by: Begley Law Group

by Marianne Johnston, Esquire

            The placement of a loved one in a care facility is often an emotional time.  There is so much to think about – Is this the right place? Is the staff kind?  Will Mom receive quality medical care?  Will Dad like the food?  Amid this often hectic environment, the family is handed a thick admission contract and told where to sign.  Vulnerable family members may think they have no choice but to accept the agreement as written and sign it.  Resist this temptation!  You should not sign the facility’s contract until you have had the chance to read the contract completely and understand its provisions.

A contract with a long-term care facility should only be signed by one of the following people in the order of preference:  (1) the person entering the facility if they are competent and physically able to sign; (2) the resident’s spouse; (3) a court-appointed guardian of the resident; (4) the person named under the resident’s power of attorney as attorney-in-fact or agent.  The guardian and attorney-in-fact should not sign their name individually and should not sign as a person guaranteeing payment.  The contract should be signed in the following manner: “Resident’s name by John Doe, Power of Attorney” or “Resident’s name by Jane Doe, Court-appointed Guardian.”  A guardian or agent should never simply sign their name without a description of the role in which they are signing the contract.  If you are not the resident, the spouse, a court-appointed guardian of the resident, or the resident’s agent under a power of attorney, you should not sign a contract with a long-term care facility.

            Federal and New Jersey law prohibit a nursing home from requiring a child or other person to sign a nursing home contract or to guarantee payment.  Although the law prohibiting guarantees in nursing home contracts has been in existence for 25 years, there are facilities whose agreements still contain guarantee provisions.  If you see this language in a nursing home contract, be sure to strike it from the agreement.  While the guarantee provision is unenforceable under the law, unscrupulous facilities may threaten litigation if the loved one’s bill remains unpaid.

            Unlike nursing homes, the law does not currently prohibit assisted living facilities from requiring third-party guarantees as a condition for a resident’s admission.  Individuals asked to sign an assisted living facility’s agreement must be aware of such guarantee provision as they are often found buried within a multi-paged document.  Do not accept a verbal representation that the assisted living facility will not enforce such guarantee provisions.  The marketing representative who made this oral promise is usually long gone when a person who signed an admission agreement as guarantor finds themselves named as a defendant in a collection lawsuit.

While prohibited from requiring guarantees, a nursing home may require an individual who has legal access to a resident’s income or assets to sign a contract agreeing to provide payment to the nursing home from the resident’s funds.  The important limitation is the resident’s agent or guardian is only required to use the resident’s resources not the personal resources of the agent or guardian.

            Some nursing homes have been increasingly aggressive in seeking payment from agents or family members who sign nursing home contracts as responsible parties if there is any indication the agent or family member misapplied the resident’s funds.  Some of these accusations of hiding or taking the resident’s assets are made without any documentation or foundation.  It is important to know your legal rights.

            The importance of knowing one’s rights in the context of a nursing home contract was evidenced in the New Jersey Supreme Court case, Manahawkin Convalescent v. O’Neill, where the nursing home attempted to collect an outstanding balance from a resident’s daughter after the resident’s death.  217 N.J. 99, 105 (2014).  Upon admitting her mother to the nursing home, the daughter signed an admission agreement, which designated her as the “Responsible Party.”  The admission agreement set forth the responsibilities of the “Resident/Responsible Party” to include payment of the nursing home bills within ten days of receipt thereof.  By signing the admissions agreement, the “Resident/Responsible Party” allowed the nursing home to place a lien on any owned property if there was a financial obligation to the nursing home that remained unpaid for a period of 60 days or more.  The admission agreement did not distinguish between the Resident and the Responsible Party and did not specify whose “owned properties” would be the subject of a lien.

            The Manahawkin admission agreement also included a section titled “Private Pay Guarantor (if applicable)” with a separate line for a “guarantor.”  The daughter did not sign here.  In the admission agreement, the daughter acknowledged she had received the “Resident’s Bill of Rights” form, which provided a nursing home could not require a third-party guarantee of payment to the facility as a condition of a resident’s admission or continued stay in the facility.

            Nonetheless, when a dispute arose over an unpaid bill following the mother’s death, the nursing home sent a letter to the daughter demanding payment.  In the letter, the nursing home threatened to proceed against the daughter as the Responsible Party by filing suit for the money owed, court costs, and legal fees if she did not respond.  The nursing home also threatened that it would report the daughter to “credit rating agencies.”

            Eight days after sending the letter, the nursing home filed a complaint in court naming the daughter, individually, as the sole defendant.  The complaint did not assert a claim against the mother’s estate.

            The daughter retained a lawyer and filed a responsive pleading in which she denied liability because she had not personally guaranteed her mother’s debts and liabilities.  The daughter also filed a counterclaim alleging violations of the Nursing Home Act N.J.S.A. 30:13-1 to 17 and various consumer protection laws.  Thereafter, the nursing home abandoned its attempt to claim the alleged unpaid balance from the daughter.  The daughter, however, continued to pursue her statutory claims against the nursing home.  Her claims were ultimately unsuccessful because the courts found the contract did not require a third-party guarantee and did not state that a Responsible Party would be committing his or her personal assets to pay the resident’s care.  In the end, the daughter did not pay her mother’s debt to the nursing home.

            How many family members receiving the same threatening letter as the daughter in the Manahawkin case would have simply paid the bill?  The New Jersey Supreme Court at the end of its opinion in Manahawkin urged counsel for the nursing home industry “to ensure that nursing home contracts are prepared – and collection practices conducted – in a manner that fosters a clear understanding of each parties’ rights and remedies.”  217 N.J. 99, 127.  Not all long-term care facilities have heeded this advice.  Thus, it is crucial for the person signing a contract with a long-term care facility to understand his or her rights.  The first step is to make sure such contracts are signed by the correct individuals in an appropriate manner as described above.

If you need legal advice concerning a long-term care facility contract, the Begley Law Group is available to help you.