Since the late 1990’s the nursing home industry has been one of the biggest proponents of the use of arbitration agreements. Proponents of arbitration clauses argue arbitration is less expensive for both parties and resolves disputes more quickly than traditional litigation. The nursing home industry further contends that by saving on litigation costs, providers have more resources which could be used for resident care.
There are several opponents to the use of arbitration agreements in nursing facilities including consumer rights groups, politicians and of course, the plaintiff’s bar. These groups often suggest the arbitration agreements are patently unfair as they are contracts of adhesion and place the helpless prospective resident and/or family in the untenable decision of either signing the arbitration contract or seeking nursing home placement at a different facility.
In 2008, The United States Senate proposed bipartisan legislation which would have virtually eliminated the use of arbitration agreements in nursing homes. The Fairness in Nursing Home Arbitration Act would have made any arbitration agreement entered into at the time of admission to a nursing facility unenforceable and invalid. Fortunately for nursing home providers, neither the Senate nor House of Representatives voted on the bill prior to the expiration of the Congressional term. Nevertheless, we expect similar legislation to be sponsored during the current congressional session.
In addition to Congress, The Ohio Department of Health has cited several nursing homes for the use of arbitration provisions during annual and/or complaint surveys. The Department reasons by signing the arbitration provisions, the residents are waiving their civil rights to have disputes heard in court thereby violating the Ohio Nursing Home Resident’s Rights. We strongly disagree with the Department’s view of arbitration agreements and further contend federal law preempts any potential adverse Department action so long as the arbitration agreement specifically states the Federal Arbitration Act controls any disputes on the validity of the agreement.
Although Ohio public policy generally favors disputes to be resolved through arbitration, a court will reject an arbitration provision if it finds both substantive and procedural unconscionability. Manley v. Personacare, 2007-Ohio-343. It appears to be simple for a plaintiff to overcome the burden of proving the arbitration agreement is procedurally unconscionable. In order to satisfy that element, the plaintiff need only show a disparity in the bargaining power between the resident and the nursing facility. The court will likely look at the resident’s age, capacity, illness and education and determine whether the resident stood on equal footing to negotiate the arbitration agreement with the facility. As expected, courts have little distance to travel to declare arbitration agreements procedurally unconscionable.
It is more difficult for the plaintiff to prove substantive unconscionability, particularly when the arbitration agreement is well drafted. Factors to consider when drafting an arbitration agreement which is more likely to be considered substantively fair include:
- Having the agreement entered into voluntarily and not as a condition of admission.
- Having the agreement separate and apart from other admission documents.
- Avoiding legalese and/or confusing legal terms.
- Providing a period of revocation where the resident can change his/her mind and nullify the agreement.
- Ensuring the agreement does not conflict with the applicable law regarding attorney fees or fee shifting.
- Using bold and uppercase letters advising the resident that by signing the agreement, disputes will be heard in an arbitration forum not in a court of law.
- Apportioning the cost of the arbitration procedures so as to not adversely impact the patient’s cost of using the remedy.
For more information regarding nursing home arbitration agreements, how it may impact your business, and assistance in drafting an arbitration agreement, please contact one of our attorneys within the Nursing Home and Extended Care Group.
