IMPORTANT ALERT: Is Your Nursing Home’s Admission Agreement Compliant with Updated CMS Guidelines?
New Rules Effective March 24, 2025, Require Your Immediate Attention!
We write to inform you of important changes in the federal guidelines governing nursing home admission agreements that will take effect this Monday, March 24, 2025, and may require your facility to amend its existing admission agreement to ensure compliance with CMS’ new guidelines.
What are the current rules regarding “third-party guarantee” clauses in nursing home agreements?
Most nursing home admission agreements already comply with long-standing guidance which precludes a nursing home from seeking to hold a third-party individual personally responsible for payment of the cost of care provided to a resident in its admission agreement. This is because nursing homes cannot require a third-party “guarantor” to agree to personally pay, from their own funds, for the cost of the resident’s care in order to secure a resident’s admission or ongoing placement at a nursing home.
There has, however, traditionally been a distinction that allows admission agreements to include clauses in which a third party voluntarily agrees to assist the resident in meeting his or her own financial obligations from the resident’s own funds. Historically, the individual assuming these responsibilities has often been an “agent” designated by the resident under a General Durable Power of Attorney, or a friend or family member who has access to the resident’s financial accounts. The obligations of these individuals, who are frequently in a unique position to aid the resident in handling his or her financial affairs, would extend to important practical activities like assisting the resident in timely applying for Medicaid benefits, collecting the necessary supporting documentation from banks and other financial institutions, and accessing the resident’s financial accounts to remit the necessary payment to the facility.
These clauses have been especially useful in cases where, for instance, a facility may otherwise hesitate to admit a resident who they do not believe would be capable of independently remitting their own income and assets as payment to the facility, and would rely on the promise of another to assist the resident with the logistical steps needed to ensure that payment is made on a timely and continuous basis. In other, more egregious cases, where individuals who are in a position to assist the resident in managing the practical and legal steps needed to secure Medicaid benefits instead deliberately fail or refuse to assist the resident in completing the Medicaid application process, these clauses have been crucial in allowing the nursing home to seek legal redress against the individual who actively seeks to frustrate the facility’s ability to get paid. The agreements often included, or at least implied, that while a third party individual could not be held personally liable for payment of a resident’s room, board and residential health care costs, he or she could potentially be held personally liable for damages incurred by the facility of the third-party individual breached their own obligations under the admission agreement.
What specific changes are required under the new CMS guidance?
The updated CMS guidance contains sweeping changes which further restrict the ability to impose contractual obligations on a third-party individual in a nursing home agreement.
Under the new CMS rules, effective March 24, 2025, a nursing home may not include any language in an admission agreement which imposes any liability upon a third-party individual who does not actually have legal authority to access the resident’s funds (such as a resident’s spouse, a joint account holder, or an agent acting under a Power of Attorney). Even if they do have such access, the admission agreement must be clear in that the liability of the third-party individual is strictly limited to the extent of his or her access to the resident’s financial resources.
Admission agreements will also not be able to include any clause which obligates a third-party individual to assist in the Medicaid process by ensuring that a Medicaid application is timely submitted and processed, providing information about the resident’s financial resources, or using his or her access to the resident’s financial resources to allow another person to spend the money that is otherwise needed to pay the resident’s nursing home bill.
Clauses that contain any language indicating or implying that a third-party individual can be personally responsible for payment, even in the case of a breach of the agreement, will not be permitted under the new CMS rules. Additionally, contractual language may be non-compliant with the new rules even if the word “guarantee” is not explicitly used, but if CMS deems the language to have the effect of constructively imposing an impermissible third-party guarantee of payment. Any language which suggests that a resident may be discharged, or denied admission, on the basis of a lack of payment or cooperation by a third-party individual under the admission agreement will likewise be prohibited under the new rules.
In addition to admission agreements, CMS has indicated that any other documents signed as part of the admission agreements will be similarly subject to scrutiny by surveyors to ensure that its mandate precluding the imposition of a third-party guarantee requirement during the nursing home admissions process is strictly followed.
If your facility is surveyed on or after March 24, it is important that your facility has the appropriate clauses included, and prohibited clauses excluded, from your admission agreements and other admission documents.
How can I determine if my nursing home's agreement is compliant with the new CMS guidance?
In light of this change in policy, Falcon Rappaport & Berkman is prepared to assist nursing home administrators, owners and operators to perform a detailed review and analysis of their admission agreement to determine whether your facility’s admission agreement is compliant with the new CMS rules, or whether it is necessary to update the nursing home admission agreement to ensure compliance with these new rules.
The firm will be hosting a Nursing Home Admission Agreement Hotline on Monday, March 24 from 10:00 am through 4:00 pm ET to assist nursing home clients who wish to update their admission agreements to ensure compliance with these new rules, or adopt a new, fully compliant admission agreement for their facility, in accordance with the new CMS rules.
Please contact us by phone at (516) 599-0888 during the hotline hours to speak with one of our experienced attorneys, and discuss your admission agreement and any concerns you may have about the new CMS rules and how it may affect your facility, or email the Chair of FRB’s Elder Law Practice Group Dana Walsh Sivak, Esq. at dsivak@frblaw.com to discuss these matters at your convenience.
We look forward to working with you to make sure your facility is up-to-date on all of the relevant guidance and compliant with the rules that directly impact your facility’s bottom line!
DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.