On Arbitration and Assisted Living

Nursing homes, community care facilities, and assisted living facilities may be among the most heavily-regulated industries in our State. It is a truism that heavy regulation can be a happy hunting ground for trial lawyers. So whatever you might think of trial lawyers, most objective observers agree that the tort system is not the most economically efficient way to handle risk management and patient recovery.

Recognizing already crowded dockets, as far back as 1925 Congress took action facilitating resort to alternative dispute resolution mechanisms, passing the Federal Arbitration Act. Since then there’s been a not inconsiderable history of lower courts and state legislatures attempting to fence this or that type of dispute or plaintiff from coverage by the Act. In particular, some states have decided that nursing home care should be exempt from arbitration. The Supreme Court has uniformly rebuffed those efforts, most recently in February of this year in a case called Marmet Health Care Center v. Brown. There the West Virginia Supreme Court had ruled that arbitration clauses in nursing home contracts were exempted from the Federal Arbitration Act and that an arbitration agreement executed by a nursing home resident or his proxy was unenforceable. Not so, said the U.S. Supreme Court. Federal law intended to encourage alternative dispute resolution and to streamline jam-packed court dockets preempted state law. So arbitration agreements for nursing home care are lawful.

That should not be understood to mean that states have no ability to shape the specifics of such agreements. Here in Colorado we have a statute that prohibits nursing homes and assisted living facilities from conditioning admission on acquiescing to an arbitration agreement. Such agreements must contain express language, in capitals, advising you that the agreement can be rescinded within 90 days of its execution. Recent case law has engendered some confusion over whether somebody with a general power of attorney can sign an arbitration agreement on behalf of the principal, but it is clear that someone with a medical power of attorney can, provided the power of attorney does not expressly withdraw authorization to do so. That same case law, however, makes it very clear that a facility cannot force you to sign an arbitration agreement as a condition of admission to the facility.

It seems doubtful that the Supreme Court’s Marmet decision will change matters in Colorado. All courts recognizes that agreements that are procured under duress are unenforceable, and thus conditioning admission to the facility or the administration of care on signing such an agreement would undoubtedly be prohibited by Colorado statute and condemned by our state courts.

“So what?” you may ask. When you do any estate planning, a central planning node is what to do in the event of incapacity. Addressing with your spouse or alternate POA appointees how you feel about arbitration agreements can avoid a lot of uncertainty and potential legal friction points later. You can make up your own mind about arbitration agreements before you move into assisted living, understanding that such agreements cannot be forced on you. And, if you’re not in a position to make that decision yourself, you want to be sure your family knows, and that your power of attorney documents reflect your druthers up front.

Plus, choosing an assisted living facility or nursing home is not simply a matter of who makes the best chicken and dumplings or has the fanciest aquarium. Spending the time to actually read all that bothersome paperwork up front might give you an idea as to the business and care philosophy of the facility. I had a case recently where a facility made it quite difficult when a client of mine had decided to move out, grossly overstepping their boundaries. Eventually, the client was permitted to move to where he wanted, but that facility now has a big red “X” through it in my book. No client of mine will be recommended to that facility, and vice versa.