Courts Off Limits to Nursing Home Residents

An increasing number of nursing homes are including binding arbitration agreements in their admissions contracts.

EDITOR'S NOTE: This article was originally published in the January 2012 issue of Kiplinger's Retirement Report. To subscribe, click here. (opens in new tab)

Seniors entering nursing homes tend to be frail, sick and anxious about the facilities' quality of care and astronomical costs. No wonder they -- and their loved ones -- rarely stop to consider whether they should be signing away their right to take the nursing home to court in case of a future dispute.

But in fact, many people entering nursing homes these days are doing exactly that. A growing number of facilities are including binding arbitration agreements in the pile of paperwork that new residents sign during the admissions process. These agreements stipulate that any future legal claims the resident or the resident's family might have against the nursing home -- even those involving abuse, neglect or wrongful death -- will be settled in a private arbitration process rather than before a judge and jury. In arbitration, disputes are submitted to one or more decision makers, often lawyers, who are supposed to be impartial and have expertise on the issue.

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The growing prevalence of arbitration agreements in nursing-home admission contracts raises a host of concerns for residents and their families, consumer advocates and attorneys representing residents say. Residents' complaints against nursing homes can include pressure sores, dehydration, malnutrition and many other serious issues. But unlike cases filed in court, arbitration proceedings are private, so there's no public scrutiny of the process or its outcome. Because nursing homes might give repeat business to arbitrators who tend to rule in their favor, residents and their families may not get a fair hearing, consumer advocates say.

Also, the parties have very limited ability to appeal the arbitrators' decision, even if the law has been misapplied. The arbitration agreement "really is a waiver of fundamental constitutional rights," says Rebecca Benson, a Boston lawyer and long-term-care resident advocate, and it's often "buried in a package of documents an inch or more thick."

Although arbitration agreements have long been common in many types of consumer contracts, such as those for credit cards or cell-phone service, they traditionally were not prevalent in the health care world. Yet attorneys say they've seen a sharp rise in nursing-home arbitration agreements in the past five years or so. A 2009 survey of nursing-home operators by the American Health Care Association, a nursing-home trade group, found that nearly 70% of residents in those facilities had signed arbitration agreements.

"Explosive litigation against nursing homes and skyrocketing insurance costs led nursing homes to look for alternatives to civil litigation for resolution of disputes," the American Health Care Association's legal department said in an e-mailed statement to Kiplinger's Retirement Report, adding, arbitration "provided a more efficient and cost-effective way of resolving disputes."

Indeed, arbitration can be more "cost effective" for nursing homes in part because arbitrators tend to give residents smaller monetary awards than judges or juries might. The 2009 American Health Care Association study reviewed more than 1,500 disputes between consumers and nursing homes, and the results showed that the disputes subject to arbitration paid consumers awards that were, on average, 35% lower than those not subject to arbitration. The trade group said in the e-mail that its model arbitration agreement, which nursing homes may use as a starting point for drafting their own arbitration clauses, does not place any restrictions on the amount of damages that may be awarded.

While arbitration in general raises concerns for consumers, some nursing-home arbitration clauses include provisions that are particularly unfair to residents, attorneys say. In a recent study of North Carolina nursing homes' arbitration provisions, Lisa Tripp, assistant professor at Atlanta's John Marshall Law School, found some provisions that limited damages that can be awarded to the injured party; other provisions, she noted, restricted discovery, the process for obtaining evidence from the opposing party.

Some agreements, Tripp says, state that the arbitration will be conducted at the nursing home if the parties can't agree on another location. That's unfair for "obvious reasons," she says, because the nursing-home operator could spruce up the facility in an effort to sway arbitrators.

A number of lawmakers and judges have recently sought to rein in arbitration agreements' power to bar nursing-home residents from courts. Legislation that would have invalidated mandatory arbitration clauses in nursing-home admissions contracts surfaced in Congress in recent years but failed to become law. And in several recent court cases, judges have sharply criticized nursing-home arbitration agreements, sometimes finding them to be unenforceable.

The West Virginia Supreme Court of Appeals, for example, last summer handed down an opinion involving three separate cases in which a nursing home allegedly negligently caused the death of a resident. In each case, a representative for the resident had signed an admission agreement containing an arbitration clause, and the nursing homes argued that the plaintiffs' claims should be dismissed from court and resolved in arbitration.

The state's highest court disagreed, saying that it did not believe that arbitration clauses in nursing-home admissions agreements are enforceable "to compel arbitration of a dispute concerning negligence that results in a personal injury or wrongful death." One of the nursing homes is now petitioning the U.S. Supreme Court to review the West Virginia court's decision.

Residents Fight Arbitration Clauses in Court

Elderly and infirm nursing-home residents who have signed arbitration agreements may have to spend years fighting to have their claims heard in court. That's what happened in the case of Beulah Addison, who suffered a stroke in 2005 and entered FutureCare Lochearn nursing home in Baltimore, where she signed an arbitration agreement, according to court documents. After the nursing home sued Addison in court in 2006 for delinquent payments, Addison filed counterclaims, alleging that she was unable to pay because a FutureCare employee had lured her into a real estate foreclosure rescue scam, causing her to lose her equity in her former home, the court filings claim. FutureCare also mismanaged the filing of her Medicaid application, Addison claimed.

The nursing home argued that Addison's claims should be submitted to arbitration, but the court disagreed, setting the stage for a lengthy appeals process. In 2009, when Addison was about 85 years old, Maryland's highest court ruled that FutureCare couldn't appeal the lower court's ruling.

Because Addison entered the nursing home shortly after a stroke, "is she in a position to really seriously read through the fine print?" asks Paul Bland, senior attorney at public-interest law firm Public Justice, who represented Addison. But a judge never ruled on that point, he says. John Murphy, an attorney at Walker & Murphy, in Rockville, Md., which represents FutureCare, says "it was never determined there was any merit" to Addison's claims. "FutureCare strives to provide all of its residents with quality health care services," Murphy says.

While seniors going through the nursing-home admissions process should ideally have a lawyer review any paperwork before signing it, they're often coming straight from a hospital or lack the time and resources for such deliberation. Lawyers encourage seniors and their loved ones to scour paperwork for an arbitration clause. And if you find one, "I counsel everybody to just X it out. Refuse to sign it," says Kelly Bagby, senior attorney at AARP Foundation Litigation.

The decision to strike out an arbitration clause, however, may be a delicate one for seniors. Although the language of these agreements generally states that they're voluntary, Tripp's study found that some nursing homes required acceptance of such agreements as a condition of admission. However, "any aspects that make the agreement less mutual can make the agreement potentially unenforceable," creating the possibility that a future dispute could be heard in court, says Christopher Puri, vice chair of the American Health Care Association's legal committee.

Residents who do wind up in arbitration can still have a lawyer represent them. They may also have some say in selecting the arbitrators, although the arbitration forum is sometimes set in advance by the arbitration agreement.

Even if you're not currently considering a nursing home, you may be able to avoid future troubles with arbitration agreements by drawing up a power of attorney that takes away any authority for the agent to enter into an arbitration agreement on your behalf. "That's a great way to limit the reach of arbitration clauses," if the agent ultimately signs nursing-home paperwork for you, Benson says.

The best scenario, of course, would be to avoid any nursing-home disputes in the first place. Contact a long-term-care ombudsman in your state for help evaluating nursing homes, Bagby says. You can also file a complaint with the ombudsman's office, which will intervene with the facility on your behalf. Locate ombudsmen by state through the National Long-Term Care Ombudsman Resource Center ( (opens in new tab); 202-332-2275).

Eleanor Laise
Senior Editor, Kiplinger's Retirement Report
Laise covers retirement issues ranging from income investing and pension plans to long-term care and estate planning. She joined Kiplinger in 2011 from the Wall Street Journal, where as a staff reporter she covered mutual funds, retirement plans and other personal finance topics. Laise was previously a senior writer at SmartMoney magazine. She started her journalism career at Bloomberg Personal Finance magazine and holds a BA in English from Columbia University.