Arbitration Clauses in Nursing Home Contracts

AUGUST 5, 2013 VOLUME 20 NUMBER 29

Ever signed a loved one into the nursing home? If so, you will recall the pile of forms you were handed. One probably authorized them to take pictures of your family member and use them in promotional material. Another authorized the facility to bill Medicare directly. Another … well, you get the idea.

Buried in the main form, though, was probably a paragraph about “arbitration.” You probably were asked to separately initial that provision, and you might well have done so. And if you haven’t had this experience yet, you are likely to run into it as a parent, spouse or other family member ages and requires more nursing or medical care.

What is the effect of those arbitration provisions? Generally, they require that any dispute you later have with the facility — like allegations of inadequate care, or injuries caused by an employee’s negligence (or even willful acts) — would have to be submitted to an arbitration process as an alternative to court action. You are basically being asked to sign away your family member’s right to sue, and to collect full damages for any injury inflicted. By signing, you also give up any right to take the matter back through the court system if the arbitration mechanism does not work for you or your loved one.

Can they do that? Courts have been divided over whether mandatory arbitration agreements are even enforceable. There is a strong preference for alternative dispute resolution, and many courts have upheld arbitration agreements on that basis. But a handful — including, now, an Arizona appellate court — have found mandatory arbitration clauses unconscionable and unenforceable.

Jim Cartwright (not his real name) was 88 years old when he entered a Phoenix-area nursing home for recovery after hip surgery. He actually signed himself in, though not until he had been in the facility for three days. One provision of the admission agreement called for mandatory arbitration of any dispute he might have with the facility — though it did not require arbitration if the facility later decided it wanted to sue Jim.

During his short stay, Jim acquired a pressure ulcer on his back — severe enough to expose bone and requiring medical attention and further long-term care. He claimed that this was the result of negligent care provided by the facility, and he sued.

The nursing home pointed to the mandatory arbitration provision and asked for dismissal of the lawsuit. Jim’s only recourse, according to the facility, was to submit his claims to an arbitration panel chosen by the two parties. The arbitration ruling would be final and unappealable. It also would require Jim to pay initial arbitration costs of about $22,800 in order to even get a hearing on the subject.

The trial judge refused to dismiss Jim’s lawsuit, and the nursing home appealed. The Arizona Court of Appeals last week ruled that the facility’s arbitration agreement — signed or not — was unconscionable and could not be enforced. His lawsuit can now go forward.

There are two reasons the trial court and the Court of Appeals invalidated the arbitration provision. One was that it would effectively bar Jim from recovering anything for his injuries, since there is no way he could come up with the $22,800 it would cost to get the arbitration started. The other was because of the way the facility crafted the agreement, requiring Jim’s claims to go to arbitration but preserving access to the court system for themselves in any future dispute. Clark v. Renaissance West, LLC, July 30, 2013.

Does this mean that your arbitration provision will also be struck down if you choose to sue a nursing facility some day? Not necessarily. The complexity of Jim’s case, and the fact that three arbitrators might be required, contributed to the court’s finding. A better option is to simply not sign an arbitration provision in the first place.

How can you avoid signing an arbitration agreement if you admit yourself or a loved one to a facility? Look at the admission agreement. Find the provision about arbitration. Draw lines through it (or a big “X” across it). Do not initial where it says “initial here”. You are not required to sign away your rights in order to enter a nursing facility.

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3 Responses

  1. Good Post and good result from the court; Thank you.

    Some additional comments:

    First, Federal law prohibits facilities who accept Medicare from REQUIRING resident to sign binding arbitration;

    Second, my state, Virginia, has provision that resident can opt out of binding arbitration within 30 days of leaving facility

    Third: I tell my clients (and tell them to tell their friends) NOT to sign ANYTHING with an ALF or SNF without a qualified lawyer reviewing it.

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