The Centers for Medicare & Medicaid Services (CMS) is tightening its grip on nursing homes’ use of third-party financial guarantees, aiming to curb practices that shift the financial burden of resident care onto others.
According to updated guidance set to take effect in March, any language in admission agreements that seeks to hold someone other than the resident personally responsible for payment could be deemed non-compliant, even if the word “guarantee” isn’t explicitly used.
This move has sparked concerns that nursing homes may resort to more aggressive tactics, such as lawsuits, to recover unpaid resident debt.
“It is becoming harder and harder for facilities to mitigate the risk of resident payment shortfalls,” says Callan Stein, a partner with Troutman Pepper Locke. “As a result of this, we may come to see more frequent legal collection actions by nursing homes.”
The updated guidance provides specific examples of non-compliant language, including:
- Holding both the resident and a third party jointly responsible for payments
- Making a third party personally liable for failing to complete a Medicaid application on time
- Threatening to discharge a resident if a third party doesn’t agree to pay
- Holding a third party liable for unpaid amounts due to inaccurate or outdated financial information
CMS emphasizes that such language is unacceptable in both the main admission agreement and any other documents signed at admission.
This crackdown aligns with broader efforts by the federal government to protect consumers from medical debt, including a recent rule by the Consumer Financial Protection Bureau that removes nearly $49 billion in medical bills from credit reports.
While the intent behind these measures is to shield individuals from undue financial burden, some industry experts worry about the unintended consequences for nursing homes.
“Often, when a resident builds up a large outstanding balance, the facility is faced with the Hobson’s choice of either taking steps to try to help the resident transfer out of the facility or continuing to allow the resident to incur debt that may be unrecoverable,” Stein points out.
The updated guidance also clarifies that while nursing homes can request a resident representative with legal access to a resident’s income to sign a contract agreeing to use those funds for care, they cannot make this request if the individual does not have legal access to the funds.
Consumer advocate Eric Carlson of Justice in Aging supports this clarification, stating, “It’s not fair to expect someone to cosign. How much are they potentially liable for? We’re talking about nursing home expenses.”
This latest move by CMS adds another layer of complexity to the already challenging financial landscape of the nursing home industry. As providers navigate these new restrictions, it remains to be seen how they will adapt their payment policies and collection practices to ensure financial sustainability while protecting residents and their families from undue financial strain.