Beware of Nursing Home Admission Agreements With Guarantor Language
It is a widespread practice by many nursing home operators and certain nursing home chains to have admission agreements include so-called “guarantor provisions”. These provide, typically, that a third party, often a close family member, is responsible for payment of the nursing home bill incurred by the resident.
It is important to be aware that such provisions are unlawful. Under 42 USCA §§ 1395i – 3(c)(5)(A)(iii) and 1396r(c)(5)(A)(ii), and 42 C.F.R section 483.12(d)(2), a nursing facility must “not require a third party guarantee of payment to the facility as a condition of admission (or expedited admission) to, or continued stay in the facility”. Furthermore, violation of this provision may constitute Medicare/ Medicaid fraud and United States attorneys have authority under the Medicare – Medicaid Anti-Fraud and Abuse Amendments of 1977 (42 USCA § 1390a – 7b(d) to prosecute offenders. However, nursing home counsel seem to believe that old case law, eg, St. Ann’s Home For the Aged, 95 Ill. App. 3d 577 at pp. 578-579 (1981), makes such clauses legal, at least under limited circumstances. This contention seems precarious in that federal preemption doctrine very likely would nullify the St. Ann’s holding in light of contrary federal law.
In addition, there is an increased interest in bringing private consumer fraud actions against nursing facilities that utilize private guarantor agreements. In Podolsky v. First Healthcare Corporation, 50 Cal.App.4th 632, 58 Cal.Rptr.2d 89 (1996, 2nd Dist.) also reported in the January 8, 1997, Chicago Daily Law Bulletin, the California Court of Appeals ruled that efforts by a nursing home to get guarantees from relatives of prospective residents were deceptive. The argument that the signer of the agreement somehow gained some valuable consideration in exchange for the signing of the agreement was considered, but ultimately rejected by the California Court of Appeals.