Arbitration Clauses and Nursing Home Admissions

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Arbitration Clauses and Nursing Home Admissions

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The Seventh Amendment affords Americans the constitutional right to a trial by jury.  Citizens can waive that right by contract or otherwise.  A common waiver of the right to a jury trial is by agreeing to an arbitration clause.

If a contract contains an arbitration clause, typically it restricts the individual’s right to sue the other party in a court of law.  Instead, the parties agree to use a more informal method of arbitrating their dispute to come to an agreement.

This scenario commonly occurs in nursing home admission agreements.  Prior to admission to a nursing facility, the facility requires the individual to sign an admission agreement.  Among other things, the admission agreement provides for the daily charge for the individual’s room, requires the individual to pay that charge upon invoice, and arranges other terms for the individual to reside and receive medical treatment at the facility.

The admission agreement itself, or sometimes a separate addendum to the admission agreement, usually contains an arbitration clause.  By signing the admission agreement and arbitration clause, the individual agrees to waive his or her right to sue the facility in a court.

Many times, the individual or their family members are unaware that this provision exists within the admission agreement, but they sign it any way.  They sign it because they are in a crisis situation where the individual or a family member desperately needs nursing home care and cannot reside at home.  The focus is on having the individual admitted and cared for, so the details of the admission agreement get lost in the shuffle.

For many people, the arbitration agreement will not affect their stay or relationship with the facility.  In fact, many people may never learn about the arbitration agreement because there is no reason for it to become an issue.

The problem arises when there is a dispute between the individual and the facility.  Perhaps the individual or the individual’s family believe that the facility is not providing proper care for to the resident.  If there is an arbitration clause in the admission agreement, the family’s only recourse may be arbitration.

Arbitration is not necessarily a “bad” course of action if a dispute arises.  Arbitration can be a quicker, cheaper, and more informal way to settle a dispute.

Some concerns arise, however, because many arbitration agreements allow the facility to choose the arbitrator, and some agreements limit the amount of damages that can be recovered by the individual.  Moreover, because nursing home admissions are often emergency situations, family members do not have time or the ability to review and negotiate with the facility regarding the arbitration agreement.

In October 2016, the US Supreme Court reviewed a Kentucky Supreme Court decision regarding the authority of an agent under a power of attorney to enter into an arbitration agreement on behalf of the individual.

In two Kentucky cases, consolidated as Kindred Nursing Centers L P et al. v. Clark et al., the agents contracted for the individuals’ admission to a nursing facility.  After both individuals died, the estates of the individuals filed lawsuits against the facility for substandard care.  The facility moved to dismiss the lawsuits due to the arbitration clauses within the admission agreements.

The Kentucky trial and appellate courts denied the facility’s motions and allowed the estate’s lawsuits to move forward.  The Kentucky Supreme Court agreed and stated that a general power of attorney is not sufficient to allow an agent under the power of attorney to enter into an arbitration agreement and waive the individual’s constitutional right to a jury trial.

The US Supreme Court reversed that decision.  The Federal Arbitration Act requires arbitration clauses to be treated the same as any other contract, and it prohibits specific rules that disadvantage arbitration.  Because of that, the Supreme Court held that an arbitration agreement entered into by an agent under a power of attorney is enforceable by the other party to the agreement.

The Obama administration moved to ban arbitration agreements in nursing home admission contracts, but the Trump administration has proposed to withdraw the ban.  The Columbus Dispatch recently printed an article relating to this issue, which you can read here.

It is important to thoroughly review the nursing facility’s admission agreement before signing it.  Although the agreement may need to be signed quickly and under a stressful situation, be sure to understand what you are agreeing to before signing it.  We often review admission agreements for clients to help them better understand the effects of the agreement.