Arbitration Clauses in Nursing Home Contracts may be upheld

Under some circumstances, courts have refused to uphold arbitration provisions in nursing home contracts. Oftentimes, these provisions are upheld. There are a variety of considerations, including the legal authority of the person who signed the contract; the adequacy of notice; the opportunity to read and consider the contract before signing; and other factors. In Estate of Ruszala vs Brookdale Living Communities, the Appellate Division of  NJ Superior Court delved in detail into the competing considerations between “our State’s laws protecting the elderly and infirm against a national policy favoring arbitration as an alternative forum for resolving civil disputes.” Federal law concerning arbitration clauses in nursing home admissions contracts requires  — among other things — that arbitration be optional not mandatory, and that the resident’s right to remain in the facility cannot be contingent on signing a binding arbitration agreement,

42 CFR 483.70(n) spells out the requirements:

(n) Binding arbitration agreements. If a facility chooses to ask a resident or his or her representative to enter into an agreement for binding arbitration, the facility must comply with all of the requirements in this section.

(1) The facility must not require any resident or his or her representative to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility and must explicitly inform the resident or his or her representative of his or her right not to sign the agreement as a condition of admission to, or as a requirement to continue to receive care at, the facility.

(2) The facility must ensure that:

(i) The agreement is explained to the resident and his or her representative in a form and manner that he or she understands, including in a language the resident and his or her representative understands;

(ii) The resident or his or her representative acknowledges that he or she understands the agreement;

(iii) The agreement provides for the selection of a neutral arbitrator agreed upon by both parties; and

(iv) The agreement provides for the selection of a venue that is convenient to both parties.

(3) The agreement must explicitly grant the resident or his or her representative the right to rescind the agreement within 30 calendar days of signing it.

(4) The agreement must explicitly state that neither the resident nor his or her representative is required to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility.

(5) The agreement may not contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state, or local officials, including but not limited to, federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsman, in accordance with § 483.10(k).

(6) When the facility and a resident resolve a dispute through arbitration, a copy of the signed agreement for binding arbitration and the arbitrator’s final decision must be retained by the facility for 5 years after the resolution of that dispute on and be available for inspection upon request by CMS or its designee.

A recent case illustrates the analysis of a situation in which the aggrieved plaintiff’s effort to avoid arbitration was rejected by the Court. The decision is “not approved for publication,” and is not precedential; its decision is limited to its facts, but is still useful because it illustrates how these situations arise. Estate of Greenstein v. Regency Heritage Nursing & Rehab Ctr., LLC, N.J. Super. App. Div. (per curiam) (12 pp.) involved a situation in which Greenstein was admitted to a skilled nursing facility in 2013 and later developed medical complications. At the time of admission, HER daughter met with the admissions officer and was given a large stack of documents to sign which included notices about arbitration. Several years later, a suit was filed against the facility for damages due to alleged negligent treatment, and the facility moved to dismiss the suit and to enforce the arbitration provision of the contract. The Court found that the daughter had legal authority to sign the contract, and rejected her claim that there had been inadequate notice or inadequate opportunity to review the contract before signing. The dismissal was sustained.

One point that piqued my interest was that the trial judge found that  the daughter “had authority to sign the document as the responsible party acting on behalf of Greenstein,”  but in the appellate decision, there was no explanation of just what “authority” the daughter had. There’s no mention of her being a Guardian, or an Agent under Power of Attorney. So she may have voluntarily accepted obligations as “Responsible Party,” which is a voluntary assumption of obligation by a third party that is found in most admissions contracts for skilled nursing facilities and assisted living facilities. For more about that, see my previous posts. 

For review of admissions agreements and advice on nursing home care issues, contact us at …… 732-382-6070