A “Responsible Party” Under A Nursing Home Admission Agreement May Be Sued For Monies Owed To The Facility

An appeals court in New Jersey held that a nursing home resident’s adult child who signed a nursing home admission agreement as the “Responsible Party” can be sued in his/her individual capacity for monies owed to the facility for services rendered to the resident if the adult child fails to use the resident’s financial resources to pay for care provided by the facility. Manahawkin Convalescent v. O’Neill

In February 2007, Elise Hopkins, who suffered from Alzheimer’s disease, became a patient at Manahawkin Convalescent Center (Manahawkin), a nursing home. Prior to her admission, Mrs. Hopkins’ daughter, plaintiff Frances O’Neill, signed an Admission Agreement designating herself as Mrs. Hopkins’ “Responsible Party.” The Admission Agreement defined “Responsible Party” as the person “acting on behalf of the Resident as his or her representative and guardian in fact, or one who has been appointed by the Court as legal guardian.” In so doing, plaintiff assumed the responsibility of making monthly payments from her mother’s financial resources to Manahawkin for services rendered by the facility. As a result, plaintiff assigned her mother’s Medicaid benefits to Manahawkin, and paid her mother’s monthly social security benefits to the nursing home, less a “personal needs allowance” which Mrs. Hopkins was allowed to keep.

During Mrs. Hopkins’ stay at Manahawkin, plaintiff made all required payments until her mother’s death in June 2008. Plaintiff disputed an outstanding balance due of $878.20 for the final month of care, for which Manahawkin sought payment from plaintiff. After several collection attempts, Manahawkin filed a lawsuit to compel plaintiff to pay the outstanding debt. Plaintiff filed an answer, a counterclaim and a third-party complaint alleging, among other things, that the Admission Agreement required a third party to incur personal financial liability for Medicaid and Medicare patients contrary to the Nursing Home Act (NHA), N.J.S.A. 30:13-1 to -17, and that the Admission Agreement, as an unconscionable consumer contract, violated the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20.

After the trial court granted summary judgment in favor of defendant, and dismissed plaintiff’s counterclaim and third party complaint, plaintiff appealed. On appeal, plaintiff alleged that, by naming “Frances O’Neill” rather than the “Estate of Elise Hopkins” as the party defendant in the original complaint, Manahawkin brought suit against plaintiff as the “Responsible Party” under the Admission Agreement in violation of the NHA, and the trial court’s dismissal of her pleadings was made in error. Plaintiff claimed that she did not agree to be the private pay guarantor for her mother’s nursing home or other care expenses, and that, by making her sign the Admission Agreement and accept the role of guarantor, Manahawkin violated the laws cited above.

The appellate court affirmed the lower court’s decision. The court held that, contrary to plaintiff’s claim, defendant was not attempting to hold plaintiff personally financially liable for her mother’s debt in contravention to NHA and federal laws regulating nursing facilities just because the facility filed a lawsuit against plaintiff as the responsible party:

We concur with the opinion of the trial court that there was no implicit or explicit action taken by defendant to hold plaintiff personally financially liable for her mother’s debt for care received at Manahawkin. … [Under New Jersey law,] a facility may require [an] individual [with legal access to a resident’s income or resources available to pay for facility care pursuant to a durable power of attorney] to sign a contract to provide payment to the facility from the resident’s income or resources without incurring personal financial liability. [That was done in this case. Therefore,] the effort to collect the outstanding debt from plaintiff, as the responsible party, was not unlawful. …

The appeals court also rejected plaintiff’s assertion that defendant violated the CFA. The court held that defendant’s billing and collection practices are considered part of the services rendered by the facility and, as such, fall within the “learned professional” exception of the CFA. The “learned professional” exception identifies learned professionals as beyond the reach of the CFA so long as they are operating in their professional capacities. Accordingly, the court concluded that defendant’s nursing home does not fall within the purview of CFA.

The case is annexed here – Manahawkin Convalescent v. O’Neill

UPDATED MARCH 17, 2014: The New Jersey Supreme Court granted plaintiff’s petition for certification and affirmed the decision of the Appellate Division. The Supreme Court, like the Appellate Division, held that the facility’s admission agreement did not violate either the Nursing Home Reform Act or the Consumer Fraud Act. The Supreme Court’s opinion is annexed here – Manahawkin Convalescent v. O’Neill, Docket No. A-17-12 (March 11, 2014)