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NURSING FACILITY DEBT & THIRD PARTY LIABILITY

Dec 20, 2010 When a resident owes money to a nursing facility, can that facility collect from a third party?

When nursing homes admit residents, sometimes they require non-resident third parties to sign on as guarantors. They do this intending to make third parties personally liable for debts owed if it becomes impossible for them to collect from the residents. Requiring third party guarantors as a condition to admit the resident, or keep the resident in the facility, is illegal.

In a recent Fairfax Circuit Court case, a nursing home resident died leaving a nursing home balance of $23,782. The nursing home sued the third party guarantor, requesting the court to have the guarantor reimburse them either with the resident’s resources or with the third party’s personal funds.

The nursing home cited a federal law that permits a nursing home to require a third party with access to a resident's income to pay that resident’s bills from that income. Since this same law bars a nursing home from collecting from the third party’s personal resources, the nursing home conveniently did not cite this part of the law in its pleadings. The facility also sued under a Virginia statute that prohibits a guarantee of payment from a third party’s personal funds with one exception—if the third party fails to provide payment from the resident's resources for such care.

The federal law, which barred third party personal liability, conflicted with Virginia law, which allowed for third party personal liability under limited circumstances. The Court ruled that since Federal law preempts Virginia law, the loophole in Virginia law which allows for third party liability was invalid, so the third party guarantor was not responsible for the resident’s unpaid bill.

What should a third party do when confronted with a nursing home contract which opens up the potential for third party personal liability should the resident fail to make payments?

First, the third party should have the resident sign the contract. If the resident is incapable of signing and a third party is required to sign, the third party should strike out language that could make him liable and sign only in his capacity as "agent." For example, if potential Nursing Home Resident Susan Jones is not capable of signing the contract, but Third Party Mark Jones wants her admitted, he should go through the contract and strike out each clause that could lead to his being personally responsible for Susan’s debt. Then, he signs his name: Susan Jones by Mark Jones, Agent under Power of Attorney.

Better yet, Mark should have an attorney familiar with nursing home contracts review the admission agreement before signing.

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