As I wrote last week, the report authored by the Government Accounting Office (GAO) in 2010 on CCRC's was intended to offer a review of the statutory provisions of eight states (Illinois, California, Florida, Ohio, New York, Texas, Wisconsin and Pennsylvania) with respect to "financial oversight and consumer protections." The states were selected based on a number of criteria including extent of regulatory requirements, size of CCRC population and geographic location.
As of the report date, Illinois had 108 CCRC's, placing the state among only four other states with more than 100 communities (California, Ohio, Florida and Pennsylvania). In Illinois, the Life Care Facilities Act sets out the regulations for CCRC's and empowers the Illinois Department of Public Health to regulate the industry. Not unexpectedly, several few commonalities and differences exist among the states and although the regulatory scheme in Illinois seems thin by comparison to some of the other states, there is no evidence that Illinois CCRC residents are at increased financial or quality of care risks compared to CCRC residents in other states. General observations include:
- Most states states required CCRC's to submit audited financial statements each year to demonstrate their basic financial health. Illinois has this requirement.
- A few states require periodic actuarial studies to address the long-term viability of a CCRC (e.g. California, New York and Texas). Illinois does not have such a requirement.
- Illinois is among the 38 states which do regulate CCRC's. Of the eight states in the report, only Ohio did not specifically regulate or license CCRC's.
- Most states have reserve requirements (including Illinois) that focus on short periods (i.e. six (6) months or one (1) year). It should be noted that lender and bondholder requirements generally exceed these regulatory standards.
- CCRC providers did not convey strong positive or negative views about the strength or effectiveness of CCRC regulations.
I am unaware of any call for new regulation of the CCRC industry in Illinois and it seems unlikely that in the near future any additional regulatory requirements will be implemented. However, the current economic climate is placing additional (and unanticipated) pressure on CCRC unit sales. Additionally, if the average age of a CCRC's population increases, it may be prudent to require an actuarial study to determine impact this may have on the the long-term financial viability of the CCRC.
I look forward to your comments.
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