Compliance Changes for Continuing Care

Written by:
07/03/2012 8:43 AM

Substantial statutory and regulatory requirements are already in place to regulate Continuing Care Retirement Communities (CCRCs). Nevertheless, the Maryland legislature enacted legislation in the 2012 session that imposed additional requirements on CCRCs. A major change was made in the required operating reserve, although the change does not take effect for over a decade. Other changes were made, including changes in the requirements for resident agreements and disclosure statements, that will require most providers to change their documentation. Here is a summary of some provisions of the new law, which takes effect October 1, 2012:

Financial

Currently, required operating reserves are 15% of the net operating expenses. That percentage increases to 25% on January 1, 2023. Additionally, beginning January 1, 2014, those reserves must be unrestricted cash and investments and, other than several exceptions, cannot be encumbered.

Ownership

With some exceptions, the new legislation prohibits transfer of an ownership interest in a facility without approval of the Department of Aging.

Marketing materials

All marketing materials including disclosure statements, that describe the entrance fee being refundable in whole or part, will be required to contain specific disclaimer language.

Disclosure statements

If the facility has a governing body, the disclosure statement must describe the process of selecting the subscriber member of the body and satisfying the other statutory requirements for governing bodies. If the facility offers an extensive agreement, specific language will be required regarding long-term care insurance policies.

Resident agreements

Most of the statutory changes involve the resident agreement, but none are particularly burdensome. The agreement now must include a representation by the provider that the resident has received the agreement (with attachments and exhibits) and disclosure statement at least two weeks before signing and an acknowledgement by the resident that he/she has reviewed the refund provisions in the agreement. The statute includes several model statements describing the use by the facility of the fees paid – one of these statements, or something substantially similar, must be included in the agreement. If payment of a refund is conditioned on reoccupancy or recontracting of the resident’s unit, the agreement must include a provision obilgating the facility to make reasonable efforts to satisfy the condition. The statute imposes required procedures and contractual language if the facility uses separate assisted living and/or comprehensive care agreements. And, the statute makes it clear that the Department of Aging’s review of agreements is not limited to the statutes governing continuing care, but instead includes “other applicable law”.

Disclosure statements and resident agreements

A table of contents is now required. If the facility offers a refund, these documents must state whether the amount that would be refunded is held in trust or escrow and, if so, where and how.

Miscellaneous changes

Within one month after minutes of the governing body are approved, either the nonconfidential portions of the minutes, or a summary of those portions, must be made available to residents. Residents must also have available for their review the most recent finalized budget of the facility. Very minor changes were made to the grievance procedure requirements – the requirements expressly apply to a group of residents as well as to individual residents, and require that the provider’s initial response be made in writing.

While many of these changes do not appear to be major, they must be followed after their effective dates. Presumably, the Department of Aging will be deluged with revised agreements close to the October 1 effective date of many of these provisions. You should consider getting us your agreements well in advance so we can make the necessary changes and submit them for approval well in advance. Please contact Dan Katz at 410.752.9725 or or any of the attorneys in the firm’s Health Care and Senior Housing groups to give your documents a check-up, particularly in light of the new law.

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