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Extra Fees Drive Up the Cost and Drive Away Some Patients.

Prompted by the trouble that many elderly people have affording assisted living, 30 states have won federal permission to subsidize it through Medicaid, the public insurance program for the poor that has long covered nursing home bills. Yet relatively few assisted-living residents get government help. The best estimates suggest that Medicaid subsidizes fewer than 60,000 of the industry’s 500,000 to 1 million residents. 
Even when states cover this kind of care, they usually limit the number of people they will help. Moreover, states often pay so little that assisted-living companies don’t consider it worthwhile to participate, particularly because they fear the money might come with tighter government rules. Assisted living is not covered by Medicare, the nation’s main insurance program for the elderly. 

Here is a look at financial help across the Washington area: 

The District: Medicaid does not cover assisted living, although a city task force on long-term care is studying the possibility. 

Maryland: Building on a small subsidy program in the past, Maryland last month began phasing in an expansion of Medicaid over several years for people in assisted-living facilities and other kinds of long-term care outside nursing homes. 

Virginia: A small pool of state money is available for assisted living. Medicaid used to chip in, but that was cut off last spring, when U.S. health officials decided the state had failed to improve conditions at a few small facilities in the Tidewater area. 


Getting Help 

These are some sources of information for consumers with questions about assisted living.
National Organizations
• Consumer Consortium on Assisted Living: 703-533-8121.
• National Citizens’ Coalition for Nursing Home Reform: 202-332-2275. 
• Eldercare Locator: Can refer consumers to local area agencies on aging by Zip code anywhere in the United States. 800-677-1116.


State Long-Term Ombudsmen
• District: 202-434-2140. 
• Maryland: 410-767-1074.
• Virginia: 804-644-2923.

By Amy Goldstein
Washington Post Staff Writer
Tuesday, February 20, 2001; Page A01 


Before choosing to place his mother in an assisted-living facility, Keith Stauffer asked the marketing director a delicate financial question. At 87, Helen Stauffer had a failing mind, a strong body and nearly $100,000 in the bank.

What would happen if she outlasted her savings?

"I was told, 'When her money runs out, no problem,' " recalls Keith Stauffer, a retired Secret Service agent. The Arlington facility, Sunrise at Bluemont Park, would seek a small family contribution each month and accept Medicaid payments for the rest.

"That was the end of it," he remembers thinking, as he toured the ivory-colored building with Victorian turrets on a hillside above Wilson Boulevard. "She'd die in that place. Everything would be fine."

Everything, however, didn't prove so simple.

Helen Stauffer turned 91 last September. The stay at Sunrise drained her bank accounts and left her son with more than $20,000 in unpaid bills. The company, it turned out, does not take Medicaid subsidies from the government. As for the marketing director, he left shortly after Stauffer arrived.

The Stauffers' predicament is symptomatic of a pattern of financial practices in the assisted-living industry that confuse -- and sometimes mislead -- consumers. Some companies promise more than they deliver as part of their basic fees, while others use contracts that obscure the true cost of care. Many facilities assess extra fees if residents need help remembering their medicine or taking baths -- charges that are legal but often unexpected.

"You have this disclosure problem," says Clifford Hewitt, a senior health services analyst at Legg Mason Inc., the Baltimore-based investment firm. "People are putting down money and being told, 'We will provide these services.' They really don't know what services. It's vague."

As a result, prices in assisted living -- already high -- can be far greater than residents and their families realize up front.

Although the industry has emerged at a time of unprecedented wealth among elderly Americans, its cost affects more than those who simply cannot afford this popular new kind of care. An unknown number of people enter an assisted-living facility believing it will be their final home, but are forced to leave because of unforeseen price increases or -- as in Helen Stauffer's case -- when their savings run out.

Advocates for the elderly, researchers and some industry analysts say that the financial roadblocks that daunt consumers are the product of an industryin which prices are unregulatedand key players are eager for rapid profits.

Industry representatives counter that consumers often decide on a facility in a hurry when an elderly relative's health declines, without examining what they are buying and what it may cost. For example, any assurances that may have been made to the Stauffers are nowhere in their contract, Sunrise officials say.

Besides, industry officials say, assisted-living communities are so varied -- housing 500,000 to 1 million people today -- that different places offer care at different prices. Consumers have "a wide range of choices, from the Rolls-Royce to the Ford," says Karen A. Wayne, president of the Assisted Living Federation of America, the industry's main trade group.

The average price of assisted living in the United States is about $2,000 a month, but many facilities charge twice that or more, particularly if they cater to people with dementia, Parkinson's disease or other severe health problems. At such prices, it was assumed until recently that assisted-living communities were attracting a largely well-heeled clientele.

Fresh evidence paints a more worrisome picture. Many people "can't afford the facilities they're in," says Catherine Hawes, a leading researcher into assisted living who teaches at Texas A&M University.

Fully two-thirds of residents have incomes that are too low to cover the typical cost of a year's stay without eroding their savings, according to an analysis by Margaret Wylde, president of the ProMatura Group, an Oxford, Miss., research firm for businesses that serve the elderly.

Nursing home patients often exhaust their savings, too. The difference is that Medicaid, the public insurance program for the poor and disabled, offers people in nursing homes an automatic safety net that is available only rarely to assisted-living residents.

To attract customers with limited means, some assisted-living facilities offer new residents discounted rates that prove to be temporary.

Richard Keller received such a discount when he moved into Alterra Sterling House of Ponca City, Okla. A disabled World War II veteran with a back injury and a history of psychiatric problems, he had virtually no savings and an income of about $1,400 a month. Alterra offered a reduced price of $1,000, about two-thirds the facility's basic fee at the time.

"They were eager to have him," recalls Keller's daughter, Lisa Lewis. When he arrived in January 1998, the facility -- like many around the country -- had empty beds to fill. Besides, as a hospice counselor, Lewis knew elderly people throughout town. "I think they thought I might do some referring," she said.

Alterra chose Keller and his daughter to be photographed for a story in the local newspaper. He was crowned king of the facility's Valentine's Day festival.

Eighteen months after he had moved in, Lewis was informed that her father's fees were going up to $1,700 a month. The price of his room, Alterra officials said, must return to its market rate. And workers had determined her father needed $300 per month worth of services that were not covered by the basic fee.

"I just thought, 'You've got to be kidding,' " Lewis remembers. "They had known all along he did not have that kind of money."

She protested for months, until the November day she received a registered letter from Alterra saying that her father was being discharged. Depressed at leaving his accustomed surroundings, Keller, 76, moved in with Lewis and her family. Within a month, he suffered a heart attack and died.

"In less than two years' time," his daughter says, "he went from being the Valentine king to being thrown out."

Senior company officials, unfamiliar with Lewis's specific complaint, say that customers have little reason to be surprised by price increases. Paul Pebley, senior vice president for sales and marketing, says the company's contract allows Alterra officials to increase the basic fee with 30 or 60 days' notice and to raise residents' surcharges with five days' notice, if their need for care escalates. Those provisions, he says, are found on the eighth page of a 12-page contract.

The provisions were in Keller's contract, too. His daughter says she and her husband were told at the beginning that any increases in fees would be small and affordable.

Pebley disputes the suggestion that Alterra charged the Lewises unfairly. He says prices have gone up by 6 percent a year for the last few years, a rate that has not kept pace with the company's expenses and that will force larger price increases in the coming year. "We believe that we are undercharging," he says.

Whether evictions such as Keller's are common is unclear. In the only national study of former assisted-living residents, fewer than 1 in 10 people reported leaving because they had run out of money, according to the survey by Hawes for the U.S. Department of Health and Human Services. On the other hand, according to Hawes's findings, nearly one-third of assisted-living residents have discovered they need to pay more than they had expected.

A chief reason that costs cannot always be foreseen was suggested by a 1999 study of assisted living by the General Accounting Office, Congress's investigative arm. Only one facility in four gives prospective customers a copy of its contract before they decide to move in, according to the analysis of facilities in four states -- the only federal examination of the industry's marketing practices.

Once new residents are given contracts, the documents can be "vague or really complicated," says Stephanie Edelstein, who has studied assisted living as an attorney for the American Bar Association's Commission on Legal Problems of the Elderly.

For example, a contract might say that a facility provides meals without spelling out that the basic rate includes two meals a day, leaving residents to pay extra for a third meal and snacks.

Similarly, the AARP found in a recent survey of dozens of facilities in eight states that marketing brochures frequently promise more services than the contracts guarantee. The brochures handed out by one Virginia facility in the survey said that laundry was provided, while the contract said it would be washed for a charge of $62 per month.

While companies deny that their marketing practices are unfair, some have started to retreat on one of the central aspects of their sales pitch -- that residents never will need to live anywhere else. Alterra has replaced the motto "aging in place" with a different one: "aging with choice."

Pebley, the Alterra vice president, says the company hoped to clarify a misunderstanding. The idea of aging in place always had been a goal, not an ironclad guarantee, "but the public said, 'Hey, that's a promise that's not being filled,' " he says.

Mindful of such criticisms, Wayne, of the Assisted Living Federation of America, says the trade group has in recent months begun offering a voluntary certification program for sales and marketing staff, emphasizing the importance of disclosing the services and the price.

"We are very much a promoter of fully disclosing what is unique about your home, what it costs," Wayne says. Judging by consumer complaints about marketing and billing practices, she says, "I am certain . . . there is validity to them."

Sue Lungren's mother had such a complaint. Her mother, 91, was being billed $3,900 a month to live at an Alterra facilityoutside Minneapolis that specializes in care for people with dementia. Lungren was leaving from a visit one afternoon in October 1999 when the manager stopped her in the hallway and said her mother's fee would go up $514 a month.

"I was so shocked, I couldn't believe it," Lungren says. She demanded a meeting with the manager and head nurse, who produced an itemized list of extra charges. There was a fee for her mother's laundry -- though Lungren took it home to do every week.

They also said workers needed to spend extra time repeating directions to her mother because she was hard of hearing. Lungren argued that her mother never had been given a hearing test and that workers commonly must repeat instructions to people who have dementia, hearing-impaired or not.

Lungren, like Keith Stauffer, had inquired carefully about the financial arrangements before deciding where her mother would live. "I asked, would there be any additional charges? I was told, 'No.' "

At first, she refused to pay the new price. But she was content with her mother's care and reluctant to move her. Eventually, she relented when Alterra lowered the additional charges to $214 a month.

Fluctuating Charges

Flexible prices, leaders of the assisted-living industry say, are inherent in the type of care they offer. Unlike the institutional world of nursing homes, they say, assisted living istailored to each person, supplying exactly as much help as he or she needs.

Before moving in, new residents discuss the services they will require -- bathing, dressing and reminders to take medicine, for example. Periodically, they are reevaluated to determine whether they need more help or less. Charges, in other words, can be expected to fluctuate.

Advocates for the elderly and some researchers contend this approach can go too far. Companies "are increasingly unbundling their deals, charging for 15-minute increments of personal care services, including walking you to the dining hall," says Donna Yee, a former Brandeis University professor who is research director of the National Asian Pacific Center on Aging.

If companies are eager to eke out extra fees, to fill their empty beds, they have ample reason.

For one thing, their growth has been so sudden that analysts believe the industry hasoverbuilt. This is especially true of the most upscale facilities in the suburbs of cities such as Atlanta, Chicago, Houston, Los Angeles and Pittsburgh, as well as Washington.

As a result, the industry's main competition no longer is nursing homes. Today, according to surveys by the National Investment Center for Senior Housing, the typical assisted-living community competes with eight similar facilities nearby.

Over time, as the nation's elderly population continues to swell, the empty rooms may well be occupied. But the current vacancies have exerted enormous pressure on the owners of assisted-living companies.

They also have disenchanted Wall Street investors who spurred much of the building boom. It was merely five years ago that the first assisted-living company publicly offered its stock. Quickly, the number of publicly traded companies rose to 15.

"Wall Street loved it," recalls Steve Monroe, a partner at Irving Levin Associates Inc., a Connecticut-based research firm that tracks the health care and senior housing industries. "This was all private pay -- no government telling you what you could charge. In very few states were there any restrictions on what could be built. They built, and they built, and they built."

But as quickly as it began, the romance with investors soured, leaving several of the industry's leaders whipsawed.

"I didn't expect Wall Street to get so enamored so quickly and so unenamored so quickly. I thought we would have had longer to work on maturing," says Keren Brown Wilson, one of the founders of the assisted-living philosophy in the United States.

Wilson stepped down a few months ago as chief executive of an Oregon-based company, Assisted Living Concepts. Hers was one of several firms whose stock prices tumbled to nearly nothing.

Stock in Alterra, the nation's largest assisted-living provider, fell from about $35 per share to $1.30 over the past two years. Emeritus Corp., another major firm, is trading at about $1.50. Two companies -- Grand Court Lifestyles Inc. and CareMatrix Corp. -- filed for bankruptcy during the last year. Others have abruptly abandoned plans for more buildings.

These reversals in fortune have direct human consequences, according to those who follow the industry. Hawes, the researcher, believes that companies struggling to maintain their profits have two choices. They can cut expenses, such as salaries, food, recreational activities and transportation. Or they can admit and keep more elderly people -- even if they are too sick to be cared for adequately or cannot afford to be there.

Taken together, Hawes says, these choices "will eventually lead to disaster."

Hidden Costs

As Keith Stauffer and his wife, Stefanie, see it, the trouble with Sunrise began the day his mother arrived.

They'd already been discouraged by his mother's experience with another assisted-living facility in her native Salt Lake City. That facility had changed owners, and the new administrators said the only way to provide her with enough care was to move her to abuilding across town. If she had to move, the Stauffers reasoned, it made sense to bring her to Arlington, near them.

They visited every facility in the area. They created spreadsheets to weigh the features and the costs. All were expensive, and comparing prices was difficult. Each sold different "bundles" of services. In the end,they chose Sunrise at Bluemont, because it wasn't a high-rise building, and it was less than 10 minutes from their home.

On moving day, however, a Sunrise administrator startled them by asking for a $4,000 maintenance fee up front. They objected. No one, Keith Stauffer insisted, had ever mentioned a move-in fee. Then they looked at his mother's furniture piled into a rental truck and agreed to pay.

The fees, they knew, would be steep -- $2,400 a month was the basic price for her apartment and meals. Exactly how steep, it turned out, they hadn't realized.

The basic rate covered two meals a day; the third cost an extra $204 a month. The "extended care plan" cost $387 a month, but it excluded a $184 monthly fee for workers to remind his mother to take her medicines and another $186 for assistance with her incontinence.

Together with price increases since then, Helen Stauffer's monthly bill eventuallyamounted to $3,877. Keith Stauffer says that, despite all his comparison-shopping, despite his careful reading of the contract, he had no way of knowing ahead of time exactly how much his mother's stay at Sunrise would cost. That's because workers would not evaluate her to determine the extra services she required until she agreed to move in.

Finally, with the savings gone and the debts mounting, Keith Stauffer took his mother to dinner one night last month and -- without telling her ahead of time -- never brought her back. He moved her into Sleepy Hollow Manor, an Annandale nursing home that accepts Medicaid payments. The idea of a nursing home had alwaysterrified his mother, and she keeps asking him to return her to Sunrise.

Her son feels guilty, but stuck. "It just kills me," he says.

Mathew Peponis, Sunrise at Bluemont's executive director, says the company is not at fault.

"We go to great lengths to avoid discharging someone because they cannot afford to pay any more," he says.

Peponis does not deny that the Stauffers may have been promised Medicaid and a discount, but he was not there at the time and says he has no record of any special arrangement in her file.

He says he confers periodically with residents' families about their finances. In Helen Stauffer's case, he says, he offered more than a year ago -- when her savings were dwindling but not gone -- to move her to one of two beds the facility sets aside for people who may become eligible for a small program of assisted-living subsidies run by the state of Virginia.

In the short term, the bed would have cost more, but it would have been free once her savings were depleted, if she qualified for the state grant.

Keith and Stefanie Stauffer recall Peponis showing them other rooms in parts of the 175-bed facility that provided higher levels of care, but rejected them because they were more expensive. They say the executive director never raised the possibility of state aid.

"We would have jumped at that opportunity," Keith Stauffer says. "I would have loved to have one of those state beds, but . . . [it] was never mentioned. Period."

In any case, Peponis says, neither bed was available when Helen Stauffer's money ran out.

A few months ago, Keith Stauffer faxed the facility a letter. The marketing director he first met, he reminded the current manager, had promised that Sunrise would help when his mother exhausted her savings, allowing her to remain in exchange for the affordable family contribution.

"It is time for me to ask for that consideration," he wrote.

He's still awaiting a response.