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Negotiating with Nursing Homes

A recent case originating in Nassau County and decided at the end of December, 2009 serves as a warning to personal representatives who are helping family members enter a nursing home. To begin with, it is common for parents to rely on children for assistance and it is just as common for children to want to assist aging parents. In this regard, elder family members (parents) commonly prepare powers of attorney documents that create principal / agent relationships with their children. The child, or attorney-in-fact or agent, usually is granted the ability to handle the parent’s financial affairs. This ability of the child to act for the parent includes the power to enter contracts and agreements on behalf of the parent. If these contracts are carefully reviewed and properly entered into, the child will not be personally liable for contracts entered into by the parent (pursuant to the power of attorney). However, the child must never forget his or her fiduciary responsibilities for the parent — to do those things in the best interest of the parent (principal).

In the case, Wedgewood Care Center, Inc. v. Sassouni, the defendant Ben Youdim, signed an Admission Agreement as the designated representative of Eliahou Beroukhim, his father-in-law. Mr. Beroukhim was a resident of the Wedgewood Care Center from May, 2003, to January 1, 2005 and he ultimately died in early 2005. The Admission Agreement required that the defendant provide Wedgewood with all relevant information and documentation regarding insurance available to pay Wedgewood, and that he timely apply for Medicaid for his father-in-law. The Admission Agreement also provided that the defendant could be held personally liable if any acts or omissions on his part caused or contributed to the nonpayment of Wedgewood’s bills. The Admission Agreement did not contain a third party guarantee of payment; Federal law specifically prohibits third-party guarantees.[1]

In August, 2004, the Nassau County Department of Social Services (“DSS”), the local Medicaid agency, denied the Medicaid application submitted on behalf of Mr. Beroukhim due to the failure to verify and document large withdrawals from Mr. Beroukhim’s bank account and the failure to provide certain mutual fund statements. Information of this nature is required within the lookback period (five (5) year lookback) by DSS to determine if disqualifying transfers (i.e., uncompensated transfers or gifts) were made by Mr. Beroukhim.

Ultimately, a subsequent application was made and granted that awarded benefits retroactive to April 2004. However, Wedgewood sustained a shortfall in payment of approximately $61,000. Wedgewood sued the defendant claiming he breached the contract (his obligations under the Admission Agreement) and that Wedgewood had sustained damages as a result.

In this case, which is an appeal from a lower court which generally ruled in favor of the defendant, the court found for the plaintiff, Wedgewood. The court ruled that there was a valid claim against defendant for breach of contract pursuant to the Admission Agreement.

The lessons to be learned from this case are numerous. Some of these lessons include the following:

  • One, litigation is painful and expensive. Note how long this case took before the ultimate resolution. The case began after Mr. Beroukhim died in early 2005 and was not decided until December 2009. PLEASE HIRE AN EXPERIENCED ATTORNEY TO NEGOTIATE A SETTLEMENT WITH THE NURSING HOME BEFORE PROTRACTED AND EXPENSIVE LITIGATION ENSUES.
  • Two, the defendant was personally responsible for the unpaid nursing home bills because he agreed to it in the contract (Admission Agreement). PLEASE REVIEW THESE AGREEMENTS WITH YOUR ATTORNEY BEFORE ENTERING INTO THEM.
  • Three, the defendant applied for Medicaid on behalf of his father-in-law to pay for the nursing home. This obligation arose from being the agent under the power of attorney (to do those things in the best interest of the principal, his father-in-law, Mr. Beroukhim) and pursuant to the Admission Agreement. PLEASE HIRE A LAW FIRM TO ASSIST IN THE MEDICAID APPLICATION PROCESS. IF THE APPLICATION IS DENIED FINANCIAL HARDSHIP IS LIKELY.

If you have any questions about this case, powers of attorney, nursing home admission agreements, or Medicaid applications and how they may affect you or your family please contact Futterman & Lanza at 631-979-4300

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