I. Introduction
An unexpected bill is never a welcome surprise. The overlooked subscription or the occasional hidden fee is frustrating. These surprises do not present problems when they are for small amounts. But what if you opened your mail to see an unexpected bill for an amount you could not pay? What if the bill was from the nursing home you checked your family member or beloved friend into, the same nursing home that reassured you that everything you signed was “standard paperwork” and that there was “no need to worry”? Now you face a mountain of debt that you never intended to acquire. Months pass and the nursing home is not budging. It says you signed a contract, but you would remember putting yourself on the line for thousands of dollars, wouldn’t you? And besides, wasn’t your loved one on Medicaid anyway? Didn’t they have assets to cover their debt? Many calls with the nursing home later—and eventually, with the collection agency—and they still will not budge, and you remain unable to pay off the debt. They say you signed a contract promising to make sure the nursing home got paid. One day, a civil complaint arrives in the mail: the nursing home is suing you for the unpaid amount. You can barely afford to support your own family and have struggled to put money aside for the nursing home bills; affording defense counsel will be impossible. What now? How did you get here?
For adults in the United States who help a loved one gain admission to a nursing home, the above scenario is a reality they must prepare for. A 2022 report from Kaiser Health Network and National Public Radio (NPR) brought renewed attention to a long-time problem: nursing homes are suing residents’ family and friends (“relatives”) for payment of the residents’ unpaid bills.Footnote 1 To justify collection, these nursing homes rely on vague contractual language known as “responsible party” clauses, which relatives unwittingly sign as part of the copious paperwork required to admit their loved one into a nursing home.Footnote 2 In many instances, these relatives cannot afford counsel, and default judgments are entered against them.Footnote 3
This problem is not new. Decades ago, Congress addressed this problem with the passage of the 1987 Federal Nursing Home Reform Act (FNHRA).Footnote 4 The FNHRA prohibits nursing homes from requiring—though, as explained below, not from solicitingFootnote 5—that a relative act as the resident’s financial guarantor.Footnote 6 Nursing homes can nonetheless assign similar contractual liability to relatives by requiring other kinds of promises.Footnote 7 Then, nursing homes lean on those promises to sue the relative for breach of contract and hold them liable for the resident’s unpaid bill—a largely permissible practice under the FNHRA.Footnote 8
Since 1987, Congress has not passed new legislation addressing this problem. And even though the nursing home industry is one of the most regulated industries in the country,Footnote 9 the Centers for Medicare & Medicaid Services (“CMS”) regulations on this topic are scarce and mostly repeat the language of the FNHRA.Footnote 10 That being the case, nursing home collection practices continue to leave relatives feeling caught off guard.Footnote 11
This Note proceeds in six parts. Part II provides an explanation and brief history of the FNHRA’s protections for relatives. Part III reviews the literature, argues that the problems recognized by those scholars persist today, and offers a new perspective on “responsible party” clauses and the FNHRA. Then, Part IV examines relevant caselaw and events from various jurisdictions. The cases are breach of contract suits brought by nursing homes against relatives who signed “responsible party” clauses; the primary dispute in each case is the clause’s validity under the FNHRA. Outside the courthouse doors, nursing home collection practices have led to government enforcement action in at least one jurisdiction—Washington D.C. Part V proposes new solutions to the problems identified by this Note. Part VI concludes.
II. Nursing Home Billing Practices: A Primer and Recent Developments
Today, over 15,000 certified nursing homes in the United States serve approximately 1.4 million residents.Footnote 12 Medicaid is the primary payor source for sixty-two percent of those residents, Medicare for thirteen percent, and other payment sources (e.g., private insurance, out-of-pocket) for the remaining twenty-five percent.Footnote 13 Essentially, the nursing home industry is propped up by Medicare and Medicaid.
Medicare covers short-term non-custodial care, which is medically necessary care that must be provided by a nurse or doctor in a Skilled Nursing Facility, usually for those who are 65 or older.Footnote 14 Medicaid covers long-term nursing home care—including custodial care—so long as the resident meets their state’s eligibility criteria, which are usually income-based and require the resident to be impoverished to some degree.Footnote 15 Custodial care is what most people picture when they think of standard nursing home care: assistance with daily living activities like eating, bathing, and dressing.Footnote 16
All nursing homes that participate as providers in the Medicare or Medicaid programs must abide by the FNHRA.Footnote 17 The FNHRA aims to “improve the quality of care that poor elderly and disabled Medicaid [and Medicare] patients receive in nursing homes.”Footnote 18 The law’s passage was prompted, in part, by reports of poor quality of care and discrepancies in care between private-pay residents and those covered by Medicare and Medicaid.Footnote 19 Accordingly, Subsection (c)(4) of the FNHRA states that “[a] nursing facility must establish and maintain identical policies and practices regarding transfer, discharge, and the provision of services required under the State plan for all individuals regardless of source of payment.”Footnote 20 More relevant to this Note, however, are Subsection (c)(5)(A)(ii)Footnote 21 (hereinafter “Subsection A”) and Subsection (c)(5)(B)(ii)Footnote 22 (hereinafter “Subsection B”), both of which define the contours of the relative’s liability.
Subsection A prohibits nursing homes from “requir[ing] a third party guarantee of payment to the facility as a condition of admission (or expedited admission) to, or continued stay in, the facility.”Footnote 23 This “third party” usually is the relative who assists the resident during the admission process.Footnote 24 But Subsection B provides an important caveat: a nursing home may still “requir[e] an individual, who has legal access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from the resident’s income or resources for such care.”Footnote 25
At first blush, the FNHRA seems straightforward: nursing homes cannot require a relative to act as the resident’s financial guarantor in exchange for the resident’s admission, but they can require a relative to use a resident’s assets for payment if they have access to such assets. Yet, as described in Part IV, nursing homes use “responsible party” clauses and questionable admission protocols to circumvent the FNHRA and obtain personal financial liability for relatives, which allows nursing homes to sue for breach of contract and recover a resident’s unpaid balance.Footnote 26 “Responsible party” clauses can span just a few sentences, buried in complicated multi-page admission agreements.Footnote 27 One such clause, part of an admission agreement for a nursing home in Rochester, New York, reads as follows:
By entering into this agreement, the patient, the patient’s spouse, and/or the patient’s responsible party and undersigned agent(s) understand and agree to the patient’s payment obligations. The patient agrees to pay for, or arrange to have paid for by Medicaid, Medicare, or other third party Insurers or payers, all services provided hereunder and agrees to pay any required third party deductibles, co-Insurance, or monthly income budgeted by the Medicaid program (called the “NAMl” amount). The undersigned accepts the duty to insure continuity of payment. This includes, but is not necessarily limited to, the duty to arrange for timely Medicaid coverage if Medicaid coverage becomes necessary.Footnote 28
Facially, this clause comports with Subsection A: the “undersigned”—the relative—is not asked to act as a guarantor or to directly assume any personal financial obligations. Instead, the relative assumes the “duty to insure [sic] continuity of payment,” which creates an independent ground for the relative’s potential liability. Nursing homes point to this “duty” to blame the relative for the resident’s missed payments, and that forms the basis of the nursing home’s complaint against the relative.Footnote 29
“Responsible party” clauses can also be misleading: relatives sometimes misinterpret the words “responsible party” as another way of saying “point of contact” (i.e., the person the nursing home should contact in an emergency).Footnote 30 Even when “responsible party” is clearly defined, the nursing home provides no adequate verbal explanation of the scope of this responsibility: administrative staff hand a stack of admission paperwork to the relative, offering little guidance beyond saying “sign here” and marking an “X” on the requisite pages.Footnote 31
Relatives often sign these admission agreements under emotional and stressful circumstances, without the guidance of a lawyer or dedicated advocate. A typical nursing home admission experience has been described in the following way:
Frequently, families begin the admission paperwork for a nursing home soon after a loved one has suffered from a life-threatening illness or injury. When an elderly family member is admitted to a hospital, oftentimes, the hospital will later discharge the individual to a nursing home for rehabilitative treatment, without much advance notice. During the discharge process, families have very little time to explore options and discuss the documents they are signing with nursing home staff. Additionally, they may believe that a third party guarantee is standard. Typically, during the admission process, the admission attendant will simply put an “X” in areas where signatures are needed. Rarely, if ever, is there time left to discuss any of this with an attorney because hospitals are often eager to discharge patients when those assuming responsibility may not understand the documents they signed.Footnote 32
Though the FNHRA provides some basic rules for the nursing home admission process, it does not address the stressful realities described above.
CMS regulations also do not address these realities. The regulations essentially repeat the language of Subsection A and Subsection B.Footnote 33 CMS provides little to no guidance on how nursing homes should advise relatives on the admission agreement.Footnote 34 Nor do the regulations acknowledge the stressful nature of the admission process or provide guidance on how nursing homes can mitigate the related pressures and misunderstandings.Footnote 35 Such a bare-bones regulatory scheme leaves a wide opening for nursing homes to adopt practices that prompt relatives to unwittingly assume higher levels of risk and liability than they intended.
Recently, the Biden administration has scrutinized nursing home admission agreements and the unexpected debt that relatives can be left with. On September 8, 2022, the Department of Health & Human Services (HHS) and the Consumer Financial Protection Bureau (CFPB) issued a joint letter condemning nursing homes in the United States that skirt compliance with the FNHRA.Footnote 36 This letter reiterated that admission agreements violate the FNHRA if they require third parties to assume financial liability for a resident’s nonpayment.Footnote 37 On the same day, the CFPB publicly advised nursing homes that collecting debts created under non-FNHRA-compliant contracts violates the Federal Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).Footnote 38 Additionally, a joint press release from HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure characterized these debt collection practices as “harassment.”Footnote 39 Recent developments therefore demonstrate the ongoing tension between nursing homes and the FNHRA. So, despite the existing literature discussed next, a new perspective is needed. This Note fills the gap.
III. Literature Review and Original Contributions
A relative’s obligations to a nursing home start and end with the terms of the admission agreement. Two scholars’ analyses of “responsible party” clauses and admission practices are discussed below.
Donna Myers Ambrogi has characterized admission agreements as adhesion contracts because they are written solely by the nursing home and because the bargaining power between the parties is greatly imbalanced.Footnote 40 Per Ambrogi, many elders that seek admission to a nursing home are particularly vulnerable: prospective residents typically suffer from some form of mental or physical illness, are unmarried, and already depend on some assistance for routine daily activities.Footnote 41 Additionally, a host of issues with admission agreements further disadvantage residents and their relatives, such as small font size and limited readability, the rushed nature of the admission process, and unfavorable “responsible party” clauses.Footnote 42 Notably, Ambrogi argues that some mandatory “responsible party” clauses diminish the resident’s autonomy by allowing nursing homes to deal directly with the responsible party on important matters related to the resident’s care—even if the resident is competent enough to manage their own affairs.Footnote 43 Ambrogi also asserts (1) that nursing homes furtively use vague contractual language to establish the relative’s financial liability without explicitly saying so, and (2) that “responsible party” requirements contradict the FNHRA.Footnote 44 Ambrogi’s contentions are correct. Indeed, a “responsible party” clause that requires a relative to assume personal financial liability is facially invalid under the FNHRA.Footnote 45 However, Ambrogi’s article was published in 1990, only three years after the FNHRA’s passage. Since then, fewer admission agreements explicitly require a responsible party to assume financial liability. As discussed in Part IV, nursing homes now circumvent the FNHRA by using contractual language that deems a “responsible party” clause voluntary rather than mandatory, even though the relative signing the agreement often does not recognize this distinction or its risks.Footnote 46 In the years after Ambrogi’s article, courts have authorized nursing homes to solicit these seemingly voluntary financial guarantees from relatives.Footnote 47 Even so, this Note argues that problematic nursing home protocols and the stressful realities of admission blur the distinction between a voluntary guarantee and a required one.
Eric Carlson, another author who has written extensively on the legality of “responsible party” clauses,Footnote 48 highlights at least two distinct problems with these clauses: (1) these clauses are misleading because relatives sometimes assume a “responsible party” is merely a contact person, and (2) relatives gain nothing from signing, which contradicts one of the key principles of contract law, consideration.Footnote 49 Carlson also briefly addresses another, more pertinent problem: “[s]ome nursing home admission agreements claim that a responsible party is not guaranteeing the resident’s financial obligations but instead is promising to take all necessary steps (including the filing of a Medicaid application) to arrange for payment of the resident’s nursing home bills. In practice such language is used by nursing homes as an illegal financial guarantee.”Footnote 50 In other words, nursing homes accuse relatives of failing to “take all necessary steps” and sue for the resident’s unpaid balance, thereby treating the relative as a de facto financial guarantor.Footnote 51
At first glance, the “problem” Carlson identifies seems largely unproblematic: it would be unrealistic to ban nursing homes from enforcing any contractual obligation undertaken by a relative—and if that contractual obligation is not a mandatory financial guarantee, the FNHRA seemingly poses no bar to doing so.Footnote 52 However, a nursing home will sometimes file suit against a relative regardless of whether it can prove that the relative’s actions caused the nursing home to stop receiving payment.Footnote 53 In other instances, the nursing home will delay in notifying the relative that Medicaid or Medicare has denied or terminated the resident’s benefits, which increases the amount that the relative could be on the hook for.Footnote 54 These nursing home practices—whether committed in bad faith or not—make relatives susceptible to abuse. The government should therefore adopt more aggressive enforcement actions that deter nursing homes from filing unsubstantiated suits against a relative. CMS should also require nursing homes to make every possible effort to inform the “responsible party” as soon as possible that a resident is accruing expenses without Medicaid coverage. Other solutions to the issues raised by Carlson and Ambrogi are discussed in Part V.
Next, Part IV outlines the different types of “responsible party” clauses and their compatibility with the FNHRA while examining the clauses’ consequences for relatives.
IV. The Legal Landscape of “Responsible Party” Clauses and Brief Reactions
Not all “responsible party” clauses are the same. They can be organized into two main categories of promises made by the relative: (1) a promise to personally act as the resident’s financial guarantor, or (2) a promise to ensure continuity of payment to the nursing home, either by using the resident’s assets to do so or by helping the resident maintain their Medicaid eligibility so Medicaid can pay the nursing home.
(1) a promise to personally act as the resident’s financial guarantor
Subsection A bans nursing homes from requiring third-party financial guarantees as a condition of admission. Footnote 55 Therefore, the legality of a relative’s promise to act as a guarantor turns on whether such a promise was required or voluntary. Footnote 56 This distinction is explored and scrutinized below.
In Podolsky v. First Healthcare Corp., the court held that an admission agreement did not violate the FNHRA because its “responsible party” clause was a “solicitation of otherwise voluntary third-party guarantors.”Footnote 57 The “responsible party” clause at issue was described as follows:
[the clause] states that the guarantor personally guarantees payment to FHC for all care, supplies or services provided to the resident. The guarantor “acknowledges that he/she understands that he/she is not required, and cannot be required, to sign a Guarantee of payment as a condition of admission of Resident to Facility, or as a condition of Resident remaining in Facility.” It also provides that the guarantor can terminate the agreement at any time by written notice, ending his obligation for any charges incurred after that time. The recited consideration for the guarantee is FHC’s promise to send monthly copies of the resident’s bill to the guarantor and to defer sending a notice of discharge to the resident until 15 days after a written notice of delinquency has been sent to the guarantor. Finally, the agreement concludes by stating in capital letters once more the guarantor’s understanding that he is not required to sign the guarantee, that the guarantee cannot be required as a condition of admission or continued residence in an FHC facility, and that the guarantor should ask questions about the guarantee before signing it.Footnote 58
The bolded language was crucial to the court’s holding that this guarantee was voluntary, not conditional. The court found that, “[h]ad Congress intended to forbid third party guarantees under any circumstances, we presume it would have said so.”Footnote 59 And so, this seemingly voluntary “responsible party” clause did not violate Subsection A’s ban on mandatory third-party guarantees.
But the court had more to say. The court then found that the circumstances surrounding the nursing home’s solicitation of this voluntary guarantee were potentially deceptive. First, the court recognized that admitting a loved one into a nursing home is an “emotionally-charged, stress-laden event.”Footnote 60 Next, in discussing the manner in which the nursing home solicited these guarantees from the relatives, the court recounted eyebrow-raising allegations of the nursing home’s problematic admission protocols: stacks of documents were hurriedly presented with little explanation; nursing home staff directed relatives to simply sign on the lines marked with an “X”; and, in at least one instance, relatives were told their signature as a “responsible party” was required—directly at odds with the clause’s “voluntary” language.Footnote 61 Considering these allegations, the court ruled that even if the admission agreement was facially compliant with the FNHRA, there was a triable question of fact as to whether these nursing home protocols deceived relatives into believing they had to sign as guarantors.Footnote 62
The Podolsky Court rightly gave significant weight to the potentially deceptive effects of the nursing home’s admission protocols. A myopic focus on the text of the “responsible party” clause ignores the realities surrounding the solicitation of these guarantees. How effective is the FNHRA’s ban on required third-party guarantees if it can be satisfied by inserting the word “voluntary” into the clause a few times? Aggressive nursing home practices can convince relatives that they must act as financial guarantors despite what the admission agreement says; in this way, nursing homes essentially circumvent the FNHRA.Footnote 63 Plus, most laypeople’s untrained eyes are not likely to spot the difference between a voluntary and a conditional guarantee—a problem compounded by the urgent and rushed nature of admissions.
Nursing homes are unlikely to change these aggressive tactics because it is in their interest to obtain these guarantees from the relative, who likely has more assets and a higher income than the resident.Footnote 64 Because current CMS regulations on this topic are scarce and mostly repeat the language of the FNHRA,Footnote 65 additional regulation is needed to ensure that admission protocols respect Subsection A’s protections for relatives, both on paper and in practice.
Though Podolsky was decided in 1994, nursing homes still engage in similarly concerning solicitations of financial guarantees. In 2020, two Washington D.C. nursing homes—the Washington Center for Aging Services and the Stoddard Baptist Nursing Home—signed an agreement with the Office of the Attorney General for the District of Columbia (“D.C. OAG”) to cease what the D.C. OAG described as “deceptive billing practices.”Footnote 66 According to the D.C. OAG:
family members were required to sign an Admission Agreement that identified them as a “Responsible Party.” This document suggested that these non-residents were responsible for paying the senior’s expenses, and on numerous occasions, these nursing facilities tried to collect money from family members if the resident or their insurance failed to pay bills on time. Misleading collection letters to family members stated that if payments were not made, they would be “personally liable for such amounts” because they were “financially responsible for the terms of [the Admissions Agreement].”Footnote 67
Though this matter did not reach litigation and the “responsible party” clauses at issue are not publicly available, these allegations strongly suggest that nursing homes continue to flout the FNHRA by pressuring relatives to believe they must act as guarantors. Indeed, under the agreement, the D.C. nursing homes promised (1) to modify their admission agreements to remove the phrase “Responsible Party” or “any other term that suggests that a non-resident is responsible to pay for a resident’s case,” (2) to include a “prominent and easy-to-read” disclosure adjacent to the signature line of any document that commits the relative to pay for the resident’s care that warns the relative they are not obligated to do so, and (3) to “not engage in any unlawful trade practice prohibited by … the Federal Nursing Home Reform Act.”Footnote 68
In short, nursing homes’ use of “responsible party” clauses runs up against the FNHRA, either by outright ignoring Subsection A and requiring relatives to personally guarantee the resident’s bills (as with the D.C. nursing homes), or by using contractual language that makes these guarantees seem “voluntary” while creating a stressful and misleading admission process that compels the relative to sign (as in Podolsky).
(2) a promise to ensure continuity of payment
Other forms of the “responsible party” clause are used by nursing homes to hold relatives responsible for the resident’s unpaid bill. In these scenarios, relatives contractually promise to take certain actions to ensure the nursing home receives payment, which include (i) using the resident’s assets to pay the nursing home directly, and/or (ii) applying for Medicaid on the resident’s behalf and submitting all necessary documentation to maintain the resident’s Medicaid eligibility. These two corollaries of the promise to ensure payment are discussed below.
(i) “Responsible party” clauses that penalize a relative for not using the resident’s assets to pay the nursing home are valid under Subsection B.Footnote 69 First, though, nursing homes must present some evidence that the relative had actual access to the resident’s assets.Footnote 70 In Prospect Park Nursing Home v. Goutier, a nursing home’s breach of contract claim was dismissed because the nursing home failed to show (1) that the relative—the resident’s friend who signed the admission agreement as a “responsible party”—had meaningful legal access to the resident’s assets and (2) that the resident had enough assets to pay the nursing home bill in the first place.Footnote 71 Proof that a relative had the resident’s durable power of attorney usually satisfies this threshold requirement.Footnote 72 Courts then validate these “responsible party” clauses under Subsection B so long as the relative is limited to using only the resident’s assets and not their own. But if the relative does not follow through, they become personally liable for the resident’s unpaid bill.Footnote 73 Thus, in Sunshine Care Corp. v. Warrick, a nursing home successfully argued that the following “responsible party” clause was valid under the FNHRA:
The agreement stated, inter alia, that the designated representative agrees to “provide payment from the resident’s income or resources to the extent that he/she has access to such income and resources without the designated representative incurring personal financial liability”…. However, the agreement goes on to state that the designated representative would incur personal liability “if her actions or omissions have caused or contributed to the nonpayment of Facility’s fees,” and that such actions or omissions included “(i) a failure to utilize the resident’s funds to pay for the resident’s care at the Facility when the designated representative has control over the resident’s funds by way of a Power of Attorney [or] access to joint accounts, [or] (ii) misappropriating the resident’s funds.” Thus, the defendant could be held personally liable for the cost of the decedent’s care if it was shown that she breached the terms of the agreement by impeding the nursing home from collecting its fees from the decedent’s funds or resources over which the defendant exercised control.Footnote 74
The court then held that the relative had shirked their contractual obligation to pay the nursing home using the resident’s funds and was therefore personally liable for the full amount owed to the nursing home.Footnote 75
(ii) Another duty that “responsible party” clauses frequently assign to relatives is the duty to assist the resident in applying for and maintaining Medicaid benefits. This duty can consist of helping the nursing home compile the necessary documentation for the resident’s Medicaid application, or, in some cases, filing the application independently on the resident’s behalf.Footnote 76 Nursing homes lean on these promises to blame the relative for the denial of the resident’s benefits—and by extension, the suspension of payment to the nursing home.Footnote 77 In Meadowbrook C enter , Inc. v. Buchman, a relative contractually agreed to “inform the [f]acility of the status of the [r]esident’s assets,” to apply for Medicaid on the resident’s behalf, to provide all timely documentation required for the application, and “to act promptly and expeditiously to establish and maintain eligibility for Medicaid assistance,” and then failed to do so.Footnote 78 The court upheld the clause’s validity under the FNHRA and ruled that the relative was liable for the unpaid expenses caused by the resident’s lack of Medicaid coverage.Footnote 79
Relatedly, nursing homes must also demonstrate that the relative’s failure to cooperate was the direct and proximate cause of the nonpayment.Footnote 80 In Nassau Operating Co., LLC v. DeSimone, a relative agreed to “be held personally responsible and liable if his/her actions or omissions have caused and/or contributed to nonpayment of the [plaintiff’s] fees.”Footnote 81 The nursing home accused the relative of failing to “timely document and secure Medicaid payments,” but the relative avoided liability because the court found that the resident’s denied Medicaid application was not affected by the relative’s neglect of their contractual duties.Footnote 82
To sum up, courts have consistently held that the FNHRA poses no barrier to requiring relatives to take actions that help a nursing home get paid, so long as those responsibilities are not tantamount to a financial guarantee. That is a reasonable approach. After all, nursing homes are businesses that need to be paid and be able to vindicate their contractual rights. But, momentarily putting aside the problematic nursing home practices previously discussed, the caselaw rarely discusses the impact of bad faith acts by the nursing home. For instance, some nursing homes are aware that a resident’s Medicaid benefits have been denied or terminated but then delay in notifying—either purposefully or carelessly—the relative of the same.Footnote 83 In this interim period, expenses accrue. The relative later faces a higher bill, more demanding collection efforts, and a lawsuit with higher stakes, some of which could have been avoided had the nursing home provided timely notice to the relative.Footnote 84
With an understanding of the FNHRA’s intricacies and shortcomings, Part V examines existing proposals for some of the problems identified above and offers new solutions.
V. Proposed Solutions
The FNHRA’s biggest flaw is its failure to account for the harsh realities of the nursing home admission process. As courts and scholars have recognized, admitting a loved one into a nursing home is a uniquely stressful event.Footnote 85 Nursing homes hold all the cards, and relatives’ ability to “shop around” and compare different admission agreements is limited, leading to a great power imbalance between the parties.Footnote 86 Relatives receive little guidance from the nursing home and are rushed to “sign here” without a proper understanding of what they’re signing.Footnote 87 And again, nursing homes have no incentive to stop these practices; it is in the nursing home’s interest to obtain as many contractual guarantees and promises from the relative as possible.Footnote 88 Accordingly, this area is ripe for new regulation on how nursing homes should approach the admission process and the solicitation of contractual responsibility from third parties.Footnote 89
Implementing a “waiting” period of at least one day between the resident’s admission and any solicitation of a voluntary guarantee from the relative would create a clear separation between the two events and mitigate mixed messaging about whether such a guarantee is required. Footnote 90 This idea was proposed by the Podolsky court in 1994, but no evidence suggests that it has been widely adopted by nursing homes or enacted by legislatures since then. Under this proposal, nursing homes could still protect themselves by obtaining other contractual assurances at the time of admission, such as the previously discussed promise to ensure continuity of payment by using the resident’s assets or by helping the resident apply for Medicaid. Though it might be burdensome to require a nursing home to hold a separate meeting with a relative to solicit a voluntary guarantee, this burden is outweighed by the massive financial liability that a relative assumes in these scenarios.
Other regulatory changes could also improve the nursing home admission process by increasing transparency. For example, as in Washington D.C., nursing homes should be required to include easy-to-read, bolded text explaining that relatives cannot be required to assume personal financial liability under FNHRA Subsection A.Footnote 91 Going one step further, the bolded text should also inform relatives that they can be held liable for failing to ensure the resident’s continuity of payment under FNHRA Subsection B. Although “responsible party” clauses already typically include some language that says a relative can be held personally liable for their failure to fulfill these promises, this point bears emphasis and should not be buried in the fine print. Plus, this proposal would also counteract small print and limited readability, which are significant problems with admission agreements.Footnote 92
Additionally, CMS could create a script to be read by the nursing home to all residents and relatives during admission to fully advise them of their rights and protections under federal law. Using a CMS script would cost the nursing home almost nothing to implement and would leave little room for misunderstanding on the relative’s part. However, without an effective enforcement mechanism, this reform could be easily evaded. Therefore, CMS should also require nursing homes to include a representation in every admission agreement that roughly states as follows: “the Nursing Home represents that it has advised the Resident and the Responsible Party of all rights, protections, and information available to them under state and federal law, including, but not limited to, all nursing home disclosures mandated by the Centers for Medicaid and Medicare.” Nursing homes will have greater incentive to make sure residents are fully informed and are read the script, or otherwise risk invalidating the admission agreement.
Alternatively, CMS could provide guidance to nursing homes by creating a FNHRA-compliant model “responsible party” clause that clearly and thoroughly explains the responsibilities that residents and relatives are assuming. Because many relatives have expressed surprise and shock at being sued by nursing homes,Footnote 93 more transparency and better communication between all parties are needed during admission.
The Medicaid application process must also be refined. The Medicaid program is deeply intertwined with U.S. nursing home care.Footnote 94 Accordingly, any institutional change to the FNHRA and to nursing home practices must be accompanied by some significant change to Medicaid (and Medicare, though the latter covers a smaller number of residentsFootnote 95). As previously explained, when a resident’s Medicaid application is denied or not filed in a timely manner, nursing homes cannot receive payment from CMS, so they sue relatives to recover the unpaid amount.Footnote 96 The longer it takes for a Medicaid application to be submitted, or for an application to be granted or denied, the more a resident’s medical expenses accrue with the risk that they might not be covered. If an application is ultimately rejected, the relative and resident should have sufficient time to adjust accordingly before liability becomes too great. Unfortunately, Medicaid applications are complicated and are commonly rejected, for instance, if the applicant does not provide all necessary documentationFootnote 97—and a relative filing out an application may not have ready access to these documents, especially if they are not a member of the resident’s immediate family, thus causing additional delay. CMS and state health agencies should simplify and streamline the Medicaid application process to lessen the time residents and their relatives are left in administrative limbo. Given the high cost of nursing home care and the large impact that an application denial can have on other parties besides the applicant, Medicaid should prioritize applications related to nursing home care to produce eligibility decisions more quickly. This proposal would make it easier for residents and relatives to understand whether they need to seek alternative payment sources during the early stages of nursing home care before costs become overwhelming.
Lastly, being able to go over an admission agreement with a lawyer would help relatives understand important—but complicated—topics, like the distinction between a voluntary and a conditional financial guarantee. But this proposal is unrealistic given the cost of hiring a lawyer and the time-sensitive nature of nursing home admissions. Perhaps this solution could take the form of a newly created “nursing home family advocate” position—similar to a case manager in a hospitalFootnote 98 or a social worker—whose sole responsibility is to carefully walk through admission paperwork with the resident and their relative. This advocate might, for example, go over the resident’s rights under the FNHRA in detail and answer questions. Or the advocate might explain that, while the relative is not required to personally guarantee the resident’s nursing home bills, the nursing home still has other avenues to sue the relative and recover the resident’s medical costs. This way, all parties will have a clearer understanding of the risks they are assuming. A version of this proposal already exists—most state governments have ombudspersonsFootnote 99 available to help residents resolve disputes with their nursing home and to educate residents and their families about their rights.Footnote 100 However, ombudspersons are not mentioned frequently in caselaw or literature, suggesting that this is not a well-known or well-utilized resource. More efforts to spread awareness of this valuable resource are needed.
VI. Conclusion
In conclusion, a recent uptick in nursing home debt collections has drawn attention to the role of admission agreements in causing relatives to be financially liable for their loved one’s care. Many relatives unwittingly assume this financial responsibility when they sign the agreement’s “responsible party” clause. These clauses include carefully worded promises made to the nursing home, which the nursing home later uses to sue the relative for breach of contract to recover the resident’s unpaid balance. Courts have primarily held that “responsible party” clauses comply with the FNHRA so long as they do not explicitly require a relative to act as the resident’s financial guarantor. In practice, however, nursing homes possess various methods for achieving the same result and holding a relative personally liable for a resident’s debts without running afoul of the FNHRA. In response to these issues, CMS should protect relatives by requiring a one-day waiting period between admission and the nursing home’s solicitation of a “responsible party,” and by requiring nursing homes to incorporate larger print and clearer textual and verbal explanations about the role of a “responsible party” into the admission agreement. The Medicaid application process should also be streamlined to decrease the time residents accrue expenses without coverage, which will lessen the relative’s potential liability. Lastly, nursing homes should employ a designated advocate who will explain the legal risks and liabilities associated with admission agreements.
Acknowledgements
Thank you to my advisor, Professor Kathryn Zeiler, for lending her wisdom and thoughtfulness to this Note; her superb guidance was crucial to this Note’s completion. Thank you to my partner, Lara, and my family, whose love and support motivate me in every endeavour, including the writing of this Note.
