The aphorism “no good deed goes unpunished” may be best exemplified by the individual who agrees to sign a nursing home admission agreement on behalf of another person. Such contracts may not condition admittance upon a guarantee by the third party. However, they may contain a provision allowing breach of contract suits against the third party for failure to use the resident’s funds to pay for the resident’s care. There may be further liability under the Debtor Creditor Law if the third party transferred resources of the resident that results in the rejection of a Medicaid application. If the prospective resident is not capable of signing the agreement, a third party may be asked to sign a contract that contains language such as:

In consideration of the fact that the Responsible Party wishes to facilitate the Patient/Resident’s admission to the facility, the Responsible Party personally and independently guarantees continuity of payment to the Facility from the Patient/Resident’s funds for the cost of the Patient/Resident’s care. Unless the Responsible Party is otherwise obligated by law to pay for the Patient/Resident’s care, as the Patient/Resident’s spouse may be, the Responsible Party is not required to use his/her personal resources to pay for such care.

The terminology in such contracts is often confusing because the third party may be identified as “responsible party,” “designated representative” or “sponsor.” The capacity in which the third party is signing is also likely to be obscure. There is often doubt as to whether the third party is a personal guarantor of the nursing home charges or an agent of the resident.

Nursing Home Reform Act

The applicable federal statutory scheme is succinctly described in Prospect Park Nursing Home Inc. v. Goutier.1

As pertinent here, the federal statute provides that ‘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’ (42 USC §1396r[c][5][A][ii]), but provides in another subparagraph that the restriction ‘shall not be construed as preventing a facility from requiring an individual, who has legal access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from a resident’s income or resources for such care (42 USC §1396r[c][5][B][ii].’

NYCRR

The requirements of the federal law are mirrored in the regulations of the New York State Department of Health. Nursing home residents’ rights regarding admission agreements are contained in 10 NYCRR 415.3(b)(1) and (6).

Utilizing Resources of Patient

There are cases in which the nursing home has alleged that the third party failed to properly utilize the resources of the patient and was personally liable. A sample of the fact patterns demonstrates the potential liability that the third party is exposed to.

In one case, a son-in-law signed the admission agreement as a designated representative. The original Medicaid application was denied for failure to explain several large withdrawals and to provide certain statements. A second Medicaid application was filed and approved, but there was a $61,000 gap in coverage. The nursing home sued the son-in-law who had signed the admission agreement. Supreme Court granted the son-in-law’s motion for summary judgment. The Appellate Division Second Department, reversed, ruling that the nursing home had raised triable issues of fact on the issue of whether the son-in-law had breached the admission agreement by failing to provide information regarding the resident’s finances.2

In another case, one of two brothers signed an admission agreement on behalf of their mother. He also held a power of attorney from her. The resident’s Medicaid application was denied for failure to provide sufficient documentation. The nursing home sued the brother who signed the agreement. He moved for summary judgment alleging that the other brother had the documentation needed by Medicaid. The court denied the summary judgment motion and ruled that the defendant failed to provide detailed information to support his allegation that his brother was responsible for the Medicaid denial. This left a triable issue of fact. The fact that he held the power of attorney weighed prominently in the decision.3

Debtor and Creditor Law

There may be an allegation that the third party not only failed to make available the funds of the nursing home resident but that the third party misused the resident’s funds. These cases present less sympathetic defendant’s who have taken advantage of nursing home residents and misused their resources for personal gain.

An example of this is New Vanderbilt Rehabilitation & Care Center Inc. v. Brown.4 The resident’s daughter signed the admission agreement. Her father had transferred his home to her nine months before his nursing home admission. His Medicaid application was denied based upon the transfer of the home. The court found that the nursing home met its burden of proving that under Debtor and Creditor Law §273 and §275 the conveyance of the home was done with the intent of defrauding Medicaid. The nursing home was granted judgment against the daughter in the amount of $124,715, and the transfer of the home was voided.

In Pinegrove Manor v. Sheperd,5 a niece who had been named as agent under power of attorney signed an admission agreement for her aunt and then transferred her aunt’s home. As a result of the transfer, the aunt’s Medicaid application was denied. The court granted judgment to the nursing home against the niece in the amount of $93,451, finding a violation of Debtor Creditor Law.

In New York Congregational Nursing Center v. Gilchrist,6 the stepdaughter of a nursing home resident signed an admission agreement. She later conveyed the resident’s home, and as a result, Medicaid denied coverage. The nursing home filed suit against the stepdaughter only. The stepdaughter’s motion for summary judgment dismissing the nursing home suit against her was denied. The nursing home’s motion for summary judgment was also denied with leave to file an amended complaint that included the nursing home resident, the owner of the property at issue and the Department of Social Services.

The common factor in these cases is the rejection of the Medicaid application. The analysis by Medicaid of years of financial records often means that a decision on an application could be delayed by a year or more. The denial could occur after the death of the resident, meaning that the third party is the most visible target for suit.

Conclusion

Given the amounts in controversy, third parties would be well served by independent counsel before signing such agreements. That advice is likely to be ignored because of the context of the signing. The layperson is likely to be unaware of the potential financial exposure created by the agreement, and it is commonly presented at a time of high anxiety and under the pressure of an imminent hospital discharge. The ability to carefully review the agreement is often lacking.

The attorney advising the third party must be aware of the impact of federal law, New York State Debtor Creditor Law and Medicaid eligibility rules. Counsel should carefully inquire as to possible transfers made to the benefit of the third party. Inquiry should also be made into documentation problems that could lead to a Medicaid denial.

Daniel G. Fish is a principal in Daniel G. Fish LLC.

Endnotes:

1. 824 N.Y.S.2d 770 (Civ. Ct., Kings Cty., 2006).

2. Wedgewood Care Center Inc. v. Sassouni, 891 N.Y.S. 2d 434 (2d Dept. 2009).

3. Woodbury Center v. Langlan, 2008 N.Y. Misc. LEXIS 9400 (Sup. Ct., Nassau Cty., 2008).

4. 934 N.Y.S.2d 35 (Sup.Ct. Richmond Cty., 2011).

5. 926 N.Y.S.2d 346 (Sup. Ct., Nassau Cty., 2010).

6. 875 N.Y.S.2d 821 (Sup. Ct., Kings Cty., 2008).