Take Control Of Your Resident Accounts Receivable: Your Resident’s Resident Representative

I want to focus this installment of our series known as “Take Control of your Accounts Receivable” on a critical player in your efforts to watch your bottom line: the resident’s “Resident Representative”, or, as some nursing facilities in Pennsylvania refer to this person, the “Responsible Party” or “Designated Representative”.  Our installments in this series share with you tips, legal updates, personal observations, and “lessons learned” to help you improve the effectiveness of your Accounts Receivable Management Program. 

Why do I want to devote this space to a discussion of the Resident Representative?  The weakest link in the admissions and account management process that negatively impacts a nursing facility’s bottom line is frequently the identification and preparation of a resident’s Resident Representative.

            The reasons for this weak link include one or more of the following:

  1. The Admission Agreement lacks a clear definition, or any definition whatsoever, of a Resident Representative, or it lacks a description of the duties and responsibilities of the Resident Representative;  
  2. The Admission Agreement properly explains that a Resident Representative will not be held personally liable for the debt, but, it fails to disclose that a Resident Representative can potentially be held financially liable in the amount that he or she fails to transfer from the resident’s income or assets despite having access to the resident’s resources;
  3. The Admission Director identifies the resident on the first page of the Admission Agreement as the Resident Representative, although a member of the resident’s family or a friend signs the signature line on the last page of the Admission Agreement;
  4. The signature line of the Admission Agreement for the Resident Representative does not identify the signatory as the resident’s Resident Representative;
  5. The Admission Director fails to identify a Resident Representative or neglects to name the person on the first page of the Admissions Agreement; 
  6. The Admission Director neglects to have the Resident Representative sign the last page of the Admission Agreement,  which is a legally enforceable contract;
  7. The Admission Director fails to adequately explain to the Resident Representative his or her duties or responsibilities, including assistance in the MA application process.  Or, worse, the Admission Director directs the Resident Representative to not make any payments or escrow the resident’s income while Medicaid is pending;
  8. The Admission Director fails to adequately explain to the Resident Representative that the Admission Agreement is a legally enforceable and binding contract; 
  9. The Admission Director or Business Office fails to explain to the Resident Representative the benefits of arranging direct deposit of the resident’s Social Security income either as Representative Payee or through the Resident Fund Management System.  The same issue applies to the resident’s pension income;  
  10. The Business Office fails to mail a monthly bill to the Resident Representative during the first several months after the facility admits the resident as a matter of policy while MA is pending; and,
  11. Finally, the Business Office simply allows the Resident Representative to avoid payment or not cooperate for too long.  In other words, the Resident Representative is taking advantage of a disorganized Business Office or its passive attempts at collection.    

When the weak link breaks . . ..   I am certain that you have experienced one or more of the following situations as a result of the weaknesses above:  

1.  The family spends the resident’s money on non-allowable expenses although the relative or resident truly believes that these expenditures were justified;

2.  A relative intentionally or fraudulently diverts the resident’s funds for personal consumption or investments; 

3.  The Resident Representative fails to fully cooperate in the Medicaid application process, including the transfer of financial documents or information; or, 

4.  Although the CAO directs the Resident Representative to “spend down” the resident’s funds to qualify for Medicaid, he or she refuses, even if the amount is nominal.  As a result of this last scenario, you’re attempting to collect against a private pay resident with insignificant financial resources.            

What law allows you to contract with a resident’s family member or friend to act as the Resident Representative?  The term, “Resident Representative,” is generally accepted under the law.  The Nursing Home Reform Act of 1987 permits the nursing facility to contract with a person who has access to the resident’s income and resources to transfer payments from the resident’s income and resources.  42 U.S.C. §1396r(c)(5)(B)(ii). 

Furthermore, the Pennsylvania Administrative Code permits a resident to name a Resident Representative.  28 Pa. Code §201.24(a).   This section of the Code defines the Resident Representative as someone who can make decisions on behalf of the resident, but it does not obligate a Resident Representative to make payments.  In addition, this section prevents a nursing facility from naming an employee as a resident’s Resident Representative, unless a court appoints the employee as the resident’s guardian.       

Accordingly, an Admission Agreement must be clear as to the definition, duties, and responsibilities of a Resident Representative to be legally enforceable.  If the Admission Agreement is clear, the Resident Representative can be held legally liable for his or her failure to perform his duty to remit payment form the resident’s funds.  Of course, the Resident Representative may also be held liable personally if he diverts the resident’s funds for non-allowable purposes, which requires a court order.    

Is a Resident Representative a Guarantor?  No.  As most of you are aware, Medicaid law expressly restricts a nursing facility that is eligible for Medicaid or Medicare reimbursement from requiring a third party guarantee of payment to the facility as a condition of admission or continued stay.  A Guarantor is someone who is personally liable for a debt from his or her own assets.  An example of a Guarantor is the father who co-signs a car loan for his daughter.  The law does not prohibit a third person voluntarily guarantee payment to the nursing facility.  I continue to see, however, the term Guarantor in admission agreements, admission fact sheets, or account invoices even though the admission agreement does not clearly obligate a third party as a guarantor.     

Why do you need to take a look at the Resident Representative clauses of your Admission Agreement?  Although Pennsylvania court case law regarding the legal financial liability of a Resident Representative is scarce, the Allegheny County Court of Common Pleas recently addressed this issue in Five Star Quality Care, Inc d/b/a Overlook Green v. Joyce and Charles Yablonski.  The opinion of this Court will have a strong persuasive effect on other county courts throughout Pennsylvania.  In summary, the Court disallowed the nursing facility’s claim against a resident’s “Responsible Party” because the Admission Agreement did not “clearly and unambiguously” define the term “Responsible Party” or obligate the Responsible Party to guarantee payment.  In fact, the Court expressly preferred the term “Resident Representative”, rather than “Responsible Party”, because the usage of “Resident Representative” is more widely accepted and defined in state statutes.   

Because it is the nursing facility or its management company that drafts the Admission Agreement, the burden is on the nursing facility to ensure the requirements and obligations of a Resident Representative are “clear and unambiguous.”  Otherwise, the nursing facility’s attempts to collect a debt against a Resident Representative in a court may be weakened or unsuccessful. 

 If you would like more information on how your Admission Agreement can be used or modified to protect your facility’s bottom line, including an analysis and revision of the contract terms related to the Resident Representative, you may contact Andrew R. Eisemann, Esq. at our Firm at andrewe@capozziadler.com or 717-233-4101.