oversight

Health Care Services: How Continuing Care Retirement Communities Manage Services for the Elderly

Published by the Government Accountability Office on 1997-01-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Requesters




January 1997
                 HEALTH CARE
                 SERVICES
                 How Continuing Care
                 Retirement
                 Communities Manage
                 Services for the Elderly




GAO/HEHS-97-36
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-274820

      January 23, 1997

      The Honorable Thomas J. Bliley, Jr.
      Chairman, Committee on Commerce
      House of Representatives

      The Honorable James C. Greenwood
      House of Representatives

      The Congress has shown interest in various models of managed care as a
      way to both control the rapidly rising cost of health care services for the
      elderly and ensure quality care.1 Managed care is intended to channel and
      coordinate individuals’ use of health services to achieve appropriate
      utilization of those services and improve health outcomes. Risk-based
      managed care, such as that offered by health maintenance organizations
      (HMO) to over 50 million people, is also expected to control costs through
      arrangements in which the organization is responsible for providing or
      arranging health care for beneficiaries in exchange for payment of a fixed
      fee. Such arrangements are intended to create strong incentives for
      managed care organizations to manage care effectively and to help
      beneficiaries maintain health and functioning. The focus of managed care,
      however, has been primarily on serving working-age adults and children.

      In contrast, continuing care retirement communities (CCRC) focus almost
      exclusively on managing various forms of care for the elderly to help them
      remain healthy and functioning. CCRCs offer retirement living in
      combination with a range of health and other services that vary by CCRC.
      The services a CCRC may provide—often in a campus-like setting—include
      housing; long-term care, such as skilled nursing facility care and assisted
      living; various medical services, including physician services and physical
      therapy; and services such as meals, housekeeping, and recreational
      activities. Most CCRCs are private, nonprofit agencies, and many have
      religious affiliations. Currently about 350,000 residents live in
      approximately 1,200 CCRCs. About one-third of CCRCs provide long-term
      care for their residents under lifetime contracts in which the CCRC assumes
      the residents’ risk for the cost of long-term care services.2 These CCRCs
      have incentives to encourage residents to use medical care to maintain or
      improve their health and functioning and to manage residents’ use of both

      1
       See, for example, the Medicare Preservation Act of 1995, H.R. 2425, which was included as title XV of
      the Balanced Budget Reconciliation Act of 1995, H.R. 2491.
      2
       Typically these contracts are intended to last for the lifetime of the resident, although some can be
      canceled at the option of the resident. In some cases the contract may be for a shorter period and
      renewable at the option of the resident.



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                   acute medical and long-term care services even though these CCRCs are
                   generally only at risk for the cost of long-term care.

                   You asked us to review the processes of managed care in CCRCs and how
                   these relate to health care costs. In response to your request, we examined
                   (1) CCRC practices for promoting wellness, (2) practices for managing care
                   for elderly people with chronic conditions, and (3) evidence regarding the
                   possible effect of these practices on health status and costs.

                   To conduct our work, we reviewed literature on CCRCs and the clinical and
                   cost effects of various health practices; interviewed CCRC experts,
                   physicians in geriatrics, and officials from the Health Care Financing
                   Administration’s (HCFA) Office of Managed Care; and visited 11 CCRCs to
                   examine their practices. We chose these CCRCs because they assume most
                   residents’ financial risk for the cost of long-term care, are accredited by
                   the Continuing Care Accreditation Commission, and represent some
                   geographic variation. During visits and follow-up contacts with these
                   CCRCs, we interviewed executive officers, administrative officials, and
                   medical staff. We also collected documentation from the CCRCs on health
                   promotion, medical screening, and chronic disease management practices.
                   For a complete description of our scope and methodology, see appendix I.


                   To serve their elderly residents, CCRCs we examined manage care to meet
Results in Brief   the needs of both healthy individuals and those who have chronic
                   conditions. They use active strategies to promote health, prevent disease,
                   and detect health problems early by encouraging exercise, proper
                   nutrition, social contacts, immunizations, and periodic medical exams and
                   assessments for all residents. Many of these CCRCs also have
                   multidisciplinary teams of nurses, social workers, rehabilitation
                   specialists, physicians, dieticians, or others to plan and manage residents’
                   care. These teams meet periodically to discuss residents’ health and
                   functional status; determine whether services are needed; and decide on
                   the types of treatment, services, and supports that will be provided. CCRC
                   staff coordinate a wide range of health and other services—whether
                   provided on or off site—to enhance their benefit to the individual resident.
                   Active monitoring of the health and functioning of residents who have
                   chronic conditions—such as arthritis, hypertension, and heart disease—is
                   an integral part of this coordinated, multidisciplinary approach to
                   managing care.




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             Many of these CCRCs’ practices are considered to be effective in improving
             the health and functioning of the elderly, although their effect on health
             care costs is largely undemonstrated. Regular medical exams and health
             assessments, immunizations, and counseling to encourage exercise,
             proper nutrition, and social interaction are all recommended by experts
             and the literature as effective health promotion and disease prevention
             strategies for the elderly. In addition, geriatric experts recommend a
             coordinated and multidisciplinary approach to manage chronic conditions
             among the elderly because their care may involve many modes of
             treatment and disciplines. While the health benefit of these practices has
             been demonstrated, little evidence exists to demonstrate health cost
             savings from either the CCRC package of services or most of the practices
             individually.


             CCRCs  represent one form of managed care for the elderly. Many CCRCs
Background   have managed both acute medical and long-term care services for the
             elderly for decades. CCRCs plan, administer, and often provide these
             services, in combination with housing and other services, frequently in a
             campus-like setting.3 The number of residents in a CCRC varies, but
             averages about 300, most of whom are elderly people leading active
             lifestyles and living in independent housing units. Some residents receive
             personal care, such as assistance in bathing and dressing, either in their
             own residential units or in special assisted living units, and some receive
             skilled nursing facility care. Residents may also receive physician,
             laboratory, and other care on site. Expenses for these and other medical
             services are reimbursable by Medicare on the same basis as for the elderly
             who do not live in CCRCs.

             CCRCs  assess prospective residents’ health and financial status to ensure a
             fit with services offered and required fees. Residents commonly pay an
             entry fee to join the community and a monthly fee thereafter. These fees
             vary considerably depending on factors such as the level of CCRC financial
             risk for long-term care services, the size of the residential unit chosen,
             whether fees are for single individuals or couples, and the kinds of
             additional services and amenities provided. (See app. II for a description
             of the different financial risks CCRCs assume.) In the 11 CCRCs we
             visited—all of which assume residents’ risk for long-term care
             costs—entry fees ranged from a low of $34,000 for a studio apartment for
             one individual to a high of $439,600 for a two-bedroom home for a couple.

             3
             See The Consumers’ Directory of Continuing Care Retirement Communities (Washington, D.C.:
             American Association of Homes and Services for the Aging, 1994) for a discussion of the philosophy of
             CCRCs and profiles of more than 500 individual communities.



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                              Monthly fees in the 11 communities ranged from $1,383 for an individual to
                              $4,267 for a couple.


                              The CCRCs we visited use a variety of practices for health promotion,
CCRCs Use a Variety           disease prevention, and early detection of health problems to help
of Practices to               residents maintain their health and functioning. These practices are part of
Promote Wellness              an approach to care that encourages CCRC residents to adopt or maintain a
                              lifestyle that is believed to promote good health. Providing activities and
                              services, usually on site, encourages residents to take advantage of them.


CCRCs Encourage               Many of the CCRCs we visited promote good health for their residents by
Exercise, Proper Nutrition,   encouraging exercise, proper nutrition, and social involvement.
and Social Involvement        Encouraging regular exercise is a common practice that CCRCs we visited
                              use to maintain or improve residents’ health and functioning. CCRC efforts
                              include having swimming pools and fitness equipment on site, providing
                              staff for exercise programs, and sponsoring lectures and information on
                              the value of exercise. Exercise classes and activities include aerobics,
                              flexibility and strength exercises, swimming, yoga, lawn bowling, and
                              square dancing. Residents may participate through a formal program or on
                              an informal basis. Several CCRCs also strongly encourage walking. The
                              campus-like designs of some CCRCs encourage walking by locating
                              residential buildings within walking distance of commonly used services.
                              Some campuses also incorporate nature trails or other attractive walks.

                              Another common health promotion practice at CCRCs we visited is the
                              encouragement of proper nutrition. Residents at many of these CCRCs are
                              offered three meals a day in common dining rooms, which encourages
                              adequate consumption of healthy foods. Some CCRCs require residents to
                              have at least one of their meals each day in these settings. For other meals,
                              residents may cook at home or eat elsewhere. The foods offered and
                              nutrition information provided encourage residents to eat appropriately
                              for weight and other health considerations. Special diets may be provided.
                              At most of the CCRCs we visited dieticians are often available for
                              consultation and can help residents develop individual diet plans. CCRC
                              officials told us that on-site dietary counseling and nutritionally balanced
                              meals in congregate, attractively decorated dining areas help encourage
                              adequate nutrition and healthy eating habits.

                              Encouraging residents to interact socially is also a common practice
                              among the CCRCs we visited. CCRC officials told us that they encourage



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                             B-274820




                             interaction because social isolation is associated with poorer health and
                             functioning among the elderly. They also said that the physical layout of
                             CCRCs fosters social interaction and is an integral part of the CCRC model.
                             Residents live next door to each other and may see each other frequently
                             through visits or while eating in congregate settings, checking mail, and
                             engaging in a wide range of CCRC activities. Recreational, educational,
                             cultural, and volunteer activities are frequently initiated, planned, and
                             organized by residents. Officials said that arranging and participating in
                             these kinds of activities are an important part of residents’ social
                             interaction in the community. Activities may include on-campus lectures,
                             movies, musical performances, woodworking, flower arranging,
                             photography, and civic and charitable activities.


Disease Prevention and       Many of the CCRCs we visited attempt to maintain their residents’ health
Early Detection Activities   and functioning through disease prevention and early detection of health
Include Immunizations and    problems. These activities are carried out by nurses, social workers and
                             physicians who may be either affiliated with or independent of the CCRC.
Periodic Medical Exams
and Assessments              Most CCRCs we visited encourage immunizations against common
                             preventable diseases, such as flu and pneumonia, to reduce illness and
                             possible fatalities. They may encourage immunization in a number of
                             ways, including inoculation clinics, seminars, distribution of printed
                             materials, and reminders from medical staff when a resident makes an
                             outpatient visit or has a medical examination.

                             Most of the CCRCs we visited encourage early detection of health problems
                             through periodic medical exams and other health assessments. CCRC
                             officials told us that these exams and assessments help staff and residents
                             to be more proactive in using effective medical treatments and changing
                             lifestyles to slow or reverse the loss of good health and function.

                             A combination of physicians, nurse practitioners, and social workers may
                             conduct elements of these exams and assessments, which may include
                             periodic inventories of prescription drugs used by a resident to assess
                             potential unwanted side effects from drug interactions, examination of an
                             individual’s ease in walking or getting out of a chair, and observation of
                             changes in an individual’s mental state. CCRC medical exams may include
                             testing blood pressure for hypertension and blood glucose levels for
                             diabetes. They may also include tests for colon, breast, and prostate
                             cancer as well as vision and hearing impairments. Residents’ medical




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                           records and staff are usually on site, making the periodic exams and
                           assessments convenient for residents.

                           The CCRCs we visited typically encourage periodic medical exams through
                           seminars, written materials, and reminders such as notices sent to
                           residents on their birthdays asking them to schedule an exam. Some CCRCs
                           follow up by telephone or other means when residents do not schedule or
                           appear for medical exams. If a resident does not come for an exam after
                           follow-up, some CCRC officials told us that this information is tracked and
                           an exam conducted when the resident next comes in for outpatient care
                           because of illness.


                           CCRCs  we visited use a multidisciplinary, coordinated approach to manage
CCRCs Use a                care for their residents with chronic conditions such as hypertension and
Multidisciplinary,         heart disease. Essential elements of this approach include a wide range of
Coordinated                on-site services, coordination of services to ensure residents receive them
                           in an appropriate and timely manner, and active monitoring of residents
Approach to Manage         with chronic conditions. The prevalence of chronic conditions increases
Chronic Conditions         substantially with age, and CCRC officials told us that properly managing
                           these conditions helps maintain residents’ functioning while delaying or
                           reducing use of costly services such as hospital care.


CCRCs Offer a Wide Range   CCRCs  we visited offer a wide range of services on site to manage care for
of Health and Other        residents with chronic conditions. These services may include primary
Services on Site           health care, care by specialists, skilled nursing care, and laboratory
                           testing. Other services may include physical therapy, social work, personal
                           care, dietary counseling, home chore service, and transportation. Various
                           combinations of services may be provided across a range of settings,
                           including an outpatient clinic, a skilled nursing facility, or a resident’s own
                           home.

                           In addition, some of the CCRCs we visited adapt their health promotion and
                           wellness programs to help meet the needs of residents with chronic
                           conditions. For example, they may modify a regular exercise program to
                           help people with arthritis retain the ability to walk. Similarly, these CCRCs
                           may encourage and help those with chronic conditions to continue regular
                           social interaction through special arrangements. For example, a resident
                           who can no longer walk to recreational events and congregate eating areas
                           may be provided with an electric cart so that he or she can remain
                           independent.



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                          CCRC  officials told us that having a wide range of services on site makes it
                          possible to manage most of the care of residents with chronic conditions
                          within the community even when the needs are intense. CCRC officials said
                          that residents less frequently need care at hospital emergency rooms or as
                          many days of hospital care when admitted because they have access to
                          physicians, nursing care, and other services at the CCRC. The availability of
                          a skilled nursing facility where residents can easily be admitted from the
                          hospital or from home for short stays may also help return residents more
                          quickly to their homes, according to these officials.


Coordination and Active   CCRCs  we visited typically coordinate services to enhance their benefit for
Monitoring Used to Meet   residents. CCRC staff coordinate various services provided by both CCRC
Residents’ Needs          staff and other providers whether on site or off. For example, a CCRC may
                          coordinate an arthritic resident’s pain relief medication, specialized
                          exercise program, home modifications, the availability of walkers or other
                          ambulatory aides, and periodic assistance with dressing or bathing to help
                          the resident stay as functional as possible and to reduce or delay the use of
                          more intensive services. Multidisciplinary teams may facilitate
                          coordination through joint team assessments and the development of a
                          plan of care. Teams meet regularly to reassess needs and services. CCRC
                          officials told us that nursing staff generally serve as the focal point for
                          convening teams and providing ongoing coordination of services between
                          team meetings. Some CCRC officials said that nursing and social work staff
                          usually have day-to-day responsibility for coordinating services and
                          troubleshooting when problems arise.

                          CCRC  officials told us that they actively monitor residents with chronic
                          conditions. Staff oversees the plan of care developed for each resident
                          with chronic conditions to ensure that the resident is receiving needed
                          services. Monitoring can include simply verifying that a resident has
                          visited the clinic as prescribed or kept a scheduled appointment with the
                          physical therapist. Or professional care staff may review medical records,
                          visit or call the resident at home, or call other service providers to verify
                          that care was received. Frequent monitoring is necessary in some cases
                          because a resident’s physical and mental condition can change quickly and
                          require different services. For example, CCRC staff may check more
                          frequently if episodes of pain may impair an arthritic resident’s ability to
                          walk or dress unassisted.

                          CCRC officials told us that nonmedical staff and the residents themselves
                          can also be important in the monitoring process. Some CCRCs we visited



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                         B-274820




                         train food services staff, residential and grounds crews, and other staff to
                         recognize potentially serious problems that residents may have and to
                         report this information to clinical or social work staff. For example, a
                         housekeeper may inform clinical staff that an individual with some
                         memory loss has burned pots on the stove or that a resident with arthritis
                         is unable to get out of bed on a particular day. In addition, some CCRCs
                         encourage residents to notify them when they see or suspect that another
                         resident may need assistance. In some CCRCs, buddy systems are
                         developed in which two residents agree to contact or watch out for each
                         other regularly. When problems are reported, clinical staff call or visit
                         residents to investigate and respond as needed.


                         Many of the practices we identified in CCRCs for health promotion, disease
CCRC Practices May       prevention, and early detection of health problems are credited by experts
Provide Health           and the literature with reducing the risk of disease and disability and
Benefits but Effect on   improving health and functioning among the elderly.4 Among the measures
                         considered to be effective are regular physical exams that include
Costs Is Largely         screening for early detection of conditions such as hypertension, colon
Undemonstrated           cancer, breast cancer, and vision and hearing loss, and immunization
                         against flu and pneumonia. Education and counseling to encourage
                         exercise and proper nutrition are also recommended. Regular aerobic or
                         conditioning exercise reduces the risk of coronary heart disease, diabetes,
                         and obesity, and exercises to improve strength, flexibility, and balance
                         may reduce the risk of falls and fractures. Encouraging social interaction
                         may also reduce isolation, which is associated with poorer health and
                         functioning among the elderly.

                         The coordinated, multidisciplinary approach to chronic disease
                         management used by the CCRCs we visited is also consistent with the
                         recommendations of geriatric care experts and is supported in the
                         literature as effective in slowing the progression of disease and restoring
                         loss of function. Multiple interventions are often used in managing many
                         chronic conditions that are common among the elderly, such as
                         hypertension, cardiovascular disease, and arthritis. These methods may
                         include drug therapy, physical and occupational therapy, behavior
                         modification, counseling, and use of special medical equipment. Experts
                         told us that because care for older people with chronic conditions may
                         involve many modes of treatment and disciplines, it needs to be organized,

                         4
                          See R.L. Berg and J.S. Cassells (eds.), The Second Fifty Years: Promoting Health and Preventing
                         Disability (Washington, D.C.: Institute of Medicine, Division of Health Promotion and Disease
                         Prevention, 1990). See also U.S. Preventive Services Task Force, Guide to Clinical Preventive Services,
                         2nd ed. (Baltimore, Md.: Williams and Wilkins, 1996).



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                  B-274820




                  coordinated, and managed. Crucial to effective care management, they
                  said, is providing periodic monitoring and follow-up both to ensure that
                  the chronic condition is being controlled and to minimize any negative
                  effects of treatment.

                  While evidence exists for the effectiveness of many of the practices we
                  found in these CCRCs, their effect on health care costs and use of health
                  services has not been conclusively demonstrated. With the exception of flu
                  immunizations and medical screening for certain forms of cancer, such as
                  breast and colon cancer, little evidence exists to demonstrate clearly the
                  cost-effectiveness of most of the individual health promotion and chronic
                  disease management practices used by the CCRCs.5 Furthermore, CCRC
                  residents tend to be very different from the general elderly population on a
                  number of important sociodemographic, health, and other measures. No
                  studies have been conducted that adequately consider these factors in
                  assessing the effect of the CCRC package of services on health costs.6


                  Because no federal agency or program was the focus of our review, we did
Agency Comments   not seek agency comments. We did, however, have a number of experts in
                  geriatric medicine and continuing care retirement communities review a
                  draft of this report. They generally agreed with its contents and provided
                  technical comments that we incorporated as appropriate.


                  We are sending copies of this report to the Secretary of Health and Human
                  Services; the Administrator, Health Care Financing Administration; and
                  other interested parties. Copies of this report will also be made available
                  to other interested parties on request.




                  5
                   The Second Fifty Years and Guide to Clinical Preventive Services.
                  6
                   People choosing a CCRC tend to be better educated and wealthier than the general elderly population
                  and are healthier when moving into the CCRC than others their age. The full effect of these differences
                  has not been accounted for in studies comparing CCRC residents’ use of health services with that of
                  elderly residents living in non-CCRC settings.



                  Page 9                                   GAO/HEHS-97-36 Care Management Practices in CCRCs
B-274820




If you or your staff have any questions, please call me at (202) 512-7119 or
Bruce D. Layton, Assistant Director, at (202) 512-6837. Other major
contributors to this report are James C. Musselwhite, Eric R. Anderson,
Ron Viereck, and Carla Brown.




William J. Scanlon
Director, Health Financing and Systems Issues




Page 10                       GAO/HEHS-97-36 Care Management Practices in CCRCs
Page 11   GAO/HEHS-97-36 Care Management Practices in CCRCs
Contents



Letter                                                                                            1


Appendix I                                                                                       14

Scope and
Methodology
Appendix II                                                                                      16

CCRC Risk
Arrangements for
Long-Term Care Costs
Table                  Table I.1: CCRCs Visited by GAO                                           15




                       Abbreviations

                       CCRC      continuing care retirement community
                       HCFA      Health Care Financing Administration
                       HMO       health maintenance organization


                       Page 12                     GAO/HEHS-97-36 Care Management Practices in CCRCs
Page 13   GAO/HEHS-97-36 Care Management Practices in CCRCs
Appendix I

Scope and Methodology


             We focused our work on practices that 11 continuing care retirement
             communities (CCRCs) use to maintain or improve the health and
             functioning of their elderly residents and to manage the use of health and
             other services by residents with chronic conditions. We also examined
             what is known about the possible health and cost effects of these
             practices. To address our study objectives, we (1) visited 11 CCRCs to
             examine care management practices, (2) reviewed the literature on CCRCs
             and on health and cost effects of CCRCs’ practices, and (3) interviewed
             experts on CCRCs and geriatric medicine as well as officials from HCFA’s
             Office of Managed Care.

             The 11 CCRCs we visited in California, Maryland, Pennsylvania, and Virginia
             (see table I.1) were selected primarily for three reasons. First, they assume
             most residents’ financial risk for the cost of long-term care (see app. II for
             a description of CCRC financial risk arrangements for long-term care costs).7
             These financial arrangements provide incentives to manage health and
             other services so that residents remain healthy and functioning as
             independently as possible and so that costs are controlled. Second, these
             CCRCs are accredited by the Continuing Care Accreditation Commission.8
             Third, they represent some range of geographic variation. Our findings
             from this sample of CCRCs, however, cannot be generalized to all CCRCs, to
             CCRCs that are at financial risk for most residents’ long-term care costs, or
             to those that are accredited.




             7
              In a 1995 survey of CCRCs by the American Association of Homes and Services for the Aging,
             35 percent of the 456 respondents reported that they offer contracts placing them at full risk for a
             resident’s long-term care not otherwise reimbursed by third parties such as Medicare.
             8
              See Accreditation Handbook (Washington, D.C.: Continuing Care Accreditation Commission,
             1994) for a description of the accreditation process.



             Page 14                                   GAO/HEHS-97-36 Care Management Practices in CCRCs
                                  Appendix I
                                  Scope and Methodology




Table I.1: CCRCs Visited by GAO
                                  Name of community                       Location
                                  California
                                  Casa Dorinda                            Montecito
                                  Mt. San Antonio Gardens                 Pomona
                                  The Sequoias-San Francisco              San Francisco
                                  The Tamalpais                           Greenbrae
                                  Maryland
                                  Broadmead                               Cockeysville
                                  Collington                              Mitchellville
                                  Fairhaven                               Sykesville
                                  Pennsylvania
                                  Foulkeways at Gwynedd                   Gwynedd
                                  Kendal at Longwood                      Kennett Square
                                  Pennswood Village                       Newtown
                                  Virginia
                                  Goodwin House                           Alexandria

                                  We conducted structured interviews to obtain information from CCRC
                                  executive officers, administrative officials, and medical staff regarding the
                                  practices used for health promotion, disease prevention, medical
                                  screening, and management of chronic conditions. In addition, we
                                  collected documentation on services provided and residents’ contracts,
                                  and we directly observed some CCRC activities, programs, campus
                                  buildings, and grounds used by residents. We conducted telephone
                                  follow-ups to obtain additional information from CCRC officials as needed.

                                  To examine the potential health and cost effects of CCRC practices, we
                                  reviewed the literature and interviewed selected experts in geriatric
                                  medicine regarding generally accepted practices or guidelines for health
                                  promotion, disease prevention, medical screening, and management of
                                  chronic conditions. We also interviewed officials from HCFA’s Office of
                                  Managed Care.

                                  We conducted our review between June and November 1996 in
                                  accordance with generally accepted government auditing standards.




                                  Page 15                        GAO/HEHS-97-36 Care Management Practices in CCRCs
Appendix II

CCRC Risk Arrangements for Long-Term
Care Costs

               CCRCs  assume different levels of financial risk for the costs of their
               residents’ long-term care services, such as nursing home care and assisted
               living services. These long-term care services are provided in combination
               with housing, residential services such as cleaning and meals, and related
               services. CCRCs’ financial risks for residents’ care are defined in lifetime
               contracts between the CCRC and the individual resident.9 A CCRC may offer
               more than one type of long-term care risk arrangement from which
               residents may choose.


               Some CCRCs are at full financial risk for the cost of long-term care services.
Full Risk      This means that the CCRC must pay all the costs of long-term care services
               residents need except for those costs that may be reimbursed by third
               parties such as Medicare. These CCRCs typically require that residents pay
               an entrance fee and a monthly fee that includes prepayment for long-term
               care costs, similar to an insurance arrangement. The monthly fee can
               increase based on changes in operating costs and inflation adjustments
               but not because of the use of long-term care services. As a result, residents
               having these agreements are not at risk for covered long-term care costs.
               This kind of agreement is sometimes known as a life care agreement or an
               extensive or Type A contract.


               Some CCRCs are at partial financial risk for the cost of long-term care
Partial Risk   services. These CCRCs must pay some, but not all, of the costs of long-term
               care services for residents beyond those reimbursed by third parties such
               as Medicare. The financial risk of these CCRCs is limited by a cap on the
               amount of long-term care services for which the CCRC will pay. For
               example, for each resident, a CCRC may pay for a maximum of 30 or 60
               days of nursing home care per year, whatever limit is specified in the
               resident’s contract. Under these arrangements, CCRCs typically require that
               residents pay an entry and monthly fee, which may be lower than the fees
               for arrangements under which CCRCs assume full financial risk for the
               costs of long-term care. Until the cap on long-term care services is
               reached, residents’ monthly fees under the partial risk agreement can
               increase based on changes in operating costs and inflation adjustments
               but not as a result of the use of long-term care services. If the contract cap
               is reached, however, the resident is at risk for the cost of all additional
               long-term care services not reimbursed by third parties. This kind of


               9
                Typically these contracts are intended to last for the lifetime of the resident, although some can be
               canceled at the option of the resident. In some cases the contract may be for a shorter period and
               renewable at the option of the resident.



               Page 16                                   GAO/HEHS-97-36 Care Management Practices in CCRCs
           Appendix II
           CCRC Risk Arrangements for Long-Term
           Care Costs




           agreement is sometimes known as a modified, limited services, or Type B
           contract.


           Some CCRCs are not at risk for the cost of long-term care services. These
No Risk    CCRCs require residents to pay for services they use either through a
           combination of an entry fee and a monthly fee or through a monthly fee
           alone. Monthly fees in either payment arrangement can increase based on
           operating costs, inflation adjustments, and the use of long-term care
           services. As a result, residents are at risk for all long-term care service
           costs not reimbursed by third parties such as Medicare. When this kind of
           risk arrangement is based on a combination of an entrance fee and a
           monthly fee it is sometimes known as a Type C contract. When it is based
           only on a monthly fee it is sometimes known as a Type D contract. Under
           either Type C or D contracts, residents typically pay lower fees than under
           Type A or B contracts unless long-term care services are needed.




(101509)   Page 17                         GAO/HEHS-97-36 Care Management Practices in CCRCs
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