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Alternatives to Litigation of Nursing Home Disputes

Disputes between a nursing home operator and its resident can escalate to litigation.  While the nursing home can sue the resident and some related parties, such as for collection of unpaid invoices, this article focuses on arbitration as an alternative to litigation started on behalf of the resident.  Such litigation usually involves a charge of abuse or neglect.

Dispute resolution alternatives to litigation are mediation and arbitration.  Mediation is a voluntary and non-binding process which is not often utilized in central Pennsylvania to resolve a nursing home dispute.   Arbitration is the more common alternative to litigation, and may be “binding” if the parties agree that it shall be.

Binding arbitration is a private process where disputing parties agree that a third party or panel can resolve the dispute after receiving evidence and hearing arguments.  Arbitration is quicker and less formal than litigation.   The arbitrator’s decision in binding arbitration is final and enforceable.

Nursing homes generally agree with the prevailing opinion that arbitration is more efficient and less expensive than litigation.   Many nursing homes have inserted clauses in their admission agreements that require binding arbitration to settle disputes.  The Federal Arbitration Act, a recent Supreme Court ruling, and revised policy of the Center for Medicare and Medicaid Services (CMS) support those who believe that binding arbitration clauses in nursing home admission agreements may be presumed to be legal.  However, circumstances related to the presentation of the admission contract to the resident could affect a nursing home’s ability to enforce binding arbitration.

On October 4, 2016, CMS published “The Reform of Requirements for Long-Term Care Facilities Final Rule.”  This regulation set standards that nursing homes were required to follow if residents were asked to sign any agreement for binding post-dispute arbitration.  The regulation also prohibited binding arbitration as a condition of nursing home admission.

Within a month, on the day before Donald Trump was elected President and before CMS had implemented the new rule, a U.S. District Court in Mississippi responded to a suit brought by The American Health Care Association and a group of nursing homes to issue a preliminary injunction to block CMS from implementing that rule.

On June 8, 2017, CMS issued a policy statement and a new proposed rule that would permit a binding arbitration clause in nursing home admission contracts as long as it is written in plain language and a few other procedures are followed.  In defending this policy shift, CMS presented a lengthy analysis to claim that residents’ rights would not be violated and costs would be saved.

This new CMS policy initiative came soon after the U.S. Supreme Court’s May 2017 opinion in a case brought by Kindred Healthcare.   The Supreme Court ruled in favor of the nursing home’s interest by overturning the Kentucky Supreme Court.   The legal analysis of the case is interesting for lawyers and confusing for the general public.

The nursing home admission contract is not usually the main concern of the resident or responsible party when it is signed.  Occasionally, the admission contract is signed under duress after admission by a person who cannot understand it and who has not been advised to seek independent legal counsel.   When those circumstances are evident, basic provisions of contract law could invalidate a binding arbitration clause.  Ideally, a nursing home resident should participate in binding arbitration only as a result of informed consent.

If the resident’s agent is appointed with a power of attorney document (POA) which specifically prohibits the agent from entering into a binding arbitration agreement, and the agent has provided the nursing home with a copy of that POA, the resident could have a future defense against binding arbitration.

Even if arbitration is less expensive and quicker than litigation, it can be an emotionally draining process and a distraction from an opportunity to optimize the care plan of the resident.   Monetary damages obtained for the resident as a result of litigation or arbitration could be spent on nursing care or lost to the estate recovery process of the Department of Human Services for repayment of Medicaid.

Keystone Elder Law does not represent nursing homes but instead represents older persons and their agents.  We function as an advocate to resolve our clients’ issues to preempt a need for arbitration.   We could not ethically or effectively assume the role of a mediator of a dispute involving our client since we would not be a neutral party.

However, if a party who is not our client would ask us to serve as an impartial mediator of a dispute involving a nursing home and a resident, we have the training and experience to fill that impartial role with the consent of both disputing parties.

Dave Nesbit, Attorney