantic (92.2%), Northeast (91.5%) and Pacific (89.1%) regions of the country, with the Southwest region lagging behind the rest of the country with 86.1% occupancy.  

Among for-profit CCRCs, the strongest occupancy rates were in the Pacific (90.9%), Mountain (86.9%) and Mid-Atlantic (86.8%) regions. The Southwest region had the lowest occupancy, at 82.1%. 

Entrance-fee versus rental CCRCs

Entrance-fee retirement communities had higher occupancy rates than rental CCRCs across all regions. The most significant difference between entrance fee and rental occupancy was reported for the West North Central region, where entrance fee CCRC occupancy was 5.4 percentage points higher than rental, followed by the Mountain (4.9 percentage points) and the Southeast (4.8 percentage points).

Entrance-fee CCRCs in the Mid-Atlantic, Northeast and Pacific regions all demonstrated occupancy at 90%. The lowest entrance-fee CCRC occupancy was in the Southwest region at 86.0%.

Rental CCRCs in the Mid-Atlantic, Northeast and Pacific regions had the highest occupancy rates, ranging from 87.4% to 88.7%; the Southeast region had the lowest occupancy rate of 82.6%

“The strong market fundamentals — characterized by strong demand and limited new supply — will likely continue through 2024. However, this must be viewed within the context of a “higher-for-longer” interest rate environment, which may present both challenges and opportunities for the sector,” Zahraoui said.

“Operators who can effectively assess and embrace these changing trends, adapt with agility, and drive innovation will undoubtedly experience remarkable growth and success in the future,” he added.

Fitch is unwavering at this time in its “deteriorating” outlook for the sector, citing decelerating real estate price growth and inflationary operating expense pressure among the sector’s biggest impediments. According to the report, to revise the outlook to “neutral,” the sector would have to demonstrate improvement in staffing numbers as well as the efficacy of measures leading to “stable” or “improving” ratings.

“Demographics are still supportive of healthy demand in terms of [life plan community] occupancy, though staffing is still very much a sore spot contributing to much of the expense pressures for [life plan communities],” Fitch Senior Director Margaret Johnson said Monday in a statement.

Johnson noted that although life plan communities have experienced flexibility relative to hospitals in responding to staffing challenges, the Centers for Medicare & Medicaid Services’ proposed minimum staffing ratios for nursing homes are expected to exacerbate staffing pressures, “though not enough to adversely affect ratings.”

CCRCs have so far been able to pass along higher costs to residents. For example, communities with significant skilled nursing components have reduced their number of beds to help keep finances in the black. 

“However, occupancy and demand could soften if rate increases continue above historical norms or if cost-cutting erodes service quality. Decelerating growth in real estate pricing may also slow the current strong pace of independent living unit (ILU) sales and limit an LPC’s ability to raise entrance fees to absorb cost inflation and pay refunds,” according to the report.

Keep an eye on mergers and acquisitions activity heading into 2024, according to Johnson.

“Inflationary and economic pressures are driving smaller providers to seek the benefits of partnering with a larger system to shore up the benefits of economies of scale,” she said.

Continuing care retirement / life plan communities continued to outpace non-CCRCs in senior living occupancy in the third quarter, with the independent living and assisted living segments within CCRCs showing the biggest occupancy gains, according to a data analysis from specialty investment bank Ziegler.

Based on NIC MAP data from more than 1,164 not-for-profit and for-profit entrance-fee and rental CCRCs, the communities’ collective independent living segment had the highest occupancy (90.5%) in the third quarter, followed by their collective assisted living (87.5%) and memory care (86.5%) segments. 

Not-for-profit CCRCs also had higher occupancy rates than for-profit CCRCs across all regions of the country, except the Pacific region. The largest differences in third-quarter occupancy between not-for-profit and for-profit CCRCs were in the Mid-Atlantic states (5.4 percentage points), followed by the Northeast (4.9 percentage points), and the South and West North Central regions, each of which reported 4 percentage points. 

The Mid-Atlantic (92.2%), Northeast (91.5%) and Pacific (89.1%) regions reported the strongest occupancy rates among not-for-profit CCRCs in the third quarter, whereas the Southwest region had the lowest occupancy among not-for-profit CCRCs, at 86.1%.

On the for-profit side, the Pacific (90.9%), Mountain (86.9%) and Mid-Atlantic (86.8%) regions had the strongest occupancy rates, with the Southwest again lagging with the lowest occupancy rate, at 82.1%.

Breaking down the data another way, entrance-fee retirement communities had higher occupancy rates than rental CCRCs across all regions. The most significant differences were reported for the West North Central region, where entrance-fee CCRC occupancy was 5.4 percentage points higher than rental CCRC occupancy, followed by the Mountain (4.9 percentage points difference) and the Southeast (4.8 percentage points) regions. 

The Mid-Atlantic, Northeast and Pacific regions had the strongest entrance-fee CCRC occupancy rates, all higher than 90%. Rental CCRCs in those three regions also had the highest occupancy rates, running from 87.4% to 88.7%. 

CCRCs also reported higher monthly fees than non-CCRCs, with CCRCs recording the largest annual rate growth in their assisted living (5.3%) and memory care segments (5.8%). 

The non-CCRC independent living segment reported the highest year-over-year inventory growth (3.4%), followed by memory care (2%). 

Whether in a CCRC or not, memory care and skilled nursing saw the highest occupancy gains, whereas independent living, overall,  had the smallest occupancy gains in the quarter.

CHICAGO — What happens when you invite a group of senior living CEOs to share personal plans for their third acts? For architectural firm Perkins Eastman, the result was a think tank of experts who defined ideal experiences that simply don’t exist in today’s traditional continuing care retirement / life plan communities. 

A panel of architectural and CCRC executives discussed conversations they had had over the past nine months about how senior living leaders can spur innovation by developing new models that balance cutting-edge visions with the realities of implementation. The panel was part of the 2023 LeadingAge Annual Meeting on Tuesday. The meeting ends today.

“There are some amazing communities out there, but a lot of what we started to discuss was outside of what the traditional life plan community offers,” said Merintha Pinson, a Perkins Eastman senior associate.

Differing ideas about retirement

Timothy Johnson, immediate past CEO of Colorado-based Frasier, retired this year after 48 years in the industry. But he said he wasn’t ready to move into a community “where everyone knows my business.”

Johnson said that he and his wife wanted to travel and split their living between Chicago and Charleston, SC, to spend time with friends and family. In his retirement, he started a consulting business, and his wife substitute-teaches, to continue doing the things they loved.

“When I retired from my full-time life as a CEO of a life plan community, we didn’t retire from our desire to continue some degree of work in our chosen areas,” Johnson said. “This  lifestyle isn’t compatible with most traditional life plan models.”

At some point, he said, understanding health constraints and mortality, they might want the security of a life plan community. But not today.

Gretchen Cobb, chief operating officer of Arizona-based Royal Oaks Retirement Community, said that CCRCs offer undeniable social benefits, but she’s looking for something that aligns with her personal lifestyle.

“I know one day I’m not just going to be looking for a place to live. I’m going to be looking for a place that aligns with my interests and who I am,” Cobb said.

Ben Glichrist, president and CEO of North Carolina-based Southminster, said he’s looking for housing options that center around active lifestyle, affordability and flexibility. Tiny homes, he said, take up less real estate, are affordably built, can be located in good destinations and can create networks to allow people to access lifestyles they may not normally be able to access.

Shifting consumer expectations

Among the challenges that life plan communities face are shifting consumer expectations. Gilchirist said that communities need to better align themselves with resident desires and try to connect with resident personalities. Ultimately, he said, communities are competing with homes in the greater community to get future residents.

“From an industry level, we need to be looking for strategic partnerships and find solutions to address affordability and operational issues, like staffing shortages,” Gilchrist said, adding that the industry also needs to improve the decision-making process to help boards move more quickly to take advantage of opportunities that arise.

“Most LeadingAge members have a solid product that sells well today,” said Dan Cinelli, principal with Perkins Eastman. “If we don’t continue to innovate, the model won’t be sustainable five, 10, 20 years from now.”

Pinson said that a good portion of baby boomers have personal experiences with helping members of the Greatest Generation of the Silent Generation — their parents or grandparents and others — find care. She added that they also saw the negative headlines about long-term care facilities during the COVID-19 pandemic. That combination of experiences — both positive and negative — will affect how prospective residents plan for their own futures.

“It’s really crucial that we understand the values of this future consumer and really align our services to appeal to them,” Pinson said.

Referring to the recent New Age of Aging online survey of older adults by Age Wave, Pinson said that 83% of older adults surveyed said they want to remain useful, more than half want to continue to work, and 97% said that it’s important to stay curious, something Cinelli called the “brightest flashlight and an opportunity for change I have ever seen.” 

Cinelli said that the traditional CCRC boils down to three things: living life to the fullest with a plan, having peace of mind that services are located on one campus, and recognizing the need for older adults to connect with other older adults. But the formula for today’s life plan community is housing plus continuum of care plus amenities — and it hasn’t changed in 50 years, he added.

Rather than “trying to figure out the better mousetrap,” the panel said the formula needs to change to home plus longevity plus experiences, the idea being that the qualities a community offers create a sense of home for its residents, including a health and wellness focus and experiences that support that. 

“We owe it to future consumers and residents to figure this out — to help them figure out what they heed and find ways to help them seek that out,” Gilchrist said.

Castleberry sits on the CARF financial advisory panel and helped write the CARF publication.

The current CARF ratios publication shows comparative data (single- and multi-site) for 17 separate financial ratios and uses Fitch credit rating categories for broader comparison. In addition to the CARF report, specialty investment bank Ziegler released its own publication, “Financial ratio medians for not-for-profit entrance fee CCRCs.”

“CARF medians and the Ziegler median generally agree,” Castleberry said, noting that the populations aren’t exactly the same. “The borrowers are probably a little bit stronger in the CARF report than the Ziegler report, but the medians are around the same levels,” she added.

The analysis shows a drop in cash for not-for-profit CCRCs last year. 

“It’s still at a pretty strong level. In fact, through the pandemic, borrower cash had hit historic highs based on this publication, but because of the market, we did see a big drop in cash,” Castleberry said.

One of the reasons for the year-over-year increase in core profitability, she said, is that many CCRCs increased their entrance fees to offset costs. 

“A lot of borrowers were playing catch up with their fee increases as it relates to their expense pressures,” Castleberry said. Additionally, she said, CCRCs have benefited from increased occupancy, particularly in their independent living areas.

But things are looking up as far as cash levels, Castleberry said.

“In terms of the stock market, through the first half of the year, borrowers were telling us —  and I think the market backs that up — that their cash levels were improving based on where they ended their last fiscal year. So I think we should, depending on what happens in the last three months of this year, expect cash to improve or at least stabilize,” she said.

“The potential affiliation with Mease Life presents a unique opportunity for Acts to expand our presence in the Florida market,” Acts CEO Gerald T. Grant said in a statement in April. “Our organizations share common values and a commitment to providing exceptional senior living experiences and services for residents.”

Under the affiliation agreement, Mease Life becomes an Acts affiliate member and part of a network of 27 CCRCs in nine states —  Alabama, Delaware, Florida, Georgia, Maryland, New Jersey, North Carolina and South Carolina — across the East Coast.

Acts is the nation’s fourth-largest not-for-profit multi-site senior living and care organization per the 2023 LeadingAge Ziegler 200, with assets of $2.4 billion and an A- rating from Fitch Ratings. The company’s communities collectively serve more than 10,000 residents.

Mease Life is home to approximately 350 residents. Founded in the late 1960s, the nine-story high-rise community includes a mix of independent living, assisted living, skilled nursing and other specialty care services.

“We are delighted to be joining the Acts family, which is one of the nation’s premier senior living organizations with an over 50-year track record in senior living services,” Mease Life President and CEO Kent L. McRae said Monday. “In joining a company with the reputation, resources and financial strength of Acts, the affiliation has set us up for continued success into the future to provide exceptional senior living services that is core to our identity.”

Friendship and Richfield Living officially have merged under the Friendship umbrella. Together, the communities have a combined 160 years of experience.

Through the merger, Richfield Living will be able to expand its offerings while Friendship expands its mission of “supporting friends by providing peace of mind” to more of the greater community, according to the companies.

“Friendship is proud to have strong leadership and financial positioning to allow us this opportunity,” the company’s president and CEO, Joseph Hoff, said in a statement. “Combining the strengths of our teams amplifies our abilities to best support the rapidly changing needs of the aging community.”

Richfield Living’s campus in Salem, VA, offers a full continuum of long-term care and services on 52 acres. The property includes a new town center, independent living, assisted living, memory care and a rehab center. The campus will retain its name and not-for-profit status under the Friendship umbrella.

The newly combined entities will serve more than 1,500 residents and employ more than 1,000 people. 

“I’m excited to merge these two organizations that have such long-standing histories in the Roanoke Valley,” Friendship Vice President of Operations Ben Higgins said.

Friendship now has four campuses serving southwestern Virginia: Richfield Living, Salem Terrace, Friendship North and Friendship South.