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The Future of ADR Agreements in Long-Term Care: What's Next?
June 4, 2009
By: T. Ryan Malone
TN appellate courts have recently filed numerous opinions on the use of ADR agreements between long-term care providers and their residents, reflecting the increased attention on this issue throughout the country.
Few long-term care issues have garnered the amount of judicial attention over the last few years as the use of Alternative Dispute Resolution ("ADR") agreements. In our home state, the Tennessee appellate courts have recently filed numerous opinions on this topic, and the development of the law in Tennessee reflects the increased attention on this issue throughout the country.
Development of the Current Law
Three years ago, there were few meaningful Tennessee appellate opinions addressing the enforcement of ADR agreements between long-term care providers and their residents. Absent guiding authority, trial court judges were reluctant to enforce arbitration agreements in this context. The tide began to turn in late 2007, when the Tennessee Supreme Court handed down its opinion in Owens v. Nat'l Health Corp., 263 S.W.3d 876, 890 (Tenn. 2007). In Owens, the resident's attorney-in-fact for health care signed a nursing home admission agreement containing an arbitration clause. After the plaintiff filed suit against the home for medical malpractice, general negligence, and a litany of other issues, the nursing home moved to enforce the arbitration agreement. The Plaintiff challenged the enforceability of the agreement on numerous grounds, but the Court determined the arguments were without merit.
Notably, the Court held: (1) the attorney-in-fact was authorized to sign the agreement on the resident's behalf; (2) public policy favors enforcement of arbitration agreements; and (3) federal law does not prohibit the enforcement of arbitration agreements in the long-term care setting. The Court remanded the case for discovery regarding unconscionability.
In the 17 months since Owens, the Tennessee Court of Appeals has filed many opinions addressing the ADR agreement enforcement issue in the long-term care context. Read together, these cases indicate ADR agreements will be enforced as long as they meet certain requirements. The most notable of these requirements is the agreements must not be unconscionable and a properly authorized person must sign the agreements.
With regard to whether an ADR agreement is unconscionable, mandatory ADR agreements required for admission to long-term care facilities have to be shown to be within the reasonable expectations of an ordinary person. This reasonable expectations test does not apply to voluntary ADR agreements signed in conjunction with admission to nursing homes.
The authority of a signor to bind a resident to an agreement is frequently the primary challenge raised by plaintiffs to combat the enforcement of ADR agreements. Fortunately, the recent opinions of Tennessee Court of Appeals indicate sufficient authority can be vested though: express actual authority (resident expressly authorized signor); implied actual authority (resident intended signor act, as demonstrated by circumstantial evidence); apparent authority (resident led third party to believe signor authorized to act); court appointment of agent (i.e. Conservatorship or Guardianship); and, the appointment of a health care surrogate pursuant to statutory authority.
Under the law as it exists today, if the terms of ADR agreement are fair and reasonable, if the person presenting the agreement adequately explains it, and if the person signing is properly authorized, more likely than not the ADR agreement will be enforceable.
What the Future Holds
Were the law to remain unchanged in the years to come, the prognosis for ADR agreement enforcement in the long-term care setting would be very positive. There is currently a clear policy favoring arbitration agreements, and lower-level courts have indicated a growing acceptance of that policy.
However, it is unlikely the law on this issue will remain unchanged. Lobbying efforts seeking federal legislation eliminating ADR agreements in this setting appear to be taking root. In April, 2008, Florida Senator Mel Martinez sponsored and introduced Senate Bill No. 2838 The Bill, in relevant part, states:
A pre-dispute arbitration agreement between a long-term care facility and a resident of a long term care facility (or anyone acting on behalf of such a resident, including a person with financial responsibility for that resident) shall no be valid or specifically enforceable.
A similar Bill, H.R. 6126, was introduced before the House of Representatives in May, 2008. While the two Bills advanced through the relevant committees, they expired without being voted on by either the House or Senate as the declining economy and national elections absorbed a significant portion of Congress's attention. Similar Bills were introduced before the new Congress in 2009; H.R.1237 and S.512 each purport to ban all pre-dispute arbitration agreements between long-term care facilities and their residents.
While neither of these Bills are anticipated to be passed in the upcoming months, it is likely just a matter of time before the Bills, in some form, become law. Some suggest the question is not if the Bills will pass, but rather what form will the final law take. As currently drafted, the Bills would ban all pre-dispute arbitration agreements. However, some favor banning only mandatory ADR agreements required for admission to the facilities. This compromise would permit the facilities and their residents to enter into voluntary ADR agreements signed in conjunction with admission, rather than as a requirement for admission.
This would appear to be a reasonable compromise that would bar the mandated waiver of the constitutional right to a jury trial and simultaneously protect the resident's right to self-autonomy and the ability to contract.
In light of the pending Bills, any facility or company considering implementation of an ADR program should consider to make the agreements voluntary and not a condition for admission. Even if the new legislation does not go into effect, it has been our experience that Courts view voluntary ADR agreements more favorably than "take it or leave it" provisions and are more likely to find voluntary ADR Agreements enforceable.
If pre-dispute arbitration agreements are barred entirely, facilities could consider incorporating ADR agreement presentation either intermittently throughout residency periods or in conjunction with discharge. While such an approach would not be "pre-dispute," and therefore permissible, the feasibility of such an approach would be fact specific.