New guidance strips nursing homes of ability to seek voluntary payments from resident reps, families

by  Kimberly Marselas

Federal regulators have taken a “big jump” in their latest interpretation of third-party financial guarantees, putting limits on contractual language used by nursing homes for decades, a pair of post-acute care attorneys warned Thursday.

Updates to surveyor guidance that went into effect in late April don’t just prohibit family member or guardian guarantees as a condition of admission; they now prohibit providers from enforcing other voluntary language that has traditionally helped ensure responsible parties use a resident’s assets to pay for care or help apply for Medicaid when those assets run out.

“This is not a change to the Nursing Home Reform Act, it is not a change to the statute, so it did not go through the regulatory, standard processes of rulemaking,” said Erin Saylor, senior partner and director of compliance for the Stotler Hayes Group. “This was sort of something CMS just issued and sort of slid under the radar a little bit.”

Saylor and Emily M. Solum, partner at Husch Blackwell, detailed the new Centers for Medicare & Medicaid Services guidance about guarantees during a webinar hosted by the American Health Law Association Thursday.

The attorneys said providers should expect to see surveyors putting admission agreements under the microscope in coming months, much as they did with arbitration agreements when those were prohibited from admission conditions in new Rules of Participation.

The problem, Solum and Saylor said, is that what’s prohibited for financial guarantees seems to have taken a sudden turn for the worse for providers whose patients’ bills are going unpaid. Examples provided in the updated guidance appear to forbid clauses that nursing homes have used in voluntary payment provisions, with similar terms upheld by courts for decades in keeping with terms in the  Nursing Home Reform Act of 1987.

“Some of the language — payment guarantees, express or implied — obviously, that is clearly not allowed under the statute, or language holding a third party jointly responsible for the resident’s care,” Solum said.

Toothless contracts

But from there, new stipulations strip providers of their right to collect payment. Those include prohibition of language that holds third-party individuals personally liable for breach of an obligation in an agreement, such as failing to apply for Medicaid in a timely manner, and failure to provide accurate financial information.

“These are all things that the statute allows you to hold a third party responsible for,” Solum said. “And now what CMS’ guidance is saying is that you cannot seek to hold that third party personally liable for failing to do the things that they had actually agreed, potentially, to do.”

Saylor explained that nursing homes could still ask residents’ family members with legal access to that resident’s assets to sign a voluntary payment contract but that the guidance prohibits enforcement of most provisions.

“You can have them enter into an agreement, but you can’t hold them responsible financially for breaching it,” she said.

The attorneys said judges have often upheld such agreements in the past, holding third parties responsible for assistance they did not provide, such as supplying banking information, other verification or appealing negative Medicaid decisions.

“It really just continues to shift the burden onto nursing facilities, who are not in a position to access the residents’ income and assets directly, are not in a position to access the resident’s financial and personal information,” Saylor said. “This is all solely within the purview of the resident or their family, or their responsible party. Essentially, CMS, with this guidance, is trying to take off the table, at least in terms of language in the admission agreement, your ability to… hold a responsible party financially responsible for failing to uphold their duties that they’ve agreed to.”

More scrutiny, penalties?

What’s worse, providers might now be dinged for agreements that contain language requesting responsible parties’ contributions, even though the statute doesn’t disallow that. As surveyors become better attuned to the new guidance, nursing homes should expect more scrutiny and potential penalties ranging from citations to denial of admissions, the attorneys said.

Everyone should be reviewing their admissions packets to make sure they comply with the guidance, as well as looking for alternatives o now to handle cases in which residents and their families are not paying. Both attorneys emphasized family extensive and documented communication in the case of patients whose bills go unpaid while assets exist, as well as referrals to outside agencies in the case of those whose representatives won’t help with Medicaid applications after agreeing to do so.

Saylor said facilities could set a dollar amount that triggers review by an attorney, who could pursue a breach of contract claim that gets family members to perform specific obligations, such as application completion, even if that doesn’t mean payment. Or providers could try to compel payment for services under state statutes or common law, including spousal impoverishment or filial care laws meant to protect impoverished seniors.

As provider associations look for relief from the new guidance from a regulation-lite administration, there may be reason to hope for eventual relief from the courts too — especially if CMS is seen as having skirted expected rule-making requirements.

“This is an expansion of what a third-party guarantee actually means from a legal perspective, but it’s also inconsistent with three decades of case law that have discussed this very issue,” Solum concluded. “There is an argument that the guidance is contrary to statute. … We’ll see how that plays out over the coming years.” 

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New guidance strips nursing homes of ability to seek voluntary payments from resident reps, families