SJC Rules on Arbitration Agreements Signed by Health Care Agents

Kimberly Butler Rainen

April 29, 2014

The process of admitting a loved one into a nursing home can be a long and arduous process, made all the more complicated by the paperwork required. With increasing regularity, nursing homes are including an arbitration agreement in their admissions papers, requiring all claims against the nursing home to be brought to alternative dispute resolution. In many instances, health care agents are completing the required documents during admission, rather than the nursing home residents themselves. This has given rise to two important cases, Licata v. GGNSC Malden Dexter, LLC and Johnson v. Kindred Healthcare, recently decided by the Massachusetts Supreme Judicial Court. The Court found that entry into an arbitration agreement or any similar agreement, though made in the context of health care, it is not a health care decision within the purview of the Massachusetts health care proxy statute. Such an agreement signed under a Health Care Proxy does not bind the principal.

The Court discusses that, in Massachusetts, one can choose a health care agent, under a Health Care Proxy, and an attorney-in-fact, under a Power of Attorney. These two roles are distinct and separate and, in fact, the Legislature had considered a bill that would have merged the two. However, the Legislature chose to enact our current schema, which allows an individual to appoint one person to make health care decisions and someone else to made decisions regarding business, estate planning, finances or legal matters. The statutory schema recognizes that a principal may appoint someone that may serve well in one role and less well in the other.

The Court also highlighted the importance of having the proper supporting documentation to effectuate a health care proxy or durable power of attorney, which are triggered when the principal has become incapacitated. The Court point outs that a principal may be incompetent to make some decisions but competent to make others, such that a clear determination of incapacity from a physician is essential for these documents to take effect.

It is worth noting that, under Massachusetts case law, an arbitration agreement must be truly voluntary to be enforceable. A facility cannot condition a resident’s admission on an agreement to arbitrate. Should the facility make admission contingent upon the execution of the arbitration agreement, a court would refuse to enforce the agreement and would likely allow a law suit to proceed without going to arbitration. Alternative dispute resolution is always an option once a claim arises, but otherwise there is no incentive for a resident entering a nursing home to waive these important rights. Such agreements can be refused without fear that the nursing home will not complete the admission.