Thursday, August 24, 2006
Nursing homes use arbitration as a shield
Critics say that the popular pre-admission agreements deprive clients of legal options.
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The nursing home industry thinks it might have found a way to stop costly and embarrassing lawsuits: Get residents to agree up front not to file them.
A growing number of nursing homes -- by one estimate more than half in Virginia -- require incoming residents or their families to sign an arbitration agreement at move-in. The agreement specifies that disputes will be resolved out-of-court. The resident can't sue the home if neglected or abused. Nor can the resident's survivors sue if poor care contributes to the resident's death.
Consumer advocates warn the practice is unfair. In January, the National Citizens' Coalition for Nursing Home Reform in Washington, D.C., asked the federal government to prevent nursing homes nationwide from using arbitration agreements. No such action has been taken.
Industry representatives say no warning is needed. The agreements simply appoint a neutral referee to efficiently settle disputes behind closed doors without formal court proceedings, which are slow and expensive and expose both sides to potentially unwelcome publicity, the industry says.
"We think they're appropriate because they hold down the cost of litigation and they provide an individual that has been damaged with the money they deserve as opposed to trial lawyers getting anywhere from a third to a half of the settlement," said Steve Morrisette, who directs the Virginia Health Care Association.
In fact, some research suggests that, notwithstanding the concerns of advocates and lawyers, consumers prefer arbitration, which is a widely used means of resolving marital problems, debt disputes between consumers and businesses and landlord-tenant conflicts.
"The majority of consumers are satisfied with the speed, simplicity and cost benefits of arbitration," according to the Web site of the National Arbitration Forum, one of three of the nation's large providers of arbitration services.
A 2005 study paid for by the American Bankers Association and performed by Ernst and Young found that consumers won 55 percent of lending-related arbitration cases ruled on, while businesses win only 45 percent of the time. Including cases dropped voluntarily or settled before the hearing, consumers prevailed in 79 percent of cases they bring.
Arbitration is cheaper and faster. No one disputes that. And it's understandable that the long-term care industry is looking for reduced financial and legal pressures, given its recent history of subpar profits and repeated allegations of poor quality care.
But critics said they worry that the desire to save money also reflects a desire to avoid taking full responsibility for abused or neglected patients.
"If a horrible event happens to a family member, I have serious doubts that the family will ever get to the truth of the matter of what happened and why it happened without the ability to pursue a civil case just like any other person has the right to do," said Dan Frith, a Roanoke plaintiff's attorney who makes a living suing nursing homes. He estimated that 60 percent to 70 percent of nursing home admission contracts in use in Virginia contain arbitration clauses. It's become the norm during the past two or three years, he said.
Frith's normal fee, paid only if he's victorious, falls between 33 percent and 40 percent of the damage award, plus expenses.
Eric Carlson, an attorney with the National Senior Citizens Law Center in Los Angeles, said factors in control of the nursing home combine to weaken the ability of a nursing home resident, or his family, to receive just compensation in arbitration proceedings.
For example, to deliver the expected savings, the arbitrator can at his discretion limit the number of investigative interviews before the arbitration hearing or limit the exchange of documents, Carlson said. This could prevent an aggrieved consumer's lawyer from deposing all possible employees who might have witnessed an incident at a nursing home and gaining access to relevant records. But the nursing home is less affected because it owns the records and employs the nursing home personnel and, presumably, can tap those resources at will, Carlson said.
In addition, some arbitration agreements cap damages well below $1.85 million, the legal limit for medical malpractice lawsuits in Virginia.
"That's just an obvious unfair provision," he said.
Frith offered a case in point: Trinity Mission Health and Rehabilitation Center in Hillsville caps damages at $50,000, according to a Trinity arbitration agreement from 2005 that he shared with a reporter.
While Trinity doesn't want to have to pay any large damage verdicts, it's taken steps to ensure that the nursing home bill gets paid. In a common practice, Trinity's arbitration clause makes one exception to the lawsuit ban: Trinity is free to sue the resident or the resident's family if the bill isn't paid, the agreement states.
Trinity Mission's administrator, Rebecca Phillips, said she didn't know enough about arbitration issues to comment. Officials with its parent company, Covenant Dove Inc., did not return a call for a comment.
Joani Latimer, the state's long-term care ombudsman and a full-time nursing-home resident advocate, discouraged signing an arbitration agreement when checking a loved one into a nursing home or signing only with extreme caution. Yet, she realizes that admitting a family member to a nursing home is stressful and an inopportune time to study details of an admission contract.
To be sure, important details of the clauses vary from home to home. For instance, some nursing homes give the resident or family member no option but to sign for residency to occur. By contrast, Medical Facilities of America, a Roanoke County chain of more than 30 homes, requires the resident or his representative sign an arbitration clause but allows the resident to opt out at almost any time -- even after a dispute arises.
Carlson and Frith argue that even where participation in an arbitration agreement is technically optional, most people won't realize they can opt out or won't think to do it. Why even ask for a signature in the first place if the intent is not to bind the hands of the consumer, Carlson asked.
Or could the motivation be among those pointed out by trade-publication articles that coach long-term care industry executives how and why to craft arbitration terms that stand up in court (many have been shot down on technicalities).
Assisted Living Today noted in January 2004 that while no party to a lawsuit can pick the judge or jury to hear the case, with arbitration, the nursing home company can select the arbitration service to be used. "You can have significant control over which arbitrator will decide your company's fact," the article said.
Then there's the confidentiality benefit: "Because most arbitration awards are confidential, your company can avoid a damaging newspaper headline," the article said.
