Opportunity knocks: CPA ElderCare Services.

EXECUTIVE SUMMARY

* AS CPAs SEEK NEW WAYS TO USE THEIR SKILLS, they can offer CPA ElderCare Services to assure clients that the financial, medical and residential needs of their parents and other elderly relatives are met. The demand for such services is growing; projections indicate the elderly population will more than double--to 80 million--in 2050.

* AN ELDERCARE PRACTITIONER PROVIDES a combination of consulting and direct and assurance services. ElderCare allows the elderly to live independently while offering their children the peace of mind that their parents are maintaining a suitable standard of living.

* CPA ELDERCARE SERVICES IS A RESPONSE to the changing needs of an aging population. The increase in dual career households and the movement of younger adults away from agricultural and industrial centers often make it difficult for adult children to care for their parents.

* CPAs WISHING TO PRACTICE ELDERCARE need to acquire, in addition to traditional skills, some new, nontraditional skills such as understanding the common physical and mental effects of aging, LTC alternatives and, perhaps most important, a willingness to work with the elderly.

* BEFORE OFFERING ELDERCARE, CPAs should consult their insurance carriers to make sure their existing policies provide the necessary coverage. Some ElderCare services may not be covered under a professional liability policy but could be covered under a general liability policy or by endorsements.

* CPA FIRMS SHOULD DECIDE TO OFFER ELDERCARE only after assessing the need for the service in their geographic areas and the resources they have available.

Is in right for your practice?

At a time when CPA firms are seeking new ways to use their traditional skills, the world population has reached the 6 billion mark. A significant percentage of these people are over age 65 and in need of a variety of support services so they can continue to lead independent and productive lives. One practice area designed to meet the needs of the growing elderly population is CPA ElderCare Services. Firms wondering whether ElderCare is a good fit for their practices should find the information presented here helpful in making that decision.

WHAT IS ELDERCARE?

ElderCare is intended to assure family members that elderly relatives no longer able to be totally independent are receiving the kind and type of care they need. The service's goal also is to give the elderly the chance to live their lives as independently as possible. A CPA ElderCare Services practitioner provides some services directly and serves as the coordinator of others. In some instances, the practitioner acts as an assurer of care, based on criteria and goals set by the client.

As coordinator and assurer of such services, the CPA often relies on the expertise of other professionals such as geriatric care managers or social workers. ElderCare can involve a combination of services, including

* Consulting services (determining the community resources available to address the elderly person's needs).

* Direct services (paying bills, managing property or submitting insurance claims).

* Assurance services (testing service providers to make sure they meet agreed-upon criteria).

Exhibit 1, page 45, provides a more complete list of the ElderCare services a CPA might provide in each area. CPAs generally have to customize their services to meet a particular client's needs. In many cases, the CPA will lead a multidisciplinary team of professionals.

Exhibit 1: CPA ElderCare Services

Direct Services

Financial

* Receive, deposit and account for client receipts.

* Ensure expected revenues are received.

* Make appropriate disbursements.

* Submit claims to insurance companies.

* Confirm accuracy of provider bills and appropriate reimbursements.

* Protect the elderly by controlling checkbook and other assets.

* Provide income tax planning and return preparation.

* Provide gift tax return preparation.

* Prepare employment tax returns for caregivers and other household help.

Nonfinancial

* Arrange for transportation, housekeeping and other services.

* Manage real estate and other property.

* Visit and report on elderly on behalf of children in distant locations.

Assurance Services

Financial

* Review and report on financial transactions.

* Test for asserters' adherence to established criteria.

* Review investments and trust activity.

* Audit third-party calculations, such as pension, insurance and annuity payouts.

* Review reports from fiduciaries.

Nonfinancial

* Measure and report on care provider performance against established goals.

* Evaluate and report on the performance of other outside parties, such as contractors.

Consulting Services

Financial ElderCare planning for

* Housing and support service needs.

* Declining competency.

* Death or disability of one or both spouses.

* Alternative costs of retirement communities and other housing.

* Housing and care alternatives.

* Services available in the community.

* Estate planning.

Fiduciary planning for

* Financial power of attorney.

* Health care power of attorney.

* Guardianship.

* Trusteeship.

* Living wills.

* Advanced medical directives.

Evaluation of health care financing options for

* Medicare and Medicaid.

* LTC insurance.

* Medigap insurance.

* HMOs.

* Annuities.

* Viatical insurance settlements.

* Reverse mortgages.

* Sale/leaseback of home.

* Flexible spending accounts.

Nonfinancial Family facilitation 

* Mediate/arbitrate family disputes.

* Provide objectivity for highly emotional issues.

* Act as a "go-between" between parent and child.

Coordination of support and health care services

* Lead a team of health care, legal and other professionals.

Other consulting services

* Help family monitor care.

* Establish standards of care expected.

* Communicate expectations to care providers.

* Establish performance measurement systems.

RESPONDING TO MARKET FORCES

The AICPA's approach to ElderCare was developed in conjunction with the Canadian Institute of Chartered Accountants. The ElderCare task force has members from both the United States and Canada. As an indication of the global importance of providing services to the elderly, a member of the Institute of CAs of Australia also now participates in task force meetings.

The AICPA special committee on assurance services developed ElderCare after identifying the 10 megatrends that will continue to affect the United States. One was the aging of the population. According to the U.S. Census Bureau's statistical brief, Sixty-Five Plus in the United States, projections indicate that the elderly population will more than double, to 80 million, in 2050. (See exhibit 2, page 47.) At that time, one in five Americans could be elderly. Most of that growth will occur between 2010 and 2030. The most rapidly growing elderly age group is the "oldest old," those 85 and over. That group grew 274% between 1960 and 1994.

[Exhibit 2 ILLUSTRATION OMITTED]

Census Bureau information indicates these services are needed throughout the United States. In 1997, nine states had more than 1 million elderly residents; two additional states had populations approaching 1 million. Ten states had elderly residents making up 14% or more of their total population, giving them the highest proportion of elderly residents in the country. Exhibit 3, page 47, shows the distribution of those 65 and older by state.

[Exhibit 3 ILLUSTRATION OMITTED]

Senior citizens also control a great deal of wealth, which they may need help managing as they get older. According to the Census Bureau, the median net worth of the elderly (excluding pensions, life insurance, home furnishings and jewelry) is more than 15 times higher than that of households headed by someone 35 or under. Although home ownership is a large component of the elderly's net worth, they also have a high proportion of interest-bearing assets.

As the elderly population increases, the number of dual career households is also growing and younger adults are moving away from the Farm Belt states and old industrial centers. This often makes it difficult for adult children to care for their elderly parents. While trends indicate a general need for ElderCare services nationally, CPAs interested in expanding their practices to include ElderCare should investigate the local market before making any decisions.

Here are some questions firms can ask to help assess the ElderCare market:

* How many people in the area are age 75 and over?

* How many live in their own homes?

* How many live alone?

* How many have the resources to afford a premium service like CPA ElderCare?

* How many are already clients?

* Does the firm have relationships with other professionals who can provide access to this market?

CPAs can obtain demographic information for their regions from government Internet Web sites. (See exhibit 4, page 48, for a complete list of Internet resources.)

Exhibit 4: ElderCare Resource Web Sites

These Web sites are useful for ElderCare practitioners who wish to research services for the elderly. The sites all provide numerous links to other sites related to aging and the aged.

Government Sites

Access America for Seniors--www.seniors.gov Information about programs for seniors and links to other senior sites.

Administration on Aging--www.aoa.gov Every conceivable issue affecting the elderly and their families. A great starting point for research. Includes numerous links as well as a comprehensive resource directory for older people.

HealthCare Financing Administration--www.hcfa.gov Medicare and Medicaid information for consumers and providers.

Medicare Handbook and Consumer Information--www.medicare.gov The official Medicare site.

National Institute on Aging--.www.nih.gov/nia Health and medical information for the aged.

Social Security Administration--www.ssa.gov The official Social Security site.

U.S. Census Bureau--www.census.gov Demographic information on the aging population, Amazing research capabilities.

Organizations

American Association of Retired Persons (AARP)--www.aarp.org Resources on consumer issues affecting those over 50 as well as links and details on AARP initiatives and member benefits.

American Association of Homes and Services for the Aging--www.aahsa.org Information on continuing care retirement communities and on the Continuing Care Accreditation Commission.

American Geriatrics Society--www.americangeriatrics.org Issues affecting the aging.

Health Insurance Association of America--www.hiaa.org Medigap policies and LTC insurance.

Joint Commission on Accreditation of Health Care Organizations--www.jcaho.org A listing of accredited health care facilities in all 50 states. Checklists for use in choosing a health care facility or provider. Explanation of the accreditation program.

National Academy of ElderLaw Attorneys--www.naela.org Information for and about NAELA members.

National Association of Area Agencies on Aging--www.n4a.org Information about local area agencies on aging, including numerous local and national links.

National Association of Professional Geriatric Care Managers--www.caremanager,org How to find a geriatric care manager.

National Association of Social Workers--www.socialworkers.org Information about social workers and links to other organizations.

National Council on the Aging, Inc--www.ncoa.org More resources for the aging and their families.

National Resource and Policy Canter on Housing and Long-Term Care--www.homemods.com/ The Home Modification Assistance Program site, which provides support for builders and others to make alterations to homes to allow for independent living.

National Senior Citizens Law Center--www.nscic.org Advocacy for the aged.

Visiting Nurse Associations of America--www.vnaa.org Links to local visiting nurse associations.

Other Resources

Careguide--ElderCare Resource Center--www.careguide.net A for-profit enterprise that provides a wealth of information for the elderly, caregivers and providers. Search for health care providers in your area.

ElderWeb--www.elderweb.com An award-winning site founded by Karen Stevenson Brown, a member of the ElderCare task force. Numerous links to resources, useful articles and a listing of some of the CPAs and CAs now providing ElderCare services.

WHAT SKILLS DO I NEED?

CPAs considering ElderCare need a willingness to work with the elderly. Although personally rewarding, it also can be difficult for practitioners who are uncomfortable around older people, especially those who have begun to decline physically and mentally.

ElderCare also requires a CPA to use his or her traditional inquiry, observation, objectivity and measurement skills as well as to acquire new, nontraditional skills such as conflict resolution. In addition, CPAs will need to develop knowledge in new areas, such as becoming familiar with health care terminology. ElderCare also requires that the CPA learn about issues he or she may not be familiar with--for example, the common physical or mental effects of aging, LTC alternatives and legal issues such as advance medical directives. Since the Internet provides a wealth of resources, technology and research skills also are important.

To help CPA ElderCare practitioners assess their competency levels, the ElderCare task force developed a competency model built around the four broad categories of competencies all CPAs should have: personal attributes, leadership qualities, broad business perspective and functional expertise.

The functional expertise areas the task force identified for ElderCare practitioners are

* Engagement management. Managing an ElderCare engagement.

* Interpersonal skills. Interacting with elderly clients and tailoring communications appropriately.

* Traditional skills. Inquiry, observation, bookkeeping, tax and measurement skills.

* Nonfinancial aging issues. Understanding the medical and psychosocial effects of aging.

* Legal and financial aging issues. LTC funding, powers of attorney, health care proxies, advance directives, insurance, wills and estate planning, administration, among others.

CPAs can refer to the AICPA Web site, www.aicpa.org, to find the entire model.

FIRM INFRASTRUCTURE AND STRATEGIC ALLIANCES

To get started in ElderCare, a firm must commit to providing sufficient staff and resources. Because the practitioner--the hub of a wheel of service providers--conducts ongoing reviews of each provider's performance, in some cases the practitioner--or his or her representative--will need to be available 24 hours a day to handle unexpected or unusual problems. It also may require the practitioner to hire staff, either permanent or on-call, to help handle ElderCare clients' specialized needs. Since the practice of ElderCare spans numerous disciplines, including finance, accounting, medicine, psychology, law and nursing, staff needs may be diverse.

To provide the best service possible, a practitioner may want to consider a strategic partnership with some of these other professionals. This enables them to help the practitioner by providing information and direction the CPA would not otherwise have. A good working relationship or alliance with a lawyer well versed in elder law is particularly important. Some CPAs also have made arrangements with geriatric care managers or licensed social workers. The arrangements may be on a retainer or on a fee-for-time basis. Unless the practitioner develops a large ElderCare practice, it probably is not practical to hire one of these professionals full-time.

The concept of a strategic partnership is to have someone to advise the practitioner when the elderly person's needs are outside the normal knowledge base of the CPA or his or her staff. For instance, if an elderly person's behavior changes, does it represent a real problem or is it a normal part of aging? A brief visit from a skilled social worker may provide the information the practitioner needs to report to the responsible family member.

Billing, staffing and client acceptance all may differ somewhat from traditional engagements and the CPA should consider the differences carefully before deciding to build an ElderCare practice. Although fees generally are based on time spent plus expenses, CPAs may need to bill a fixed amount each month because elderly clients, even wealthy ones, often like to be able to budget monthly expenses. CPAs may want to then settle up with clients (reconcile monthly billing with actual fees) on a quarterly, semiannual or annual basis. Client acceptance requires CPAs to look at family dynamics as well as the usual financial information before taking on a new client.

To help CPAs better prepare themselves to practice ElderCare, the AICPA and others have developed a number of courses and practice aids, which are listed in exhibit 5, at left.

Exhibit 5: ElderCare Tools for Practitioners

CPAs can use the following to help them start an ElderCare practice. Product code numbers are in parentheses following the titles.

Courses

Developing an ElderCare Practice (730070JA) is the introductory course for those providing CPA ElderCare Services. This is the course to take to understand what CPA ElderCare Services are and what you need to know to provide them to your clients. CPAs should take four additional courses to get a comprehensive understanding of this multidisciplinary service:

* ElderCare: The Financial Issues of Aging (731400JA).

* ElderCare: The Legal Issues of Aging (731401JA).

* ElderCare: Practice Management and Practice Development Issues in CPA ElderCare Services (731402JA).

* ElderCare: The Medical and Psychosocial Issues of Aging (731403JA).

The price for each eight-hour self-study course is $119 for AICPA members and $149 for nonmembers. These programs also are available as group study courses through state CPA societies, which have all scheduling information.

Practice Aids

Guide to Providing, Eldercare Services, from Practitioners Publishing Co., provides practical, "how-to" guidance on everything from marketing to providing CPA ElderCare Services to elderly clients and their families. To order, call 800-323-8724, or visit the PPC Web site, www.ppcinfo.com

The following AICPA practice aids can help a CPA start and manage an ElderCare practice:

* CPA ElderCare: A Practitioner5 Resource Guide (022504JA). A fount of information on all areas of ElderCare, it cove/:s topics such as choosing a nursing home, long-term-care insurance and federal and state programs for the elderly along with sample documents and checklists. The book provides Medicare updates--including massive Medicare program changes for 1998 to 2003--and information on Medicare + Choice. It is available to AICPA members for $99 and to nonmembers for $124.

* CPA ElderCare Marketing ToolKit (022508JA). CPAs can take the CD-ROM in this kit to a local printer to customize brochures, ads or letters with their firm names and addresses. The client brochure even lets the CPA create a custom list of services by selecting from a master list or customize the materials if he or she has QuarkXpress and Adobe Photoshop. Each set of marketing materials includes messages targeted to the two different ElderCare audiences, the elderly and their adult children. The kit is available to AICPA members for $59 and to non-members for $74.

* Assurance Services Alert: CPA ElderCare Services--1999 (022231JA). This alert serves both as an introduction to CPAs unfamiliar with CPA ElderCare Services and an update of important new developments for those who have expanded their practices to include ElderCare engagements. The price is $12.95 for AICPA members and $18.50 for non-members.

All AICPA courses and products are available by calling 1-888-777-7077.

RISK AND INSURANCE CONSIDERATIONS

Before entering any new area of practice, CPAs need to assess the risks involved and take steps to minimize them. Ways to do so include maintaining sound internal controls, establishing a quality control system, documenting all client communications and following professional standards.

CPA firms can use these questions as a starting point for identifying potential liabilities:

* Does the staff have enough training or experience to handle ElderCare engagements?

* Can the firm refer some work to other professionals? (If a CPA does not have the required expertise, it may be necessary to bring in other professionals. Professional referrals can lead to claims based on "vicarious liability," especially when the professional becomes part of the care team.)

* Are appropriate internal controls in place?

* Will the staff be properly supervised?

* Has a lawyer been consulted about how to handle high-risk areas such as elder abuse reporting requirements, terminating ElderCare engagements and disclosing confidential client information in conjunction with an ElderCare engagement?

* Has the firm's underwriter been contacted to make sure existing insurance covers ElderCare services?

Before offering ElderCare services, practitioners should consult their insurance carriers to ensure coverage is available. Since the service is new for most accounting firms, some carriers may be unfamiliar with ElderCare and reluctant to extend professional liability coverage into what they see as a new and uncharted area. Standard professional liability policies should cover any traditional accounting or assurance work performed in an ElderCare engagement; other ElderCare activities, such as some of the direct services, may not be covered under a professional liability policy but may be covered under a general liability policy or by endorsements to a professional liability policy.

If a CPA chooses to act in a fiduciary capacity, he or she must be bonded and may be required to bond staff members. Each practitioner should consult his or her insurance carrier, explain the services to be performed and either get confirmation that coverage already exists or make arrangements for adequate coverage.

When working with other ElderCare professionals, the CPA should ascertain whether they also have the right insurance coverage. The CPA also should make clear in discussions with the insurance carrier that he or she does not intend to handle medical or psychological matters. (Family members or the elderly person will need to employ the appropriate professional for ongoing medical or psychological needs.) Because some practitioners have found that their insurers have difficulty understanding the nature of ElderCare, it is crucial for the CPA to make clear to the insurer exactly what kinds of services he or she is going to provide.

The ElderCare task force met with the AICPA affinity insurance carrier (CNA) and broker (AON) to educate them about ElderCare services and to ask for their assistance in minimizing the risks to ElderCare practitioners. AON and CNA are working with the AICPA to make sure ElderCare will be covered by the AICPA professional liability insurance program through policy adjustments. These changes are not yet effective as of the date of this publication. CPAs should contact their brokers if they have specific questions.

DECISION TIME

CPAs are ideally suited to provide ElderCare Services. Despite the potential for success, only a firm and its partners can decide whether ElderCare holds promise--after carefully reviewing the resources needed vs. the market opportunity offered in their area. The first step in assessing whether ElderCare is a good fit for a firm is to look carefully at the local market, the firm's existing client mix and the potential for referrals from other professionals and service providers. A firm needs this information to determine whether conditions are right to enter the market. If the firm has the client base to support the introduction of ElderCare, it has passed the first hurdle.

The second step in assessing ElderCare's potential is to look at internal factors, including staff skills, the availability of professionals with complementary skills, the firm's ability to manage multidisciplinary teams and the existence of proper risk management. Once a firm is satisfied that hurdle has been passed, it's time to prepare for the final decision.

The last step is examining the firm's overall willingnessto support entry into the ElderCare market. This is a decision unique to each firm, since it must be based on more subjective factors. This is a crucial decision because the support of a firm's partners and staff is key to the success of any new service.

Standards for ElderCare Engagements

1. AICPA Rules of Professional Conduct, including the rules governing

* Conflicts of interest.

* Objectivity.

* Competence,

* Due care.

* Handling of trust funds and property of others.

* Payment and receipt of commissions,

* Unauthorized benefits,

2. Professional standards, depending on the type of engagement:

* Statement on Standards for Attestation Engagements no. 3, Compliance Attestation.

* Statement on Standards for Attestation Engagements no. 4, Agreed Upon Procedures. * Statement on standards for accounting and review services.

Long-Term-Care Insurance Trends

As life spans increase, the United States faces the challenge of providing long-term care to millions of elderly. Long-term care is the largest unfunded liability facing Americans today. Medicare does not provide long-term-care coverage, and Medicaid covers only those with low incomes and very few assets. Long-term-care insurance (LTC)--private policies that pay for some of the expenses of care in an institutionalized setting, home care or both--can play a key role in filling the gap.

Here are some figures about the LTC insurance market as of 1996, the latest year for which information is available:

* The average annual premiums for individual policies with a 20-day deductible, four years of coverage and a $100 institutional or $50 home care benefit were $247 at age 40, $364 at age 50, $980 at age 65 and $3,907 at age 79.

* The same policy with a 5% compounded inflation feature had an average cost of $589 at age 40, $802 at age 50, $1,829 at age 65 and $5,592 at age 79.

* There were 600,000 new policies sold between 1995 and 1996, the largest number of new policies ever sold in one year.

* As of December 31, 1996, 5 million LTC insurance policies had been sold.

* Employer-sponsored LTC insurance accounted for nearly 20% of all LTC policies sold in 1996. Sales increased 47% between 1987 and 1996.

Source: The Health Insurance Association of America, Washington D.C.

KAREN DUGGAN, CA, is a principal with the Canadian Institute of Chartered Accountants in Toronto, Ontario, Canada. Her e-mail address is [e-mail]. GEORGE A. LEWIS, CPA, a retired partner of Broussard, Poche, Lewis & Breaux in Lafayette, Louisiana, is the chairman of the AICPA ElderCare task force. His e-mail address is [e-mail]. ANN ELIZABETH SAMMON is a technical manager in the AICPA assurance services division in New York City. Her e-mail address is [e-mail]. Mss. Duggan and Sammon are the staff aides for the task force. Ms. Sammon is an employee of the American Institute of CPAs and her views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due process and deliberation.