Senior Living & Long-Term Care Updates – Spring 2008

29 April 2008 Publication
Author(s): John S. Lord Jr Michael A. Okaty

Legal News: Senior Living & Long-Term Care

Fairness in Nursing Home Arbitration Act
On April 9, 2008, legislation was introduced to the United States Senate Committee on the Judiciary that would invalidate pre-dispute arbitration agreements between a long-term care facility and its residents. The Fairness in Nursing Home Arbitration Act (the Bill) makes void and unenforceable any pre-dispute arbitration agreement between a long-term care facility and any resident of the facility. The Bill’s sponsors, Sens. Mel Martinez (R-Fla.) and Herbert Kohl (D-Wis.), contend that the new legislation is “narrowly targeted” to protect nursing home residents from “losing the right to hold nursing homes accountable in court for negligent and abusive care.”

The Bill would amend the Federal Arbitration Act (FAA), enacted in 1925. Sen. Martinez intends this Bill to restore the FAA’s “original intent” by carving out nursing home disputes from the FAA’s alternative forum for resolving business disputes. The Bill provides that a “pre-dispute arbitration agreement between a long-term care facility and a resident of a long-term care facility . . . shall not be valid or specifically enforceable.” This would apply to any pre-dispute arbitration agreement, whether entered into during the admission process or any time thereafter. Sen. Martinez assures that the Bill will not prevent arbitration. Rather, the Bill merely requires that agreements to arbitrate be made after a dispute has arisen.

Although the Bill’s name implies it will apply only to nursing homes, the phrase “long-term care facility” is defined to include a skilled nursing facility, a nursing facility, and any other facility that “makes available to adult residents supportive services to assist the residents in carrying out activities such as bathing, dressing, eating, getting in and out of bed or chairs, walking, going outdoors, using the toilet, obtaining or taking medication, and which may make available to residents home health care services, such as nursing and therapy, and provides a dwelling place for residents in order to deliver such supportive services… .”

The Bill’s broad definition of long-term care facility may subject assisted living facilities to its requirements, given that many states define assisted living facilities as providing housing, meals, and personal services of the type described in the Bill.

Two days after the Bill was introduced, The Wall Street Journal ran a front-page article entitled “Nursing Homes, in Bid to Cut Costs, Prod Patients to Forgo Lawsuits” showcasing the expanded role of arbitration agreements in nursing home cases. An Aon Global Risk Consulting study cited in the article determined that after years of increasing, the average payout per claim dropped slightly and leveled off in 2004 and 2005, due in part to the increased use of arbitration agreements.

If enacted in its present form, the Bill would make void any existing pre-dispute arbitration agreements. Accordingly, owners and operators of long-term care facilities should follow the Bill’s progress closely. The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) quickly announced its opposition to the Bill, arguing that pre-dispute agreements foster timelier, less adversarial settlements, allow facility staff to concentrate time and effort to improved care for patients and residents, and ensure that scarce resources go toward improving patient care rather than litigation.

Florida’s Assisted Living Facility Proposed Statutory Amendments
The Florida House of Representatives and the Florida Senate have each proposed alternative bills that would alter the day-to-day administration of assisted living facilities in Florida. As the legislative session draws to a close, the House has a working version of the bill that differs from that of the Senate. As such, it is unclear which version, if any, will survive. Foley will continue to monitor the progress of each bill. Please contact us should you have any questions.

Senate Bill 2216 (Senate Bill) proposes numerous amendments and new requirements to Florida’s Assisted Living Facilities Act, including increased Level 1 background screening requirements, required screening of residents for sexual offenders, changes to the relocation and termination procedure currently in place, and the requirement that all residents have a service plan. House Bill 1401 (House Bill) has a more narrow focus of standardizing the resident transfer and discharge process, which previously required only 45 days notice to the resident. Specifically, it defines certain conditions in which the transfer or discharge of a resident is permissible, creates a notice requirement in the event of a resident transfer or discharge, allows for the review of the notice by a local long-term care ombudsman council, and provides an appeals process to challenge the proposed transfer or discharge.

The Senate Bill mandates all employees who have access to resident living areas and all contracted workers who provide personal service to residents undergo Level 1 screening. Currently, only employees who perform personal services are required to undergo Level 1 screening. The Senate Bill does not change any Level 2 screening requirements. Each facility is required to maintain a sign-in/sign-out log for all contracted workers who do not provide personal services and thus need not undergo the screening. The Senate Bill requires each facility to conduct a search of the Florida Department of Law Enforcement’s sexual offender database for each prospective resident and to maintain verification that all residents have been screened. Each facility also must assess residents periodically to determine whether each resident is competent to handle his or her personal and financial affairs. A facility owner, administrator, staff, or representative may not act as the resident’s representative, designee, or health care surrogate unless that person is a relative of the resident, a distinction that is not presently in the Assisted Living Facilities Act.

The Senate Bill amends the existing 45-day relocation or termination notice to require that the reason for the relocation or termination be stated in the notice, and it also requires the facility to send a copy of the notice to the resident’s representative, designee, or guardian and a copy to the State Long-Term Care Ombudsman Program. Whereas current law only requires that a facility have a grievance procedure, the Senate Bill requires each facility to establish a written grievance procedure that must include maintaining a written record of each grievance, the stated reason for the grievance, actions taken by the facility, and reporting of grievances. Facilities will be required to transmit a copy of the written record to the local ombudsman council on a weekly basis.

Under the Senate Bill, AHCA will be required to conduct at least one unannounced inspection of each facility every 24 months to determine compliance with minimum standards of quality, adequacy of care, and the rights of residents. Currently, AHCA does not need to make an inspection unless a facility seeks license renewal or unless the facility had violations within the past year. Finally, all residents, not just those receiving extended congregate care services, as the law currently requires, are required to have a service plan. The service plan is a written document that addresses the unique physical and psychosocial needs, abilities, and personal preferences of each resident. The Senate Bill requires that the service plan must either be reviewed and updated annually, quarterly (in the event a resident receives physician-ordered nursing services), or whenever a resident experiences a significant change in condition. AHCA is required to develop a service plan form.

The House Bill enumerates five instances in which a transfer or discharge of a resident from an assisted living facility may take place: (1) when it is necessary for the resident’s welfare, and the resident’s needs cannot be met by the facility; (2) when it is appropriate because the resident’s health has sufficiently improved so that the facility’s services are no longer necessary; (3) when the health and safety of other residents or facility employees would be endangered; (4) when the resident has failed, following reasonable and appropriate notice, to provide payment for his or her stay at the facility; or (5) when the facility ceases to operate. Transfer is explicitly prohibited solely because the source of payment for care changes.

The House Bill requires notice of a proposed transfer or discharge be provided to the resident and a family member or legal guardian 30 days prior to such event, with limited exceptions. The notice must be signed by the administrator or his or her designee. If there is a medical reason for the transfer or discharge, the notice also must be signed by the resident’s medical provider. If the proposed transfer or discharge is due to a change in the physical plant of the facility, AHCA must be notified, after which it must conduct an onsite inspection of the facility to verify the necessity of the transfer or discharge. AHCA also must develop a standard form for purposes of notifying residents of a transfer or discharge.

The House Bill allows a resident to request that any notice of transfer or discharge be reviewed by the local long-term care ombudsman council, which may request a private informal conversation with the resident to ensure the facility is acting in accordance with the proper procedures. In addition, a resident is entitled to a hearing to challenge the facility’s proposed transfer or discharge, if requested within 90 days after the resident’s receipt of the notice. The House Bill would prevent a resident from waiving any of the rights enumerated above.

Proposed Patient Safety Rule Raises Thorny Issues for Skilled Nursing Facilities and Other Providers
On February 12, 2008, the U.S. Department of Health and Human Services (HHS) issued a proposed rule (Rule) that creates a system for voluntary reporting to Patient Safety Organizations (PSOs) of adverse events, medical errors, or ”near misses” by hospitals, doctors, and other health care organizations and practitioners (Providers) on a privileged and confidential basis. Skilled nursing facilities (SNFs) would be included under the category of “other health care organizations.” The Rule creates a legal quagmire, as discussed below. Written comments on the Rule were due no later than April 14, 2008. In the preamble to the Rule, the Secretary of the HHS requested public comment on more than 15 key areas. A representative list of questions upon which the HHS sought comment is included below:

  • Should Providers be required to have written documentation of a patient safety evaluation system in order to claim privilege for the Patient Safety Work Product (PSWP)?
  • What alternative mechanisms for Providers reporting to PSOs should be considered?
  • Should Providers and PSOs be allowed to share patient databases?
  • Can the PSWP be protected before a Provider reports it to a PSO? If so, how much time should be allowed to elapse after the event occurred?
  • Should the definition of a Provider be expanded to include the Provider's corporate parent organization?
  • Should components of parent regulatory or accrediting entities be barred from becoming PSOs?
  • Does the proposal sufficiently protect the interests of reporters and patients?
  • Should protective orders be required for certain disclosures by PSOs?
  • What processes should be used to develop standard reporting formats for the PSWP?
  • Should procedures for reporting impermissible uses of the PSWP parallel those in the Health Insurance Portability and Accountability Act () Privacy Rule?
  • Is the security framework sufficiently protective and flexible? Does it address the most significant security issues?
  • Should additional exceptions to the confidentiality requirements be considered?
  • Are there additional consultants or contractors to whom disclosure should be allowed for business operation purposes?
  • Are there alternative standards for defining de-identified information?
  • What procedures should the HHS use for de-listing PSOs?
  • In what types of situations should PSOs be allowed to “cure” deficiencies rather than being de-listed?
  • What procedures should PSOs follow in disposing of the PSWP after they have become de-listed?
  • What types of notice should be given to Providers when a PSO is de-listed?

Designed to complement the Patient Safety & Quality Improvement Act of 2005 (Patient Safety Act), the Rule is intended to address current laws that have discouraged Providers from sharing information regarding adverse events, medical errors, or “near misses,” which is believed to be essential to improving quality and safety in the health care delivery system. Currently, the state peer review laws constitute the legal framework for protecting information regarding medical errors, adverse events, or “near misses.” According to the HHS, peer review laws are limited in that they vary between states, only apply to hospitals and other specific health care entities, and largely fail to protect information transmitted outside the protected entity. The Rule seeks to create a forum to allow sharing of this information among facilities by granting privilege and confidentiality to information disclosed to PSOs.

Although well intended, the Rule fails to protect Providers that share information from potential liability adequately. Although the Rule generally protects information disclosed to PSOs, the federal protection is not extended to information other than the precise reports collected for and made to the PSO. The Rule also fails to address the issue of federal pre-emption of state law. This leaves open the question of whether the Provider waives or loses peer review protections for information that it collects through peer review, risk management, or some other function and subsequently reports to a PSO. Furthermore, the Rule provides exceptions to the privilege granted to information disclosed to PSOs, raising the risk that the information could be disclosed subsequently to the detriment of the disclosing Provider. Hospitals, SNFs, and others must carefully evaluate whether they risk waiving or losing state peer review protections by participating in this new regulatory scheme.

The Rule sets forth proposed confidentiality and privilege protections for patient safety information or the PSWP. The PSWP is defined as information that (i) is gathered for purposes of reporting to a PSO and actually is reported, (ii) is developed by a PSO in the conduct of defined patient safety activities, or (iii) reveals the internal deliberations or analysis regarding reporting pursuant to a patient safety evaluation system. However, a significant limitation of the Rule is that information gathered in another context such as risk management or peer review is not protected, even if subsequently reported to a PSO. Nor does the Rule protect original data such as medical records, billing, or discharge information that was collected for purposes other than reporting to a PSO. In short, the Rule protects only the information actually reported to the PSO, the activities of the PSO, and the deliberations about reporting to the PSO.

Although there are many similarities between the regulatory framework of the Rule and the HIPAA Privacy Rule, the confidentiality protections apply more narrowly here than under the HIPAA Privacy Rule. The confidentiality provisions of the Rule govern only “disclosures” of the information outside of the reporting entity or the PSO, but do not regulate or limit the “uses” of the PSWP within the Provider or PSO. The Rule establishes procedures for imposing civil monetary penalties of up to $10,000 per violation in the event of a knowing or reckless impermissible disclosure of the PSWP.

The Rule also grants a federal privilege to the PSWP, generally making it not subject to subpoena, discovery, or disclosure in disciplinary proceedings against a physician or other health care practitioner and inadmissible as evidence in civil, administrative, and criminal proceedings. However, two important exceptions apply. The Rule allows disclosure of the PSWP for use in criminal proceedings and for proceedings in which whistleblowers are seeking equitable relief for adverse employment actions. Given these exceptions, the federal privilege granted by the Rule may well afford Providers more limited protection than that of state peer review laws.

Under the Rule, Providers are allowed to disclose the PSWP voluntarily to accrediting organizations such as The Joint Commission (TJC) without jeopardizing the federal privilege. In this regard, the Rule may be the basis upon which TJC might try to require mandatory reporting of events not currently required for reporting such as sentinel events.

In Florida, voters approved Amendment 7, known as the Patient’s Right to Know Amendment. The amendment makes accessible all adverse event reporting by health care facilities where that information is relevant to particular litigation. Previously protected peer review information may now be subject to greater discovery in the litigation process. There may be pre-emption of Amendment 7 under the federal law outlined above. On April 29, 2008, Foley hosted a program where participants explored these developments, the challenges raised, and the potential solutions PSOs may hold for Florida health care providers in light of Amendment 7.

When a Nursing Director’s Duties Include Reporting Compliance Problems to Her Company, Can She Also Sue Under Whistleblower Laws?
A nursing director for a health care company that operates nursing homes in several states sued her employer in federal court under a state law whistleblower statute, alleging retaliation for reporting violations of various laws, regulations, and company policies. As with many senior living facilities, the nursing director who brought the lawsuit reported directly to the facility’s administrator. The nursing director had clinical responsibilities and also worked with a regional nurse consultant to ensure that the facility complied with clinical regulations.

The nursing director began working in a single nursing home in July 1997, and she was promoted to the position of regional nurse consultant for eight facilities in February 2000. Upon appointment to an interim nursing director position at a facility in Robbinsdale, Minnesota in April 2004, the employee complained about her work responsibilities and informed her supervisors that each facility was required to have a full-time nursing director and a licensed administrator. She provided statutory citations to her regional director to support her assertions that the company could be denied Medicare payments if it had no licensed administrator at her facility. She also complained internally about alleged inappropriate admissions policies and about various other Medicare reimbursement issues. However, she never filed any complaints during her employment with government agencies or with the company’s compliance hotline through which employees were encouraged to report suspected violations of the law. She later resigned and complained that she was constructively discharged by the company, alleging that the company created an unbearable work environment with the intent to force her to resign.

The trial court threw out the employee’s claim, and a federal court of appeals affirmed the dismissal. The courts reasoned that the employee’s job duties as nursing director required her to ensure compliance with applicable laws and to expose unlawful behavior internally. She did not become a whistleblower under that state statute “by merely exercising her duties to report compliance problems at her facilities,” the appeals court stated. That court reasoned that the nature of her internal complaints was to carry out her regular job duties as opposed to engaging in whistleblower activities.

In these circumstances, in which employees’ job duties require that they report compliance issues internally to management, senior living facility operators will have a good defense to any claims by employees under whistleblower laws. Best practices for employers wishing to use this defense should include making sure written job descriptions expressly state such duties and setting up internal company compliance hotlines, as the operator did in this case.

Legal News: Senior Living & Long-Term Care is part of our ongoing commitment to providing legal insight to our clients and our colleagues.

Please contact your Foley Senior Living & Long-Term Care attorney if you have any questions about these topics or want additional information regarding energy matters. Authors and editors: 

Michael A. Okaty
Orlando, Florida

Robert E. (Rob) Slavkin
Orlando, Florida

John S. (Jack) Lord, Jr.
Orlando, Florida

Christopher S. Linde
Orlando, Florida