RiverWoods’ Answers to Financial Questions

The recent US Senate Committee on Aging’s CCRC Investigation Report, released in July, has sparked a number of national articles, in the New York Times and the Wall Street Journal, among others.  The report, which was initiated because of two prominent CCRCs who declared bankruptcy last year, looked at the financial risks to consumers, and recommended that consumers look closely at a CCRC’s financial performance, before signing a contract.

The complete report identified the many resources for potential residents to review.

RiverWoods has always been a financially strong organization, and we welcome and encourage prospective residents to review our audited financials and ask questions to enable them to completely understand our structure.

To make it easy, we have answered a number of the recommended questions from the Senate report, AAHSA and CARF for your review here.  As always, we are willing to go into more detail on any question and meet with you personally to ensure your questions are answered. 

Review a CCRC’s audited financials:

They are available on our website in the About Us section or in person at RiverWoods

What is the average days of cash on hand?

RiverWoods has 750 days (which is above the 75^th percentile of accredited CCRCs, nationally). This is the number of days we could continue to operate if we stopped taking in revenue.

What is the cash to debt ratio?

RiverWoods is 81% (which is between the 50^th and 75^th percentiles of accredited CCRCs). This is the percentage of our outstanding debt that could be paid off with our existing cash reserves.

What is the debt service coverage ratio?

RiverWoods is 4.0x (which is above the 75^th percentile of accredited CCRCs). This represents cash generated by the organization in one year, divided by interest and principal payments made.  It represents our ability to service debt from operations in one year.

Has the organization met its financial covenants?

RiverWoods has never missed a financial covenant in its 17 years of operation, including two separate expansions.

What is the organization’s financial model?

RiverWoods uses cash revenues from operations to cover cash expenses with a slight positive margin left over.  Additionally, we use net cash from entrance fees to cover capital investments and repayment of debt principal, with the excess used to further build our cash position.

Over the past four years, RiverWoods has adjusted its operations and financial projections so that we are not dependent on capital gains from our investments. This reduced reliance helps to protect us from investment market upheaval.

Does the organization have a positive net worth?

As a not-for-profit with a Type-A LifeCare contract, RiverWoods does not have a positive net worth.  While RiverWoods does have a book Net Deficiency, this does not tell the complete story. Since the refunds of entrance fees are contingent upon re-occupancy, they are, in a sense, a permanent source of capital.  In fact, many in the industry consider these refunds a source of equity. As we typically describe it to non-accountants, we have a large liability on the balance sheet for GAAP financial purposes but the liability is not contractually owed until we take in a new entrance fee.  Essentially, we do not send refund cash "out the door" until new cash has come "in the door."  Additionally, we have unrestricted cash and investments of $53.7 million with $66.1 million of outstanding debt.

To what degree does the organization rely on non-operating income from donations, endowments and investment income?

Investment income represents less than 4% of our cash operating revenue. Donations are an even smaller percentage of our revenue.

What is the organization’s investment policy?

RiverWoods retains a professional investment advisor, Bank of America Wealth Management, and has a formal investment policy statement developed by the CEO, CFO and members of the Board of Trustees, who serve on our Investment Committee. The Committee reviews performance on a quarterly basis. RiverWoods' investment objective is to provide a stable, total return with predictable investment income while minimizing downsize volatility. Currently, 50% of the portfolio is targeted to be held in fixed income and cash.

How is information about the organization’s financial and operational performance shared with residents?

RiverWoods has a Resident Finance Committee, comprised of residents from all three campuses, who meet with the CFO and review the financials on a monthly basis.  The CFO meets three times a year, at a minimum, with the entire resident population to review financial performance, and meets more often if needed.  Audited financials and the annual report are made available to any resident upon request, and are also posted on the RiverWoods website.

Is the organization accredited?

Yes, RiverWoods is accredited by CCAC/CARF, the industry’s accrediting body.  Less than 10% of CCRCs are accredited, and RiverWoods earned accreditation very early on, and has been re-accredited since.

Does the organization have a credit rating?

RiverWoods does not have a credit rating, but we benchmark favorably with the small number of CCRCs who do have a credit rating.