CCRC and Life-Plan Community Due Diligence

Map the entities and rights in the proposed deal

List the continuing-care provider, property owners, component operators, managers, employers and parties to debt or guarantees. State which interests, assets, contracts and obligations are included. Explain related entities and shared services. A consolidated financial statement does not by itself show which party owes each duty.

Review governing documents and required decision rights with counsel. Identify third-party consents and any restrictions relevant to the proposed deal structure. The CCRC overview frames the campus model. Keep property acquisition, operating authority and resident contracts distinct in the review record.

California lists certain changes to the organization and a sale or transfer as events to review. It also requires licenses for the relevant care components. (Source: CDSS applications) Use that example only for California. Calling a deal an asset or equity sale does not settle every approval or duty that continues after closing.

Inventory executed agreements and key changes

Build a register of contract versions, amendments and special terms. List the services, fee provisions, refund rights and occupancy or proprietary interests involved. Have qualified advisers assess key differences. Do not use one marketing category or current template to represent every agreement still in force.

Compare the register with management's resident list and fee and cost schedules through a lawful review process. Investigate missing documents, inconsistent dates and promises outside the standard forms. State what the evidence supports and which interpretations remain open. Small groups of unusual contracts can still create meaningful cost or cash obligations.

CDSS distinguishes contract promises from the payment method and notes that terms vary. (Source: CDSS FAQ) Use those distinctions to organize the questions, not to infer a national contract definition. The buyer's forecast must use the actual agreements and the law that applies.

Trace fees, refunds and restrictions to the records

Reconcile entrance-fee receipts, recognized revenue, refund duties and ending balances with the accountant. Review the basis for accounting adjustments and the signed agreements. A receipt can create duties without becoming current operating income. A revenue balance does not necessarily identify money available for immediate use.

Use the entrance-fee register exercise to track a payment and a separate change from conditional to due. The status change does not create the obligation again. Keep unresolved terms outside any claim that the quantified total is complete.

Use the refundable entrance fee guide to keep amount and timing distinct. Examine completed refunds as well as pending requests. A payment queue or management estimate should not replace the contract, required process or evidence of what was actually paid.

Carry those supported duties into the model with their existing treatment visible. The CCRC value exercise shows a refund effect deducted twice under stated assumptions. Removing it once does not prove the original value. Actual payment dates, available funds and other duties still need their own review before closing.

Reconcile components and shared operating costs

Review each service area under its actual care model, including the independent living, assisted living and skilled nursing checklists where relevant. Identify component licenses, staff, services, payer terms and property needs. Do not assume all campus revenue follows one payment system.

Reconcile component results to the consolidated statements. Show how shared management, meals, repairs, utilities and other costs are split. Count real costs once. If a company tied to the seller will stop providing support, price a replacement the buyer can actually obtain.

Map management and owner duties, relief and access to key systems. Assess the cost and qualifications of the incoming team. Cost the work needed to fulfill the resident promises. Do not reach an earnings target by omitting a service or assuming the seller will help for free without an end date.

Examine future-care studies and changing assumptions

Obtain relevant actuarial, accounting, clinical and operating studies with their dates, data and limits. Ask the qualified reviewers to assess whether they still fit the current contracts, residents, staffing and proposed plan. A study made for another use may not answer the buyer’s questions.

Test the effect on cost and cash of changes in care needs, wages, service costs and fees. Keep clinical decisions with qualified professionals. Distinguish fee increases already implemented from proposals that depend on rights, notice, demand or other conditions. Proposed income should not be treated as certain cash.

Update the forecast for new refund requests, staffing findings and capital work. Explain which assumptions changed and why. Preserve the connection between component findings and campus totals. Otherwise an updated operating review can sit beside a financial model that still uses outdated inputs.

Test dated cash needs before relying on the ending balance

Consider a fictional month with $600,000 accessible opening cash. Refunds of $700,000 are due and paid on day 5. Net ordinary operating cash of $250,000 arrives on day 12. Capital work of $350,000 is paid on day 19, and $400,000 of entrance fees arrives on day 25.

Assume all listed receipts are legally available for these uses, with restricted funds excluded. Net ordinary operating cash excludes the separately listed entrance fees, refunds and capital work. No other cash flows occur in this limited schedule; debt service, taxes, acquisition costs and any new funding costs are excluded.

The ending calculation is $600,000 + $250,000 + $400,000 − $700,000 − $350,000 = $200,000. Yet the schedule is short $100,000 on day 5 and $200,000 on day 19 before new funding. Later receipts cannot meet an earlier payment without another lawful source of cash available in time.

The negative balances flag an unfunded plan; they do not authorize an overdraft, use of restricted funds or delayed resident refunds. These invented amounts establish neither a reserve target nor solvency. The actual schedule needs a funded response and all excluded duties before it can support a closing decision.

Review reserves, covenants and capital funding

Reconcile reserves, escrows, investments and bank balances with restrictions, required amounts and access rights. California requires annual audited statements and reserve reports. (Source: CDSS FAQ) Read the actual reports and open findings. Authority to operate and state oversight do not guarantee future results.

Test debt covenants using the definitions in the loan agreement. Check how each measure treats entrance fees, refunds, debt and funds available for use. Use the required periods and adjustments, and confirm who must certify the result. A simple cash example or EBITDA figure may not be the measure the lender requires.

Obtain qualified property reviews and a dated capital plan. Include disruption to occupied units or care areas and the resources needed to maintain service. HUD's program overview does not confirm funding for a specific campus or component. (Source: HUD programs) Match actual lender conditions with the full cash requirement.

Build an approval and reporting calendar

List continuing-care authority, component licenses, third-party consents and financing conditions for the proposed deal. Record each responsible party, required evidence, current status and dependency. Submitted paperwork is not the same as approval. Use actual agency and adviser guidance before relying on a start date.

The CCRC notice-calendar exercise shows how a later sale notice changes a fictional shared milestone. Its stated intervals run in parallel. The result is a planning check, not permission to close or a forecast of agency processing.

CDSS distinguishes organizational, financing/lien and sale/transfer reporting. (Source: CDSS provider resources) Confirm the current instructions for the actual event; the page's older linked form years do not establish the correct current packet. Do not apply one generic notice period to every change.

Compare the calendar with property work, funding and service duties. List the cost of delay and the response if an approval remains open. A private closing date cannot create missing authority or bind a third party. Keep unresolved requirements visible in the final decision record.

Preserve resident rights and lawful information access

Prepare required resident communication about services, contacts, fees and the proposed handoff with qualified advisers. California describes duties to inform residents and involve them in specified matters. Those duties exist apart from the buyer's agreement with the seller. (Source: CDSS resident resources) Check the rules in the actual state.

Pre-NDA outreach excludes financials and identifying provider, owner, campus, exact location, resident, staff, vendor and referral details. Later commercial review follows screening and authorization. Sensitive-record disclosure needs its own lawful basis and safeguards. Small groups and codes can still identify people. (Source: HHS de-identification)

Use the records custody guide to assign permitted access, storage and ongoing requests. An NDA does not replace disclosure authority or required notices. The handoff should preserve both usable records and the rights of the people whose information they contain.

Make the final decision useful to the incoming team

Record evidence, uncertainty, reviewer, effect on cost and cash, and required action for each key finding. Separate a missing document, recurring cost, disputed duty and barrier to operation. The letter-of-intent guide helps connect findings with proposed terms. A price adjustment cannot perform a required service or supply an approval.

Refresh contract, refund, reserve, staffing and capital schedules near closing. Rehearse fees, refund requests, payroll, resident questions and reporting with fictional information. Confirm permissions, backup and who handles open work. Keep professional care review separate from this business handoff exercise.

Carry accepted duties into the first 90 days plan. The final report should show what the buyer will assume, how it will be funded and what remains unresolved. The completed checklist should support that explanation with evidence.

Use the entrance-fee definition to identify the payment before reviewing its refund terms. Initial cash receipts, future care promises and recurring charges need separate schedules.

Start with the CCRC contract map when several agreements name different parties. Trace each resident promise to its supporting agreement and responsible provider before evaluating how the buyer will fund it.

The CCRC purchase exercise tests a new-resident template against older contracts. The seller’s message exercise checks proposed assurances against deal records. Use both before accepting the final plan. The operating forecast and resident explanation should reflect the same current duties, with unresolved questions kept clear for the people reviewing them.