Since 2020, at least 16 continuing care retirement communities (CCRCs) have filed for bankruptcy, putting thousands of older adults at risk of losing their six-figure deposits and homes. While these facilities promise lifetime care in exchange for entrance fees ranging from $200,000 to over $1 million, complex financial structures and inadequate oversight are part of an increasingly unstable system.

The good news is that there are critical warning signs you can watch for and essential steps to take before choosing a CCRC.

What Are CCRCs and How Do They Work?

CCRCs are residential campuses designed for retirees. The minimum age for residents ranges from 55 to early 60s, although the majority of residents are in their mid-70s to early 80s. CCRCs offer a complete spectrum of care as residents age. They have independent living units, assisted living facilities, and nursing homes. They offer amenities like meals, housekeeping, and social activities.

Residents usually enter when they’re relatively healthy, paying an entrance fee ranging from $200,000 to over $1 million, plus monthly fees of several thousand dollars. They can choose from three contract types:

• Type A (life care): Offers unlimited assisted living and nursing care at no extra cost
• Type B (modified): Provides a fixed set of services for a defined period
• Type C (fee-for-service): Additional care is paid for separately at market rates

The Financial Crisis Among Some CCRCs

CCRC bankruptcies have been driven by rising operating costs, labor shortages, and wage increases. According to experts, some CCRC operators aren’t keeping enough money in reserves to honor their long-term care commitments, instead using deposits from new residents and tax-exempt bonds to meet existing obligations, creating a potentially unstable financial structure.

The fees paid by residents haven’t always kept pace with the rising costs for CCRCs. Since many CCRC operators also offer refundable entry fee plans at a higher price, this means some haven’t had the money to pay up when a resident opts for a refund.

What Happens When CCRCs Fail

When CCRCs declare bankruptcy, residents face two major risks. First, they could lose their entrance fee deposits, as residents are considered unsecured creditors and stand last in line for repayment. Second, they face potential eviction from their homes.

How To Assess a CCRC’s Financial Health

Before committing to a CCRC, experts recommend examining these key financial indicators:

• Days cash on hand: Look for at least 120 to 200 days of operating cash reserves.
• Operating revenue: Look for facilities where operating revenue stays within 5% to 10% of expenses.
• Occupancy rates: Check for rates above 90%. Consistently low occupancy can signal financial trouble.
• Bond ratings and debt: Review the facility’s municipal bond disclosures and debt ratio (if applicable). Its cash should cover at least 40% of outstanding debt.

Experts also recommend the following:

• Ask for annual financial reports and state filings.
• Consult with a financial advisor familiar with CCRC contracts.
• An elder law attorney should review any contracts as well.
• Check the long-term capital improvement plans and maintenance schedules.
• Verify the facility’s history of paying entrance fee refunds.

The Bottom Line

While many CCRCs operate successfully and provide valuable services to older adults, the stakes are simply too high to skip proper due diligence—too many have been mismanaged in recent years not to do so.

Before committing enormous savings to one of these communities, work with qualified professionals to thoroughly examine the facility’s financial health.