Mediation and arbitration of disputes between nursing facilities and their residents

Less than two months ago, Massachusetts joined a number of other states whose courts have recognized the enforceability of agreements to arbitrate disputes between nursing facilities and their residents (or residents’ families or other legal representatives).  See Miller v. Cotter, 448 Mass. 671 (2007).  (Alternate link to opinion here.)  This is a trend that is welcomed more by the long term care industry than by nursing facility residents and their advocates, but aside from the chance to hit the jackpot with a jury verdict (which would likely be reduced, set aside, or negotiated post-judgment anyway), alternative dispute resolution may ultimately be beneficial for both parties to a dispute.

A couple of big conceptual issues have stood in the way of enforcing arbitration agreements in the nursing facility resident dispute context.  Leaving aside a technical pre-emption issue (Federal Arbitration Act vs. state arbitration laws), these are (1) enforceability of arbitration agreements in the context of residents’ rights guaranteed by the federal Medicare program and by the states’ Medicaid programs and (2) the question of whether an arbitration agreement in this context is "unconscionable."  (Again, we’ll leave for another forum the distinctions between procedural unconscionability and substantive unconscionability.)

First, enforceability in the Medicare/Medicaid context:  A couple of years ago, the federales gave the nod to arbitration in this context (for Medicare purposes), so long as a facility does not retaliate against a resident (e.g., transfer or discharge) for failing to enter into an agreement to arbitrate disputes.  In addition, mandatory arbitration may not be part of a new resident agreement that a facility requires an existing resident to sign.  See the CMS Center for Medicaid and State Operations memo here.  For Medicaid purposes, the CMS memo notes that enforceability of arbitration agreements depends on state law.  The Massachusetts court determined that the agreement in question was enforceable.    

Second, "unconscionability":  Classically, any agreement put in front of a prospective nursing facility resident for signature at the time of admission is considered a contract of adhesion — a strongarm deal — and is voidable.  (I can’t resist quoting the definition of "unconscionable" the Massachusetts court picked out of a 1750 English decision: a contract "such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.") The Massachusetts Supreme Judicial Court, in the Miller case, announced that this is a determination to be made on a case-by-case basis, and found that the arbitration agreement at issue in that case was not unconscionable due to the following facts and circumstances:

• The arbitration agreement was a separate document, and its execution on behalf of the prospective resident was clearly not a condition of admission
• The resident’s representative (her son)was well-educated, familiar with legal contracts from his work, and thus able to understand and agree to their terms
• The resident’s representative had an extended appointment with a facility social worker at which all the paperwork was discussed and signed
• Nothing in the terms of the agreement — its "purpose and effect" — suggest that it was unconscionable

The court also found no fraud or duress, the other means for voiding an agreement to arbitrate.

The cases (in Massachusetts and elsewhere) are all about arbitration, but it seems to me that the parties would be better served by a mediation-arbitration agreement.  In other words, disputes would first be submitted to a mediator, and if a mediated agreement is not possible, to binding arbitration.  (Most cases subject to med-arb yield a mediated settlement.)

So, based on this landscape, a couple of practice pointers:

• Make the med-arb agreement a separate agreement
• Make clear that signing the med-arb agreement is not a condition of admission; to make that point even clearer, it could be signed later on (to further dispel the notion that it is a contract of adhesion entered into at the time of a nursing facility admission), but should be clearly retroactive to the date of admission
• Make sure the person signing on behalf of the resident has the authority to do so (lack of authority is a favored argument to be made in trying to invalidate such a med-arb agreement)

Earlier this year, I went through the American Health Lawyers Association mediation training, and am available as a neutral for health care mediation and arbitration, both through the AHLA dispute resolution service and directly.  (The AHLA service does not accept personal injury or wrongful death cases where the arbitration agreement predates the incident in question.)  I am also available to work with nursing facilities in the development of admission policies and procedures, including alternative dispute resolution policies and procedures.

While perhaps not every resident or his or her representatives will agree to binding arbitration of all potential disputes with a nursing facility (financial, personal injury or wrongful death), following the steps outlined here will likely afford most nursing facilities the opportunity to keep most disptes with residents and their representatives out of court.

ADR is preferable to court process for resolving disputes for a number of reasons, but the key reasons are that it’s quicker and cheaper, and that the speed and savings do not come at the cost of less-just justice.

— David Harlow