Continuing-care bankruptcy wipes out residents

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/finance/she-paid-1-million-to-join-a-senior-facility-its-bankruptcy-wiped-her-out-1732159d?mod=wknd_pos1

She Paid $1 Million to Join a Senior Facility. Its Bankruptcy Wiped Her Out.

Families have lost at least $190 million in 16 bankruptcies at continuing-care retirement communities

By Akiko Matsuda, The Wall Street Journal, July 7, 2025

  • A senior facility filed for bankruptcy, wiping out much of its residents’ refunds.

  • Chapter 11 filings rose among continuing-care retirement communities during the pandemic due to low move-ins, wiping out families’ savings.

  • The Senate investigated these communities in 2010, but many states still struggle to regulate them effectively.

…
Harborside required a $945,000 entrance fee, a standard in the industry. On top of that, Kohen was paying $5,700 in monthly fees by the end of her stay. Kohen sold the family house in Great Neck, N.Y., for $838,000 to help cover entry. Harborside told her that 75% of that upfront fee would be refundable to her family upon her death, or returned to her if she chose to leave, also a typical practice in the industry.

Harborside struggled to recruit residents and went bankrupt three times. Finally, the owner sold the business to an investor who is scaling back on the level of care offered. Kohen needed more care, so she had to leave.

But because of the way bankruptcy proceedings work, secured creditors get paid before residents. …

Among nearly 2,000 of these types of facilities nationwide, at least 16 of them have filed for chapter 11 since the outbreak of Covid-19 in March 2020…

About 623,000 people lived in continuing-care retirement-community facilities as of 2023, according to the nonprofit National Investment Center for Seniors Housing & Care…

Most of these businesses nationwide are now owned by nonprofits, often taking advantage of tax-exempt bonds to build large campuses. …Many states have struggled to regulate these businesses. That is, in part, because of their unique insurance-like business model, under which fees are collected for future services…[end quote]

The question of continuing care is Macroeconomic since such a large part of the population is elderly and may need long-term care for years of frailty and dementia. Many of the continuing care facilities are nonprofits but many are for-profit and owned by private equity.

The very high up-front entry fee could be spent on private caregivers in the home. That would avoid the need to commit (and risk) a huge lump sum.

Anyone who is seriously considering a move into a continuing care facility should carefully investigate its finances before making a commitment.

Wendy

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The thing is, you can investigate all you want and it may still not help. That’s because at any time the entity that you investigated can be purchased by a different entity that has different financial characteristics. And I wouldn’t be surprised if that is the case in many of these failures. Of course 16 out of 2000 isn’t that terrible considering. But if you are in one of the 16, it’s terrible.

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$1M is pretty steep. My aunt moved into one of those places around 2007. She paid about $100,000 up front, and about $3,000/month.

Steve

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The CPI-U was 85 in January 2007 and 126 in May 2025. So $100,000 in 2007 would be equivalent to $148,364 in May 2025. You’re right, $1M is steep compared with that.

Of course…location, location.
Wendy

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That’s for sure. North Shore, LI is not for the faint of wallet! All those Gold Coast communities…Great Neck, Manhasset, Port Wash etc…are seriously pricey. Our first home in the US was just across Hempstead Harbor …Glen Head. Much more affordable (relatively speaking) as the Oyster Bay line into Penn Station was not straight through.

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I have four data points: my father (twice) and Mrs. Goofy’s mother and father.

All four went into religiously affiliated homes, all non-profits, where the overriding sentiment isn’t “profit” but “do good.” The homes were overtly but not obnoxiously religious, I mean there were church services in the chapel which you were free to attend or not, as you chose, but otherwise they looked and acted like any other of the retirement homes, and we looked at a dozen or so across the twenty years as our parents aged.

Dad’s cost $300,000 to get in, plus $5K a month. Lovely place run by the Mennonites in Eastern PA. My sister moved him after 5 years to a home closer to her when the 90 minute trip became an increasing bother. That one was Presbyterian, as I recall. Again, owned by a church but not particularly religious.

Mrs. Goofy’s parents went to Jewish homes (separate), and for him there was no entry fee at all. He did have to have at least $300k in assets to (spend down) and if that was used up he could stay as long as necessary and the home attached his SS and Medicaid as payment. (Statistical demography: he died on the exact day when his assets ran out, although he did not know that.) In return he got a nice (almost tiny) apartment, 3 meals a day, and such activities as the home provided. (Concerts, classes, etc.)The mother also went to a Jewish home, smaller, and the arrangement was similar, not exactly the same but I forget the details.

When my Dad left the first home he was refunded the $300k entrance fee, but that was stipulated up front. Their deal was $300k refundable and $5,000/mo, or $300k 2/3 refundable and $4,000/mo or $300k 1/3 refundable and $3,000/mo. Those are from memory and might be off a little, but that was the spirit of the deal. I chose “completely refundable” for him, which turned out to be the better choice given that he later moved. He spent a total of about 8 years in those homes, as I recall.

Anyway, the “religious” aspect of it intrigues me, as it seems less likely to be flipped from non-profit to profit, or from profit to “even-greater” profit and stripped for assets as seems to be increasingly common these days.

I should point out that I am atheist, but there was nothing about the religious homes that would have bothered me; quite muted iconography, discrete chapel and church, etc. Of course I can’t speak to whether they attract the proselytizing crowd, but that’s a small price to pay for the (not perfect) idea of the home being sold out from under me.

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Rent Vs. Buy. I’d much rather just rent a nursing home by the month, rather than make a big lump sum payment to “guaranty” access. Once they have your money, you’ve lost any leverage.

One of my former Exxon colleagues had a similar experience with an upscale Houston facility.

https://www.wsj.com/articles/houston-retirement-community-seeks-muni-bond-restructuring-in-bankruptcy-11624914918?gaa_at=eafs&gaa_n=ASWzDAg8XXtvgchPK47GSn4UOOTafyizVl32Itl3h4qSEvf5yxcoUFlcrP7R&gaa_ts=687426df&gaa_sig=0oMrY2Z5Zy5mW6e4pNoR6q60qK938hNbPyq9mPC4cf-e_mqqnK8plgZLnh9NuE4bV3pp-juSAiXR3xHxX6TeOA%3D%3D

intercst

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Part of the “argument” in favor of such insane “entry fees” is the desire of the person involved themself, and/or their family/friends to achieve some sense (never the reality) of “making all the necessary decisions while still sane” and having “it” all handled.

Mom told me “Never ever get old alone; people like us always need connection with actual people who are alive and doing things.” I think she was right, and I think that is what most revolts me about where most (not all) rest retirement homes have gone.

I am embedded in an extremely varied friendly local social scene where I live in Mexico. Most of my friends are around half my age, but we also know some true oldsters with mental and/or physical issues. We communally look after them.

Friendship, family, community and the ancient habits they depended on CANNOT be replacd by contractual relationships of whatever sort. My love and devotion inherently cannot be bought and sold.

What a bummer! :upside_down_face:

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I agree with you here.
Wendy

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