Traps for the unwary: Nursing home admission agreements and third-party liability | Commentary

Anna Anderson

Federal regulators have found serious fault with the nursing home industry’s collection practices against third parties, such as family members or close friends of nursing home residents. Attorneys should be aware of the potential ethical and legal consequences of seeking to hold someone liable for another person’s nursing home bill. In fact, the Consumer Financial Protection Bureau (CFPB) concluded in September that nursing homes and debt collectors are flouting a law that prohibits facilities from requiring friends and family of nursing home residents to be responsible for their bills.

The CFPB found that friends and family members of nursing home residents have had to declare bankruptcy, had their wages garnished, and lost their homes after signing lengthy and confusing admission agreements with nursing facilities and being held liable as third parties for their loved ones’ nursing home stays.

The 1987 Nursing Home Reform Act (NHRA) is supposed to prevent facilities from requiring a person other than the resident to assume personal responsibility for any cost of the resident’s care. This federal law prohibits a nursing facility from requiring a third-party guarantee of payment to the facility as a condition of a resident’s admission. While the NHRA does expressly permit a nursing facility to require an individual who has legal access to a resident’s income or resources to sign a contract to provide payment from the resident’s income or resources for such care, the third party cannot incur personal liability in signing such a contract and cannot be required to sign a contract if they do not actually have legal access to the resident’s income or resources. See 42 U.S.C. §§ 1395i-3(c)(5)(A)(ii); 1395i-3(c)(5)(B)(ii).

Jeffrey P. Nieznanski

In an apparent attempt to circumvent the NHRA, facilities have simply ignored the prohibition of guarantors in nursing home admissions agreements and have been requiring third parties to sign responsible party clauses even when the third party does not have legal access to a resident’s income. Facilities have also included hidden clauses, addendums, or fine print that allow for the facility to pursue a responsible party personally for damages if there is a breach of the agreement, an explicit violation of the NHRA. But, due to lax government enforcement, agencies in charge of oversight rarely cite or fine companies that require third parties to sign illegal admission agreements.

Whether family members or other people assisting in the application process have actual access to the resident’s income or resources matters little. Nursing facilities still sue third parties personally when the facility fails to receive full payment from the resident — in clear violation of the law.

Complicated Medicaid and Medicare programs can be especially difficult for families who are often unexpectedly thrown into becoming caregivers for their ailing parents without any legal guidance or support. Confusion over coverage is an all too familiar contributing factor in the accrual of large obligations to a nursing home. While financial exploitation of nursing home residents is a real issue and is often raised as a reason for seeking payment from a third party, the CFPB found in its report that, other than the fact that the bills remained unpaid, claims that the third parties abused or exploited the resident typically did not cite any factual support.

Left to its own devices, this problem is likely to get worse. Nationally, nearly half of all adults over age 65 will require long-term care services and supports such as a home health aide, assisted living, or nursing home care; over one-quarter will receive nursing home care.

Medicaid is the safety net of last resort for older adults with limited income and assets and those who have depleted their resources to pay for long-term care. Sixty-two percent of nursing home residents receive institutional Medicaid assistance, which is available to individuals who meet income and asset qualifications.

With the attention of federal and state regulators and lawmakers, attorneys representing nursing homes should think carefully about advising their clients in bill collection efforts. The practice of suing third parties for these bills may violate federal laws administered by the CFPB and the Centers for Medicare & Medicaid Services (CMS) that could implicate nursing homes and the attorneys filing these lawsuits. The CFPB and CMS issued a joint letter on this issue in September advising nursing homes and debt collectors to examine their practices for compliance with federal law. If attorneys and facilities want to avoid potential Fair Debt Collection Practices Act or Unfair Debt or Abusive Practice lawsuits, they should look not only at their collection practices, but also the admission agreements themselves to ensure they are in compliance with the Nursing Home Reform Act.

Having seen the devastating effects of egregious nursing home debt collection cases, we see a great need for attorneys to advise their clients before they sign nursing facility admission contracts. Additionally, federal and state regulators must not leave the work to nursing home residents’ attorneys alone. They must step up enforcement with actual citations and fines for bad actors.

Anna Anderson is a staff attorney at the National Consumer Law Center (NCLC), where she focuses on student loans, criminal justice debt, and nursing home debt collection issues. Prior to NCLC, she was a Supervising Attorney of the Consumer Unit at Legal Assistance of Western New York (LawNY) and represented dozens of residents, their families, and their friends in nursing home collection cases.

Jeffrey P. Nieznanski is a supervising attorney for Legal Assistance of Western New York, Inc. (LawNY) in Rochester, supervising attorneys working on behalf of seniors, crime victims, children with special education needs, elder abuse victims, and advocates working for Finger Lakes Legal Care, LawNY’s Medical-Legal Partnership.  Jeff has provided direct legal representation to Monroe County Seniors since 2012, and initiated a Seniors Legal Information Line for Monroe County residents in 2018.