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Read It Three Times, Then Read It Again: How Nursing Homes Use “Responsible Party” Clauses in Admission Agreements to Charge Relatives for Their Loved Ones’ Care
Published online by Cambridge University Press: 02 April 2024
Abstract
This Note explores an alarming, decades-old trend that has received renewed attention from enforcement agencies and the media: nursing homes suing family members and friends ("relatives") for residents’ unpaid bills. As justification, nursing homes point to “responsible party” clauses within admission agreements signed by relatives during the admission process. Undeterred by the 1987 Federal Nursing Home Reform Act’s (FNHRA) prohibition on requiring relatives to act as financial guarantors in exchange for residents’ admission, nursing homes use carefully worded “responsible party” clauses to obtain virtually the same result: relatives’ total liability for residents’ unpaid balances. Relatives are frequently caught off-guard by these lawsuits; many who sign admission agreements do so without a proper understanding of the potential liability they are assuming and have limited (if any) access to residents’ assets. This problem is aggravated by several aspects of the admission process that disadvantage relatives, such as the stressful and emotional nature of admission, the complicated language in admission agreements, and the inadequate—at times, misleading—guidance provided by nursing homes. This Note examines the tension between the FNHRA’s financial protections for relatives and nursing homes’ admission practices and use of “responsible party” clauses. Furthermore, this Note proposes solutions aimed at better informing relatives of the legal risks associated with “responsible party” clauses.
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References
1 See Noam M. Levey, Nursing Homes Are Suing the Friends and Family of Residents to Collect Debts, Kaiser Health News (July 28, 2022), https://khn.org/news/article/diagnosis-debt-nursing-home-lawsuits-third-party-debt-collection/ [https://perma.cc/38UJ-CRP2].
2 Id.
3 Id.
4 See generally Pub. L. 100–203, Title IV, Subtitle C, §§ 4201 to 4218, Dec. 22, 1987, 101 Stat. 1330–160.
5 See Podolsky v. First Healthcare Corp., 50 Cal.App.4th 632, 646 (Cal. App. 2 Dist. 1996).
6 42 U.S.C.A. § 1395i-3(c)(5)(A)(ii) (West 2021); 42 U.S.C.A. § 1396r(c)(5)(A)(ii) (West 2021).
7 See Part IV, infra (describing types of contractual promises used by nursing homes in admission agreements to hold relatives independently liable for resident’s unpaid bills); e.g., Meadowbrook Ctr., Inc. v. Buchman, 90 A.3d 219, 238, 240 (Conn. App. 2014) (holding that defendant could be held personally liable under “responsible party” clause for failure to file Medicaid application on his mother’s behalf).
8 See, e.g., Buchman, 90 A.3d at 223-25, 238, 240-41.
9 Nursing Home Law Center LLC, Who Regulates Nursing Homes? (last visited Apr. 10, 2023), https://www.nursinghomelawcenter.org/who-regulates-nursing-homes.html [https://perma.cc/6KJW-3PQK].
10 See 42 C.F.R. § 483.15 (2021).
11 See Levey, supra note 1; Economic Impact of the Growing Burden of Medical Debt: Hearing Before the Comm. On Banking, Housing, and Urban Affairs, 117th Cong. (2022) (statement of Robyn King, Client, Legal Aid Society of Cleveland) (relative was “shocked” to learn she was “suddenly on the hook for paying a huge bill” of over $70,000) [hereinafter “Statement of Robyn King”].
12 Nursing Homes, Off. of Inspector Gen., Dep’t of Health & Human Servs., (Mar. 31, 2023), https://oig.hhs.gov/reports-and-publications/featured-topics/nursing-homes/ [https://perma.cc/2KUH-7MKT].
13 Priya Chidambaram, A Look at Nursing Facility Characteristics Through July 2022, KFF (Aug. 24, 2022), https://www.kff.org/medicaid/issue-brief/a-look-at-nursing-facility-characteristics-through-july-2022/ [https://perma.cc/SKK8-K9FX].
14 Ctrs. for Medicare & Medicaid Servs., Nursing Home Care, https://www.medicare.gov/coverage/nursing-home-care [https://perma.cc/7AWH-XPYV] (last visited Apr. 15, 2023); Ctrs. for Medicare & Medicaid Servs., Skilled Nursing Facility (SNF) Care, https://www.medicare.gov/coverage/skilled-nursing-facility-snf-care [https://perma.cc/28QB-PVX4] (last visited Apr. 15, 2023); see also Ctrs. for Medicare & Medicaid Servs., Medicare Coverage of Skilled Nursing Facility Care 6, 14, https://www.medicare.gov/Pubs/pdf/10153-Medicare-Skilled-Nursing-Facility-Care.pdf [https://perma.cc/G3JB-3P6Y] (last visited Apr. 15, 2023).
15 Ctrs. for Medicare & Medicaid Servs., Institutional Long Term Care, https://www.medicaid.gov/medicaid/long-term-services-supports/institutional-long-term-care/index.html [https://perma.cc/65UL-9QZB] (last visited Apr. 15, 2023); MacLean Holloway Doherty & Sheehan, P.C., The Basic Rules of Nursing Home Medicaid Eligibility, https://mhdpc.com/the-basic-rules-of-nursing-home-medicaid-eligibility/ [https://perma.cc/4ZQD-RTG8] (last visited Apr. 10, 2023).
16 Ctrs. for Medicare & Medicaid Servs., Custodial Care vs. Skilled Care, https://www.cms.gov/Medicare-Medicaid-Coordination/Fraud-Prevention/Medicaid-Integrity-Education/Downloads/infograph-CustodialCarevsSkilledCare-%5BMarch-2016%5D.pdf [https://perma.cc/V8E4-8E5K] (last visited Apr. 10, 2023).
17 42 U.S.C.A. § 1395i-3 (West) (applies to Medicare-certified skilled nursing facilities); 42 U.S.C.A. § 1396r (West) (applies to Medicaid-certified nursing facilities). These two laws are virtually identical. Unless otherwise stated, any mention of the FNHRA in this Note refers to both statutes and the corresponding sections therein.
18 Medicaid Issues in Family Welfare and Nursing Home Reform: Hearings on H.R. 2270 Before the Subcomm. on Health & the Env’t, 100th Cong. 93-94 (1987) (statement of Rep. Hen A. Waxman, Chairman, Subcomm. on Health & Env’t).
19 See id. (alluding to the poor quality of nursing home care in America and describing the need for legislative reform); Katherine C. Pearson, Responsible Thing to Do About Responsible Party Provisions in Nursing Home Agreements: A Proposal for Change on Three Fronts, 37 U. Mich. J.L. Reform 757, 760-61 (2004); see also Eric Carlson, Illegal Guarantees in Nursing Homes: A Nursing Facility Cannot Force a Resident’s Family Members and Friends to Become Financially Responsible for Nursing Facility Expenses, 30 Clearinghouse Rev. 33, 34 (1996).
20 42 U.S.C.A. § 1395i-3(c)(4) (West); 42 U.S.C.A. § 1396r(c)(4) (West).
21 42 U.S.C.A. § 1395i-3(c)(5)(A)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(A)(ii) (West).
22 42 U.S.C.A. § 1395i-3(c)(5)(B)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(B)(ii) (West).
23 42 U.S.C.A. § 1395i-3(c)(5)(A)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(A)(ii) (West).
24 See Levey, supra note 1 (describing several cases in multiple states where relatives helped admit their loved ones into a nursing home and fill out admission paperwork, only to later be sued by the nursing home for the resident’s unpaid bills).
25 42 U.S.C.A. § 1395i-3(c)(5)(B)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(B)(ii) (West).
27 See Levey, supra note 1.
28 Id. (scroll to “Trapped by Paperwork” section of article and click on hyperlink titled “making friends and relatives a ‘responsible party’ (p. 4)”); Cnty. of Monroe v. Lawson, No. 4:17-CV-2952 JCH (E.D. Mo. Jul. 12, 2018) Ex. 4 (available at https://www.documentcloud.org/documents/22121933-e2020010204_county_of_monroe_v_james_lawson_et_al_exhibit_s__4#document/p4/a2131991 [https://perma.cc/TS5W-FARA]).
29 See, e.g., Wedgewood Care Ctr., Inc. v. Kravitz, 154 N.Y.S.3d 312, 315-16 (N.Y. App. Div. 2d Dept. 2021); National Church Residences First Community Village v. Kessler, NO. 14-22-22, 2023 WL 3162188, at * 8-11 (Ohio App. 3 Dist., 2023).
30 Carlson, supra note 26, at 525; Christina Lesher, Andrea Wilson & Kerrie Wesley, Whose Bill Is It Anyway – Adult Children’s Responsibility to Care for Parents, 6 Est. Plan. & Cmty. Prop. L.J. 247, 260 (2014).
32 Lesher et al., supra note 30, at 259.
33 See 42 C.F.R. § 483.15(a)(3) (2021).
34 See generally 42 C.F.R. § 483 (2021).
35 See generally id.
36 Letter from the Ctrs. for Medicaid & Medicare Servs. and the Consumer Fin. Prot. Bureau to nursing homes and debt collectors (Sept. 8, 2022), https://files.consumerfinance.gov/f/documents/cfpb_nursing-home-debt-collection_joint-letter_2022-09.pdf [https://perma.cc/3RFS-63UN].
37 Id.
38 Consumer Fin. Prot. Bureau, Consumer Financial Protection Circular 2022-05 (Sept. 8, 2022), https://www.consumerfinance.gov/compliance/circulars/circular-2022-05-debt-collection-and-consumer-reporting-practices-involving-invalid-nursing-home-debts/#3 [https://perma.cc/R36Q-UUVB].
39 Press Release, U.S. Dep’t of Health & Human Services, HHS Joins CFPB to Protect Nursing Home Residents and Their Caregivers from Illegal Debt Collection Practices (Sept. 8, 2022), https://www.hhs.gov/about/news/2022/09/08/hhs-joins-cfpb-protect-nursing-home-residents-and-their-caregivers-illegal-debt-collection-practices.html [https://perma.cc/8KM8-GKZ9].
40 Donna Myers Ambrogi, Legal Issues in Nursing Home Admissions, 18 L. Med. & Health Care 254, 255 (1990).
41 Id. at 255.
42 Id. at 256-58.
43 Id. at 258.
44 Id. at 258.
45 See 42 U.S.C.A. § 1395i-3(c)(5)(A)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(A)(ii) (West).
46 See Podolsky, 50 Cal.App.4th at 646 (finding that “responsible party” in admission agreement was merely solicitation of voluntary third-party guarantee and thus did not violate the FNHRA) and relevant discussion in Part IV Section 1, infra.
47 See, e.g., id (approving nursing home’s solicitation of voluntary third-party guarantee under the FNHRA, though ultimately ruling against nursing home for deceptive business practices under state law); Pioneer Ridge Nursing Facility Operations, L.L.C. v. Ermey, 203 P.3d 4, 7-8 (Kan. App. 2009) (discussing how FNHRA does not prohibit nursing homes from asking relatives to voluntarily act as resident’s financial guarantors, so long as that guarantee is not required for admission); Manor of Lake City, Inc. v. Hinners, 548 N.W.2d 573, 576 (Iowa 1996).
49 Carlson, supra note 26, at 524-25; Carlson, supra note 19, at 38-39. Hypothetically, nursing homes could offer additional benefits to the relative and/or the resident as consideration for the relative’s signature on the “responsible party” clause—benefits that are not available to those families that do not sign (e.g., lower prices). However, to this Author’s knowledge, the literature does not mention any such benefits. In fact, scholars usually suggest the opposite: that relatives and residents gain nothing from “responsible party” clauses. See Carlson, supra note 26, at 524-25; Carlson, supra note 19, at 38-39; Rebecca J. Benson, Check Your Rights at the Door: Consumer Protection Violations in Massachusetts Nursing Home Admission Agreements, at ii, 16 (1997) (examining forty-five admission agreements and concluding that eighty-seven percent of the agreements “seek the signature of a ‘voluntary responsible party,’ despite the fact that such an agreement would provide no benefit to the resident, family member, or friend.”); see also Podolsky, 50 Cal.App.4th at 654-56 (reversing lower court judgment for nursing home in part because “responsible party” clause signed by relative may have lacked consideration).
50 Carlson, supra note 26, at 525.
51 See id.
52 See 42 U.S.C.A. § 1395i-3(c)(5)(A)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(A)(ii) (West).
53 See, e.g., Prospect Park Nursing Home v Goutier, No. 103442/04, 2006 WL 2251908, at *4 (N.Y. City Civ. Ct., Aug. 07, 2006) (nursing home offered no proof that relative had access to resident’s assets such that relative could have made payments to the nursing home).
54 See, e.g., Kessler, 213 N.E.3d at 838 (nursing home waited two months to contact relative after learning resident’s Medicaid benefits had been terminated); Statement of Robyn King, supra note 11 (Ohio nursing home took several months to inform relative that her mother’s Medicaid benefits had not been re-approved, causing relative to face unexpected $70,000 bill).
55 42 U.S.C.A. § 1395i-3(c)(5)(A)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(A)(ii) (West).
56 See Podolsky, 50 Cal.App.4th at 646.
57 Id. at 646.
58 Id. at 642 (emphasis added). Though this clause uses the word “guarantor,” the court found no difference between the terms “guarantor” and “responsible party” for purposes of its analysis. Id. at 645.
59 Id. at 646.
60 Id. at 652.
61 Id. at 652-53.
62 Id. at 652-54.
63 See id. at 652-54.
64 “Ahmad Keshavarz, an attorney who documented debt lawsuits around New York City, said nursing homes see adult children as more appealing targets than older residents. ‘Sons or daughters are more likely to have assets,’ he said. ‘They have wages that can be garnished.’” Levey, supra note 1.
65 See 42 C.F.R. § 483.15 (2021).
66 Off. of the Att’y Gen. for the Dist. of Columbia, Stopping Deceptive Billing Practices at Nursing Homes (July 30, 2020), https://oag.dc.gov/blog/stopping-deceptive-billing-practices-nursing-homes [https://perma.cc/AEX8-5VGD].
67 Id. (brackets in original).
68 Assurance of Voluntary Compliance, in re Stoddard Baptist Global Care, Inc. and Washington Center for Aging Services 4-5, https://oag.dc.gov/sites/default/files/2020-07/Stoddard-WCA-AVC.pdf [https://perma.cc/PV79-KV8R] (last visited Aug. 24, 2023) [hereinafter “Assurance of Voluntary Compliance”]. Tracking the language of Subsection B, this Assurance of Voluntary Compliance also included an exemption provision that permits nursing homes to “require a non-resident who has control over the resident’s funds to pay the [nursing home] with the resident’s funds.” Id.
69 See 42 U.S.C.A. § 1395i-3(c)(5)(B)(ii) (West); 42 U.S.C.A. § 1396r(c)(5)(B)(ii) (West).
70 See Prospect Park Nursing Home, No. 103442/04, 2006 WL 2251908, at *4.
71 Id.
72 See, e.g., id. at *3-4 (no proof that relative had legal access to resident’s assets where relative did not have power of attorney when he signed admission agreement nor while resident was living in nursing home); Sunshine Care Corp. v. Warrick, 957 N.Y.S.2d 122, 124 (N.Y. App. Div. 2d Dept. 2012).
73 See Warrick, 957 N.Y.S.2d at 124.
74 Id. at 124.
75 Id. at 124-25.
76 See, e.g., Buchman, 90 A.3d at 223, 238-240.
77 See id. at 238-41.
78 Id.
79 Id. But see Kessler, 2023 WL 3162188, at * 10 (holding that relative is not liable for failure to fulfill contractual promise to participate in resident’s Medicaid eligibility process, and that such promises are not enforceable under the FNHRA).
80 See Nassau Operating Co., LLC v. DeSimone, 171 N.Y.S.3d 528, 536-37 (N.Y. App. Div. 2d Dept. 2022).
81 Id.
82 Id.
83 See, e.g., Statement of Robyn King, supra note 11; Kessler, 2023 WL 3162188, at *7 (nursing home took several months to contact relative about resident’s Medicaid denial).
84 See Statement of Robyn King, supra note 11; Kessler, 2023 WL 3162188, at *7.
85 See Podolsky, 50 Cal.App.4th at 652; Part III, supra (reviewing literature).
86 See Lesher et al, supra note 30, at 259.
87 See id. at 259; see also Part II, supra (discussing typical admission process).
88 See supra note 64 and accompanying text (describing how adult children are “more appealing targets” for lawsuits than older residents, because the former likely has more assets). Again, this claim relies on the assumption that nursing homes do not lower their prices in exchange for such contractual guarantees and promises.
89 As discussed supra in Parts I and II, existing regulations mostly track the language of the FNHRA. See 42 C.F.R. § 483.15(a)(3) (2021).
90 See Podolsky, 50 Cal.App.4th at 657.
91 See Assurance of Voluntary Compliance, supra note 68.
92 See Ambrogi, supra note 40, at 256.
94 See Chidambaram, supra note 13.
95 See id.
96 See Buchman, 90 A.3d at 223-24, 238-240; Carlson, supra note 26, at 524-25.
97 Common Reasons for Medicaid Denial, E.A. Goodman L., https://www.eagoodmanlaw.com/medicaid-planning/common-reasons-for-medicaid-denial/ [https://perma.cc/NF2X-X3ND] (last visited Apr. 10, 2023).
98 See, e.g., Case Management, Tufts Med. Ctr., https://www.tuftsmedicalcenter.org/patient-care-services/patient-and-family-services/case-management [https://perma.cc/HLR6-FNZN] (last. visited Oct. 6, 2023).
99 An “ombudsperson” or “ombudsman” is “a person who investigates, reports on, and helps settle complaints: an individual usually affiliated with an organization or business who serves as an advocate for patients, consumers, employees, etc.” Ombudsman, Merriam-Webster, https://www.merriam-webster.com/dictionary/ombudsman (last visited Nov. 7, 2023).
100 E.g., Florida Ombudsman Program – Advocating for Quality Long-Term Care, https://ombudsman.elderaffairs.org [https://perma.cc/DSL5-FQQ2] (last visited Aug. 23, 2023); Massachusetts Long-Term Care Ombudsman Program, https://www.mass.gov/info-details/learn-more-about-the-ombudsman-program [https://perma.cc/9PCP-9EVP] (last visited Aug. 23, 2023).