Use of Binding Arbitration Clauses in Nursing Home Patient Contracts

The nursing home admission process requires that the patient or his or her agent sign a number of documents. One of these is an admission agreement. Increasingly, nursing homes are including binding arbitration clauses in these agreements. The binding arbitration clauses require patients to agree to give up the right to have any dispute against the nursing home decided in a court of law. Instead, the arbitration clauses require that a private arbitrator make a final decision in the dispute. In virtually all of these arbitration clauses, there is no right to appeal the arbitrator's decision, and the arbitration record is not a matter of public record.

Those in favor of arbitration to settle nursing home disputes claim that arbitration is superior to litigation because it is neutral, less expensive and faster than litigation. Those opposed claim that nursing home patients are forced to sign the agreements in order to gain entrance into the nursing home, that arbitrators are biased in favor of the nursing home because the corporate entity has the potential of providing repeat service to the arbitrator, and that patients have no recourse if the arbitrator errs.

A number of courts have addressed the legality of arbitration clauses in nursing home contracts. Some courts have invalidated the clauses in situations where the nursing home patient did not sign the nursing home contract him or herself, a common happening. Many courts have determined that the patient's representative, usually a spouse or child, does not have apparent authority to bind the patient to an arbitration clause merely because he or she signed the forms for the patient. However, the Alabama Supreme Court determined in 2004 that arbitration clauses contained in nursing home admission agreements signed by agents of the patients were enforceable. Other courts have invalidated these arbitration agreements on the grounds of unconscionability. Citing that many of these arbitration clauses are printed in small type, contain language not easily understandable by the patients, and do not provide equal bargaining power between the nursing home and the patient, courts have deemed them invalid.

The Centers for Medicare and Medicaid Services (CMS), the agency that runs the Medicare and Medicaid programs, has issued a policy statement on the issue. According to CMS, the determination of whether to enter into a binding arbitration agreement should be made between Medicare recipients and their nursing homes. With respect to Medicaid recipients, states are free to determine whether to allow nursing homes to mandate that patients agree to submit to mandatory arbitration. However, under both Medicare and Medicaid, there are federal laws and regulations that may limit a nursing home's ability to enforce such actions. For example, federal law prohibits nursing homes from discharging or transferring patients due to their refusal to sign an arbitration agreement. Likewise, a nursing home that retaliates against a patient who refuses to sign an arbitration agreement would be subject to federal penalties.