As more people enter continuing care retirement communities, a bill in the North Carolina General Assembly would create new rules for those facilities. The legislation is partly in response to serious financial troubles at Aldersgate, which is one of Charlotte's oldest and best-known retirement facilities.
The Charlotte Ledger Business Newsletter has been following the story, and the Ledger's Cristina Bolling joins me now to talk more about the proposed changes.
Marshall Terry: OK, before we get to the legislation and what it would do, let's talk about Aldersgate. What's going on with the financial situation there?
Cristina Bolling: Just to kind of take a step back — because this is kind of an industry that's foreign to a lot of people; it was to me before I started reporting so much on it — Aldersgate and these continuing care retirement communities offer multiple levels of care to their residents, from independent living to assisted living and memory care.
And people pay in the hundreds of thousands of dollars in entrance fees to move into these places, and then they pay monthly fees to live there that are in the thousands. So once they pay those entrance fees, they don't technically own anything, but depending on how much they pay going in, they — or their estate — get a portion back when they pass away or move out.
So, because these seniors invest so much upfront in these CCRCs — and in many cases they could basically be homeless if they fold — the North Carolina Department of Insurance regulates them to make sure that they're financially sustainable.
In the case of Aldersgate, back in 2023, it had missed some financial reporting deadlines to the state, which made regulators take a closer look at what was going on there. And what they discovered was that Aldersgate had years of operating losses and mounting debt. And they actually owed more than $3 million to vendors who had done business at Aldersgate, and they owed another $2 million or so in entrance fees to former residents or their families.
A lot of other things had been happening, too. The leaders of Aldersgate had created a nonprofit — that was outside of the oversight of regulators — that had essentially become Aldersgate's parent company. And they had planned to build another campus in South Charlotte, and that plan had failed. And there had been several million dollars in planning that had gone into that, that had basically kind of gone up in smoke.
In August of 2023, regulators did something that they had the authority to do but they'd never done before. They declared what's called an order of supervision over Aldersgate. They said, basically, that Aldersgate was at a risk for becoming insolvent, and so they worked with Aldersgate to create a plan to bring things back financially. Their CEO was fired, and they really have been working since then to kind of turn things around.
Terry: So, let's look at this bill that was filed in the state Senate. What are some of the changes it would make, and how is it meant to protect residents?
Bolling: Yeah, so sort of the overview of the bill — which has a companion bill in the state House as well — it has new rules about financial reporting and, really, transparency. So basically, the amount of financial information that regulators are going to receive from these communities, and also how much information they're going to put out to the public.
So, for instance, right now these retirement communities like Aldersgate send in financial reports to the state once a year. This bill would require them to do that quarterly. So the state feels like if they have more frequent check-ins, they'll have a much bigger handle on if there's a problem brewing before it gets to a situation like what happened at Aldersgate.
Another thing that it would do — it would beef up what are called disclosure statements. And those are big statements that every prospective resident is forced to receive — and hopefully read and sign — that tells them information about how the facility is run, who the leaders are, what the occupancy is like, and also the finances and how things are going financially.
So, there would be a lot more that would need to go into those disclosure statements, with the goal of being more transparent to people who are moving in. And also, really, anyone can read those disclosure statements — they're online publicly — so current residents could read them as well, just to get a sense of the health of the organization.
Terry: Now, you mentioned in your latest story on this that some parts of this bill were inspired by what's going on with Aldersgate, but that most of it actually predates that. So, what prompted the legislation in the first place? I mean, are there other situations like what's happening at Aldersgate at other facilities around the state?
Bolling: Well, I haven't heard of other situations like what's happening at Aldersgate in North Carolina, but they definitely are happening nationally. I've read of some happening in states like Florida and Texas.
In North Carolina, our legislation around these retirement communities dates back to the 1980s, and if you were to time-travel back to the 1980s and look at this industry, it looked so much different than it does right now.
Basically, back then they weren't mission-driven — a lot of times, faith-based organizations with a single campus and a pretty simple kind of governing organization.
Now, we've had a lot of private investment in these. They operate on a much larger scale, and they've basically just gotten a lot more complicated. Meanwhile, the regulations over them haven't gotten more complicated — haven't gotten more sophisticated.
Two years ago, there was a bill to update the rules for CCRCs introduced in the North Carolina Legislature, and it just failed to advance. And so it's going to come back up.
Terry: So, what happens now with the legislation? What are its chances?
Bolling: I'm hearing that the chances for the legislation to pass seem really high. It was drafted with the help of a 20-member committee made up of state regulators, leaders of CCRCs across the state, and also residents of CCRCs.
So, if you think about kind of who the stakeholders are in the industry, you've got the major players there that are saying that they're pretty happy with the legislation. So I think it has really broad support and is not likely to see much opposition there.
It's sponsored by Republican Sen. Todd Johnson, who represents Cabarrus and Union counties, and in the companion House bill has four primary sponsors, and I'm hearing that odds are good that it will go through.
