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Arbitration Clauses Should Be Specific in Nursing Home Contracts

Tuesday, February, 5, 2013


An increasing number of nursing home facilities are now including arbitration clauses in their admissions paperwork and service contracts due the high number of unpaid accounts that the recent economic crisis has caused.  Through the use of arbitration to avoid litigation, such nursing home facilities are able to keep their legal costs down, thus keeping their overall operating expenses at a more affordable level.  Arbitration also offers several benefits over litigation, primarily related to the overall cost of the procedure and the time in which a claim is generally settled. 


In order to ensure that arbitration will be the first course of action in disputes related to nursing home payment for services or service contracts signed with third-party providers, it is important to include an arbitration clause in the paperwork and contracts that are signed by all parties.  This type of clause will help the nursing home facility direct all claims and disputes toward arbitration as the preferred choice of alternative dispute resolution, helping the facility to avoid costly litigation. 


However, when creating this type of clause in the paperwork, it is important for nursing home facilities to realize that such clauses may turn out to be unenforceable if they are written too broadly.  If the party wishing to file a lawsuit takes an arbitration clause before a judge, claiming that the clause was unconscionable, a judge could rule in favor of allowing the suit to go to litigation, despite the best efforts of the nursing home facility.  For example, stating that “all disputes between the facility and a resident or service provider are subject to mandatory, binding arbitration” is a good way to get the arbitration clause thrown out by a judge should someone decide to dispute it. 


If the arbitration clause for the nursing home facility contract contains wording specifying the type of dispute in which arbitration must be used (for example, non-payment for services), it is more likely to be enforced should the opposing party attempt to by-pass it as a form of alternative dispute resolution.  Another benefit to arbitration in this type of situation is its expense versus the considerable expense that would be incurred by both parties in attorney fees if the issue were taken to court with litigation.