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No Return, No Deposit

If you drop dead in an assisted-living home, you can forget about getting your money back.

Eighty-year-old Jane Spence of Denver didn't plan on dying. But when she caught a fatal case of pneumonia this past March, her lack of foresight resulted in her estate losing a $3,500 damage deposit she had put down at the Golden Orchard assisted-living home in Littleton. Golden Orchard, which offers apartment-like living to elderly people and is one of a growing number of its kind in Colorado, requires residents to give thirty days' advance written notice of plans to terminate a lease. If a resident dies without giving notice, well, too bad.

The loss of Spence's damage deposit came as a shock to her legal guardian and former neighbor, Don Hentschel. "How in the world can you give thirty days' notice that you're going to die?" he asks.

Incensed that a home catering to the elderly could refuse to waive the thirty-day-notice clause in the case of death, Hentschel hired a lawyer. But after a brief salvo of legal correspondence was fired off to the upscale Golden Orchard chain in an attempt to recoup at least part of the deposit, Hentschel gave in and accepted the loss. "They just pointed to the contract she signed," he says.

Golden Orchard's policy also came as a surprise to the American Association of Retired Persons, the nation's leading senior-citizens group and one of the country's most powerful lobbying organizations. Officials at the AARP's Washington, D.C., headquarters say they've never heard of a thirty-day-notice agreement like this one. While the tactic may be legal, they add, it takes advantage of an unpredictable situation.

"We're shocked that any provider would enforce a contract to the letter of the law under circumstances such as these," says Elizabeth Clemmer, manager of consumer policy research for AARP. "I acknowledge that contractual law is set up to protect providers from having a resident just pick up and say 'sayonara.' But we feel that in an emergency situation like this, deposits should be returned on a pro-rated basis if another resident can be found."

That type of turnaround would be just fine with Jim Johnston, president of Golden Orchard Homes, which has two facilities in metro Denver. Johnston defends his company's actions, pointing out that the thirty-day-notice clause is standard in the assisted-living industry, as is the right of companies to keep all of a deposit if a new resident is not found immediately. "Some laws aren't moral," says Johnston, "but if we had been able to re-rent her room the day after she died, she would have got all her deposit back."

Instead, Johnston says, it took him several months to find a new tenant after Spence's death. Increased competition in the assisted-living industry, as well as the fact that Golden Orchard homes are among the most expensive assisted-living facilities in the state (Spence paid $4,000 a month), means that new residents aren't always immediately available. "Two years ago there would have been a line to get in here," says Johnston. "The market has changed."

And since Spence had lived in Golden Orchard for only about a month and a half before being transferred to a hospital, Johnston says that it was even more costly for his company. "We lost a lot of money on this one lady," he says.

Johnston says it costs Golden Orchard, which has a sales force and high marketing costs, as much as $12,000 "on the front end" per resident. Assisted-living homes pay to perform health screening on potential residents and keep the contractual right to make residents move out if they become too sick; they turn profits only if residents stay for a while. "Once we get someone in here," Johnston says, "we want them to live as long as possible."

"In our industry," another official of an assisted-living home says, "the only reason someone's going to leave is if they need to go into intensive care or they pass away. I've seen instances where someone's lived [in an assisted-living home] for only five days."

Karen Wayne, president and CEO of the Assisted Living Federation of America (ALFA), says Golden Orchard acted in an above-board manner when it kept Spence's deposit. "Our only concern," she says from ALFA's offices in Virginia, "is that a company make its policy very clear so that the resident and their family knows right up front what they're getting into. Unfortunately, the hard-nosed approach to enforcing contracts is just a part of the market-driven economy which assisted living has become a part of."

Colorado officials say that they have run into problems like this before but that they are essentially powerless to do anything about them. Virginia Fraser, the state's long-term-care ombudswoman, says she has seen other families lose their deposits in much the same manner as in the Spence case. "But the truth is that we don't hear about situations like this a whole lot," says Fraser, who works out of the state's Legal Center for People With Disabilities and Older People. "And when it is brought to our attention, there's nothing we can do about it, because it's a contractual issue. All we can really do is give out guidelines for signing a contract. Other than that, we've been pretty stymied by it."

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