Nursing Homes Increasingly Use Arbitration To Avoid Lawsuits, Reduce Costs

Nursing home residents and their families increasingly are "giving up their right to sue over disputes about care, including those involving death, as the homes write binding arbitration into their standard contracts," the Wall Street Journal reports. Under arbitration agreements, nursing home residents and their families agree to settle disputes through a third-party arbiter. According to the Journal, "Nursing homes have been among the biggest converts to the practice since a wave of big jury awards in the late 1990s."

The practice has "profound implications" on the nursing home industry, according to the Journal. An industry study released last year found that the average cost of settling cases has declined for nursing homes. At the same time, claims of poor treatment have been increasing, the Journal reports.

Consumer advocates and plaintiffs' lawyers have criticized the arbitration systems for nursing homes, saying that people too often do not understand whether the arbitration clauses are mandatory or that they are waiving their right to sue. Critics say courts should handle such claims. Sens. Mel Martinez (R-Fla.) and Herb Kohl (D-Wis.) on Wednesday introduced legislation that would prohibit nursing homes from requiring patients to sign an arbitration agreement as a term of service. Martinez said, "It is an unfair practice given the unequal bargaining position between someone desperate to find a place for their loved ones and a large corporate entity like a nursing home."

The American Arbitration Association, which is the largest arbitration provider in the nation, generally refuses to handle cases of nursing home arbitration and opposes arbitration requirements in nursing home claims. The American Health Lawyers Association has a similar stance, and other arbitration groups said they only accept the cases when the agreements are in compliance with law. Eric Tuchmann, general counsel for the American Arbitration Association, said that some patients "really are not in an appropriate state of mind to evaluate an agreement like an arbitration clause."

The nursing home industry says arbitration is relatively inexpensive for plaintiffs and defendants, and allows nursing home staff to focus on patient care, instead of litigation (Koppel, Wall Street Journal, 4/11).