California Nursing Chain Must Change “Guarantee”


Eunice Walker, an elderly California resident, suffered a massive stroke in August, 1990. She was admitted to a local hospital for a short period, but when the treatment failed to return her to her former level of independence the hospital informed her that she would need to find a nursing home placement.

Because Ms. Walker was not able to make her own placement arrangements her daughter, Darlene Brozovich, actually made the contacts with nursing homes and selected a suitable placement for her mother. Her choice was to place Ms. Walker in Hillhaven Hospital of Orange, California.

When Ms. Brozovich arrived at Hillhaven to sign her mother in, she was presented with a stack of admitting papers. The director of Hillhaven told her she would need to sign all the forms, and that they were “routine.” She was also told that Medicare would “cover” her mother’s care. What she was not told was that she signed a “Guarantee of Payment” promising to pay for her mother’s care in the event that other sources were unavailable or insufficient.

Ms. Brozovich’s situation was not unique. In fact, the Hillhaven nursing home chain (which owns 42 California nursing homes) routinely included a guarantee of payment in their admission forms, and scores of family members unknowingly signed such forms. When Hillhaven sought to secure payment from Ms. Brozovich, she joined with other family members of Hillhaven patients to sue the chain over its admission practices.

Hillhaven, in turn, pointed out that its “Guarantee of Payment” form clearly provided that the person applying for admission “is not required, and cannot be required, to sign a Guarantee of payment as a condition of admission” to the facility. The chain also noted that family members received some benefit from guaranteeing payment, since the form provided that the patient would be given an additional 15 days notice before discharge for nonpayment (federal law already required 30 days notice), and would be provided copies of all billings.

Ms. Brozovich and the other plaintiffs had several counter-arguments. Since the patients were already entitled to copies of billings, they said, agreeing to give an additional copy to family members was not much of a concession on the part of Hillhaven. Similarly, agreeing to extend the 30-day period for notice of discharge to 45 days was not much additional benefit. Since Hillhaven had not given family members any additional benefit, Ms. Brozovich argued, the “agreement” to guarantee payment was unenforceable.

More importantly, the plaintiffs insisted that Hillhaven’s practice of including the guarantee in a thick packet of “routine” forms was a deceptive practice. Last week, the California Court of Appeals agreed. The Court objected to “an admissions process in which a stack of documents was hurriedly presented with little or no explanation.” The Court also found that the practice of calling the family member securing admission a “responsible party” confused the issue; family members were led to believe that they had no choice but to pay for their loved ones’ care.

The Court of Appeals sent the matter back to the trial court for further action, but with instructions. Among the requirements imposed by the Court of Appeals: Hillhaven must fully and completely explain the guarantee form both orally and in writing, and must clearly tell applicants that they need not sign the form. Podolsky v. National Medical Enterprises, Inc., Oct. 29, 1996.

[Editor’s note: Arizona law provides an additional defense against “third-party guarantees” where the family member signing the form is married, but the practice of securing signatures from “responsible parties” is widespread.]

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