CCRC and Life-Plan Community Due Diligence

Map entities, rights and obligations

Identify the continuing-care provider, property owners, component operators, management entities and material affiliates. Request organizational documents, ownership interests, agreements, debt and guarantees. Describe what the buyer acquires and what stays outside the transaction.

Match each major resident promise to the entity responsible for fulfilling it. Determine whether shared services, funding or guarantees depend on an affiliate that will not transfer. A campus-level income statement can conceal those dependencies, so the acquisition perimeter needs both an asset schedule and an obligation schedule.

Inventory the executed contract forms

Collect current and historical forms, amendments, side agreements and relevant disclosures. Group active residents by the terms that affect services, fees, refunds and future care. Reconcile the number of agreements and associated balances to operating and financial records.

California's continuing-care FAQ distinguishes the promise of care from payment method and describes contract variation. Use it as a scoped example, then have counsel evaluate the target's actual agreements and governing jurisdiction. A familiar industry label is not a substitute for that review. (Source: CDSS)

Test fee schedules from receipts to financial statements

Request roll-forwards of deposits, entrance payments, recognized fee revenue, refundable obligations and amounts held under restrictions. Select cases covering different contract terms and trace entries to agreements, bank activity and accounting schedules. Investigate changes in classifications or recognition policies.

Have qualified accountants explain the applicable treatment and reconcile it to the audited statements. Separate original cash receipts from current-period revenue and obligations to residents. The refundable-fee definition helps identify the contractual questions without prescribing a universal accounting entry.

Verify refund requests and payment conditions

Obtain a current register of refund balances, requests, triggering events, due-date analyses, payments and disputes. Match a sample to contracts and subsequent cash movements. Identify terms that differ across resident groups and ask counsel to resolve uncertain timing or conditions.

CDSS's resident guidance describes differing refund arrangements and warns that contract approval does not guarantee performance. Do not assume an approved form proves timely payment or adequate funding. Review the actual history, current obligations and proposed source of cash. (Source: CDSS resident resources)

Confirm which assets are available for which duties

Request account statements, investment schedules, reserve calculations, escrow agreements, restrictions and control documentation. Identify assets dedicated to refunds, debt service, operations or other obligations. Reconcile balances and permissions to the financial statements and proposed closing adjustments.

California's provider materials identify several reserve and disclosure reporting categories. Their existence does not establish an unrestricted pool that can fund an acquisition. Obtain the target's current reports and governing terms, including requirements attached to financing or resident contracts. (Source: CDSS provider reporting)

Reconcile component operations

Obtain separate revenue, occupancy, staffing, expense and capacity schedules for independent living, assisted living, nursing and other material services. Define measures consistently and reconcile transfers between components. Avoid treating internal charges as additional external revenue.

Review allocations for kitchens, utilities, maintenance, administration, insurance and management. Reconcile the components to the consolidated statements and identify costs supplied by excluded affiliates. The independent-living, assisted-living and nursing checklists provide separate operating questions within that wider review.

Examine future-care studies and changes

Request relevant actuarial, operating and financial feasibility work and its underlying assumptions. Identify the population, agreement types, service costs, future transitions and scope addressed. Ask qualified specialists what has changed and whether the study supports the buyer's proposed model.

Compare those assumptions with the acquisition forecast and current records. Differences in fee growth, costs, capacity or resident commitments should be explained. Record limitations and necessary updates; do not describe a specialist's report as comprehensive unless its actual scope supports that conclusion.

Review property and the capital sequence

Obtain condition, life-safety, accessibility, environmental and permitted-use assessments suited to the property. Review licenses, past projects, work orders, warranties and expected replacements. Identify common infrastructure on which several components rely.

Build a funded capital schedule with timing and operating disruption. Distinguish necessary work from proposed expansion or repositioning. Assess how temporary loss of units, space or services affects residents and cash. An expense appearing small in historical statements may still represent a substantial deferred need.

Read financing terms and covenant evidence

Collect loan and bond documents where applicable, amendments, collateral schedules, guarantees, compliance certificates and lender correspondence. Have appropriate advisers assess change-of-control, consent, reporting and financial-test requirements using the governing definitions.

Review proposed financing against the actual property and contract structure. HUD's healthcare program descriptions do not establish automatic financing eligibility for every CCRC. Separate an indicative discussion from confirmed conditions and include fees, capital needs and working cash in the funding requirement. (Source: HUD)

Stress cash timing without treating the example as a benchmark

Reconcile accessible opening cash, operating inflows, fee receipts, refunds, capital and debt service. Explain every category and its timing. Test slower new occupancy alongside continuing refund and service obligations, rather than changing only a single favorable assumption.

In a fictional scenario, $600,000 opening cash plus $250,000 operating cash and $400,000 fee receipts, less $700,000 refunds and $350,000 capital spending, leaves $200,000 before other omitted obligations. This calculation is a teaching example, not an adequate reserve target or a complete solvency assessment. Identify the funded response if the result falls short.

Build an approval and reporting schedule

List continuing-care authority, component licenses, payer participation, property rights, financing consents and required notices. Assign a responsible party and specify the evidence that confirms completion. A submitted application or notice is not equivalent to approval.

California's application page covers sales and specified organizational changes, while provider guidance identifies distinct reporting duties. Confirm current instructions and actual transaction requirements with the agency and counsel. Do not reuse new-community construction or marketing milestones as a sale closing guarantee. (Sources: CDSS applications, provider reporting)

Preserve resident communication and information rights

Review resident association arrangements, financial-information access, notices, grievances and any governance rights. Determine what must be communicated, by whom and when. California's resident guidance illustrates duties within its framework; the target's jurisdiction and contracts need their own assessment. (Source: CDSS)

Protect private information through authorized, limited disclosure. HHS guidance explains that removing names alone may not de-identify protected records. Assign current and historical custody, system access and communication responsibilities as part of the handoff. (Source: HHS)

Keep a current decision record

For every material issue, document the evidence, uncertainty, responsible specialist and effect on price, funding, conditions or operating readiness. Record whether a conclusion concerns historical liability, future cost or authority to proceed. Reconcile commercial terms to those findings.

Refresh contract, refund, cash, occupancy and capital schedules for significant changes before closing. Use the CCRC overview to place the findings in context. The finished review should establish what is supported, what remains conditional and whether the proposed team and funding can sustain the obligations the buyer would assume.