[Senate Hearing 110-618]
[From the U.S. Government Publishing Office]
S. Hrg. 110-618
S. 2838, THE FAIRNESS IN NURSING HOME ARBITRATION ACT
=======================================================================
JOINT HEARING
before the
SUBCOMMITTEE ON ANTITRUST,
COMPETITION POLICY AND CONSUMER RIGHTS
of the
COMMITTEE ON THE JUDICIARY
and
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JUNE 18, 2008
__________
Serial No. J-110-101
__________
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
44-741 PDF WASHINGTON DC: 2008
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York LINDSEY O. GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island TOM COBURN, Oklahoma
Bruce A. Cohen, Chief Counsel and Staff Director
Stephanie A. Middleton, Republican Staff Director
Nicholas A. Rossi, Republican Chief Counsel
------
Subcommittee on Antitrust, Competition Policy and Consumer Rights
HERB KOHL, Wisconsin, Chairman
PATRICK J. LEAHY, Vermont ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa
CHARLES E. SCHUMER, New York SAM BROWNBACK, Kansas
BENJAMIN L. CARDIN, Maryland TOM COBURN, Oklahoma
Jeffrey Miller, Chief Counsel
William Castle, Republican Chief Counsel
------
SPECIAL COMMITTEE ON AGING
HERB KOHL, Wisconsin, Chairman
RON WYDEN, Oregon GORDON H. SMITH, Oregon
BLANCHE L. LINCOLN, Arkansas RICHARD C. SHELBY, Alabama
EVAN BAYH, Indiana SUSAN M. COLLINS, Maine
THOMAS R. CARPER, Delaware MEL MARTINEZ, Florida
BILL NELSON, Florida LARRY E. CRAIG, Idaho
HILLARY RODHAM CLINTON, New York ELIZABETH DOLE, North Carolina
KEN SALAZAR, Colorado NORM COLEMAN, Minnesota
ROBERT P. CASEY, Jr., Pennsylvania DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri BOB CORKER, Tennessee
SHELDON WHITEHOUSE, Rhode Island ARLEN SPECTER, Pennsylvania
Debra Whitman, Staff Director
Catherine Finley, Republican Staff Director
C O N T E N T S
----------
STATEMENTS OF MEMBERS OF THE COMMITTEES
Page
Casey, Hon. Robert P., Jr., U.S. Senator from the State of
Pennsylvania, prepared statement............................... 74
Feingold, Hon. Russell D., a U.S. Senator from the State of
Wisconsin...................................................... 17
prepared statement........................................... 84
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 2
Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin...... 1
prepared statement........................................... 90
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont,
prepared statement............................................. 97
Martinez, Hon. Mel, a U.S. Senator from the State of Florida..... 3
Smith, Gordon H., a U.S. Senator from the State of Oregon,
prepared statement............................................. 111
WITNESSES
Connor, Kenneth L., Esq., Wilkes & McHugh, PA, Washington, D.C... 11
Hirschel, Alison E., President, National Consumer Voice for
Quality Long Term Care, Washington, D.C........................ 7
Kurth, David W., Burlington, Wisconsin........................... 5
Rice-Schild, Kelley C., Executive Director, Floridean Nursing and
Rehabilitation Center, Miami, Florida.......................... 9
Ware, Stephen J., Professor of Law, University of Kansas,
Lawrence, Kansas............................................... 12
QUESTIONS AND ANSWERS
Responses of Kenneth L. Connor to questions submitted by Senators
Kohl and Feingold.............................................. 26
Responses of Alison Hirschel to questions submitted by Senators
Kohl and Feingold.............................................. 34
Responses of Kelley C. Rice-Schild to questions submitted by
Senators Kohl and Feingold..................................... 37
Responses of Stephen J. Ware to questions submitted by Senators
Kohl and Feingold.............................................. 39
SUBMISSIONS FOR THE RECORD
American Association of Homes and Services for the Aging (AAHSA),
Washington, D.C., statement.................................... 48
AARP, Washington, D.C., statement and letters.................... 50
Alzheimer's Association, Washington, D.C., statement and letter.. 66
Bill S. 2838..................................................... 69
Center for Medicare Advocacy, Inc., Toby S. Edelman, Senior
Policy Attorney, Washington, D.C., statement................... 76
Connor, Kenneth L., Esq., Wilkes & McHugh, PA, Washington, D.C.,
statement...................................................... 81
Hirschel, Alison E., President, National Consumer Voice for
Quality Long Term Care, Washington, D.C., statement and
attachment..................................................... 85
Kurth, David W., Burlington, Wisconsin, statement................ 92
National Senior Citizens Law Center, Eric M. Carlson, Director,
Long-Term Care Project, Los Angeles, California, letter........ 99
Public Citizen, David J. Arkush, Director, Washington, D.C.,
letter......................................................... 100
Rice-Schild, Kelley C., Executive Director, Floridean Nursing and
Rehabilitation Center, Miami, Florida, statement............... 103
Tripp, Lisa C., Assistant Professor, John Marshall Law School,
Atlanta, Georgia, statement and attachment..................... 114
Ware, Stephen J., Professor of Law, University of Kansas,
Lawrence, Kansas, statement.................................... 127
Wisconsin Health Care Association (WHCA), Thomas P. Moore,
Executive Director, Madison, Wisconsin, statement and
attachments.................................................... 132
S. 2838, THE FAIRNESS IN NURSING HOME ARBITRATION ACT
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WEDNESDAY, JUNE 18, 2008
United States Senate,
Subcommittee on Antitrust, Competition Policy and Consumer
Rights, of the
Committee on the Judiciary,
and the Special Committee on Aging,
Washington, D.C.
The Subcommittees met, pursuant to notice, at 10:30 a.m.,
in room SD-226, Dirksen Senate Office Building, Hon. Herb Kohl,
Chairman of the Subcommittee, presiding.
Present: Senators Kohl, Feingold, Salazar, Hatch, and
Martinez.
OPENING STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE
STATE OF WISCONSIN
Chairman Kohl. We will call this hearing to order and
proceed. Today we are here to examine arbitration agreements in
nursing home admissions contracts. We are conducting a joint
hearing with both the Judiciary and the Aging Committees
because the issue involves access to justice as it relates to
the 1.5 million Americans currently in long-term care
facilities and all those who may someday need this kind of
care.
Over the past several years, more and more long-term
facilities have required incoming residents to sign mandatory
arbitration agreements. By signing these agreements, residents
give up their right to go to court. It is important to note
that we believe the vast majority of nursing homes are doing a
very good job and working hard to deliver quality care. But we
must protect the rights of those who receive inadequate care to
hold poor-performing facilities publicly accountable.
As we will hear today, Mr. Kurth and his family want to
protect others from the tragedy they have suffered and to send
a strong message to underperforming facilities that harmful
care is not acceptable. The experience of placing a family
member in a long-term care facility is very emotional. Often
the decision is the last resort after a medical emergency or
when a family acknowledges that they cannot provide the level
of care their loved one needs.
The family's sole focus is on finding the best facility,
not studying technical legal clauses buried in the document.
Many incoming residents lack the capacity to make even simple
decisions, much less judge the legal significance of an
arbitration agreement. Most are unaware that they are signing
away their right to go to court. Typically, admissions
agreements are presented on a take-it-or-leave-it basis.
Residents have few choices because they require immediate
admission or because there are no other facilities in the area.
And as a result, whether or not they understand the arbitration
provision, they all feel compelled to sign in order to ensure
that their loved one will be admitted.
In response to these concerns, Senator Martinez and I have
introduced a narrowly targeted bill which would invalidate
mandatory arbitration agreements in long-term care facility
contracts. It is important to note that our bill does not
preclude arbitration as an option for resolving disputes.
As proponents of arbitration emphasize and with whom I
agree, arbitration can be a timely, efficient, and less
adversarial option for resolving disputes and going to court.
However, it is critical that the decision to use arbitration be
made voluntarily by both parties and only after a dispute
occurs. It is only fair that families and residents have the
opportunity to make an informed decision based on the facts of
their particular case. After the dispute, if both parties feel
that arbitration will truly offer a fair shake, as its
proponents argue, then they should be free to agree to it at
that time.
[The prepared statement of Senator Kohl appears as a
submission for the record.]
We will now turn to the Ranking Member of the Subcommittee,
Senator Hatch, for any comments he may have.
STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE
OF UTAH
Senator Hatch. Thank you, Mr. Chairman. It is always a
pleasure to be with you, and I appreciate the important work
that you, Mr. Chairman, and Senator Martinez have dedicated to
this issue. Your intentions are noble, and I agree that it is
vital that we ensure that our Nation's seniors receive proper
medical and nursing home care. Unfortunately, I do not believe
that S. 2838 meets our common goal of controlling costs which
is required to sustain an appropriate and professional level of
nursing home care for our growing senior population.
Mr. Chairman, as you well know, our Nation faces a crisis.
Out-of-control health care costs are the single most
significant fiscal issue facing our Nation. In fact, I consider
four major issues--Medicaid, Medicare, Social Security, and
energy--to be the issues of the next 5 to 10 years that are
going to make or break our Nation, and we have got to solve
these problems. We have to eliminate waste and needless costs
whenever possible.
The numbers confronting us are truly staggering. The
Department of Health and Human Services' Centers for Medicare
and Medicaid Services estimate that as a percentage of gross
domestic product, health care spending will increase from 16.3
percent in 2007 to 19.5 percent in 2017. In other words, in the
next 10 years, health care costs will increase faster than our
Nation's GDP by at least 1.9 percent a year. That means by 2017
our Nation will spend $4.3 trillion a year on health care. To
place this sum in the proper context, $4.3 trillion was the
approximate size of Japan's entire economy in 2007. To me, the
bottom line is this: If we do not curtail costs, we could very
well bankrupt our Nation. And given this historic challenge, we
should take care before advancing any legislation that would
unduly increase costs and undermine access to affordable care.
Unfortunately, I believe that will be the unexpected
consequence of this legislation. But I have got an open mind,
and I am certainly going to listen.
Arbitration clauses were not capriciously added to nursing
home contracts. According to a report by Aon Global Risk
Consulting titled ``Long Term Care 2008 General Liability and
Professional Liability,'' nursing home liability costs exploded
in the late 1990s. In those States that enacted tort reform,
long-term care liability costs plummeted. Regrettably, most
States have not enacted these reforms. Yet the report also
concludes long-term health costs have begun to ``level'' in
non-reforming States, in part because of arbitration clauses.
Now, this is a promising development. I believe that S.
2838 will relinquish these initial gains, and I fear that small
business owners will be unable to afford or obtain additional
liability insurance. As a result, many of them will be forced
out of business.
I also have trepidation that it will be the less-well-off
seniors who will be unable to afford the resulting increases in
nursing care prices, and as a consequence, their care will
needlessly suffer. Both of these avoidable prospects will be
caused by the elimination of arbitration clauses, in my
opinion.
Let me be clear. I am deeply concerned about nursing home
abuse. The violation of a patient's trust just cannot be
tolerated. I have read the Government Accountability Office
report that you requested, Mr. Chairman, and I was struck by
its conclusions. This report stated that there are serious
deficiencies in nursing home care which are not being
adequately reported to the Federal agencies responsible for
monitoring Medicare and Medicaid patient care. And while I
agree that these problems need to be addressed, I believe we
should also acknowledge the important initiatives launched by
the nursing home industry. These initiatives have made great
strides in ensuring that a professional level of care is
maintained at all nursing homes.
Now, Mr. Chairman, as I stated at the beginning of my
remarks, I deeply appreciate the leadership that you and
Senator Martinez have shown on this issue. However, I must
admit that I have serious concerns with this legislation due to
my belief that it will not achieve our common goal of
controlling costs that will enable us to sustain an appropriate
level of nursing home care for our growing senior population.
And these are matters that we just have to work through and
hopefully resolve, and hopefully I can be of assistance to you
in getting it resolved in the right way, because I have--I
think we have the same goals in mind. We have the same hopes
that we can get this system so it works better than it does
today.
I appreciate you doing this, and as usual, it is always a
pleasure to work with you.
Chairman Kohl. Thank you very much, Senator Hatch.
Senator Martinez?
STATEMENT OF HON. MEL MARTINEZ, A U.S. SENATOR FROM THE STATE
OF FLORIDA
Senator Martinez. Thank you very much, Mr. Chairman. I am
delighted to be here with you this morning. I thank you for
calling this important hearing, and we are here today to
consider whether nursing homes should be able to require their
patients to sign away their right to a jury trial as a
condition of admittance to a facility. And while I believe
arbitration is a valid way to settle business and financial
disputes, it should be a completely voluntary process where
both parties have a reasonable opportunity to understand the
benefits and the consequences of agreeing to arbitrate future
disputes.
As a practicing attorney for many years, I had the
opportunity on many occasions to participate in arbitration
proceedings. And like the Chairman, I believe that alternative
dispute resolution is a very legitimate way to resolve
disputes, but it particularly should be limited and should
apply in the intent of what the Arbitration Act was intended to
do, which is with people in similar positions when they are
entering into the decision to arbitrate. It is clear to me,
however, that prospective nursing home residents, one of our
Nation's most vulnerable populations, should not be forced to
decide the forum for resolving their potential claims as a
condition of admittance to a nursing home. Allowing pre-dispute
arbitration agreements for resolving future nursing home
disputes forces patients and their families to choose between
quality care and foregoing their rights within the judicial
system. That is hardly a free and voluntary choice, and it is
well beyond the original intent of our arbitration laws.
The Federal Arbitration Act of 1925 was originally enacted
to provide parties an alternative forum for voluntarily and
efficiently resolving potential business disputes. But more and
more frequently, nursing homes are requiring patients to agree
to arbitration as the sole vehicle for dispute resolution
before patients actually take residence in the facility. I
believe this is an unwarranted expansion of binding
arbitration, and if after a dispute or claim arises both the
patient and the nursing home freely were to decide to arbitrate
their case, then this legislation would allow that as well. So
that decision to arbitrate is clearly voluntary and may be the
best way to resolve a particular dispute.
Some in the arbitration industry themselves feel that
included in this is the American Arbitration Association, one
of the country's largest forums, generally refused cases over
nursing home care where the patient was forced to sign a pre-
dispute arbitration agreement prior to admittance. They
recognize the vulnerability of nursing home residents and their
families at the time of admission when they are most
vulnerable, when they are most distraught, when they are most
concerned, and that is not a time when we should be asking them
to make a legal decision that they would knowingly make at that
time to bind themselves to only arbitration as their sole
remedy.
Nursing home disputes often involve allegations of neglect
and of abuse, and, unfortunately, the prospects of patients and
their families being able to file a complaint in the civil
justice system may be the only way of holding nursing homes
accountable. I believe it is a way of forcing the industry to
regulate itself because we do know that their care falls in too
many instances below the level of care that we would all want
to see in that industry. So the fact of the matter is what we
are doing here is removing the one incentive that the industry
has to self-regulate and to police itself and to provide a
level of care that I believe is what all of us would like to
see for this very vulnerable group of American citizens.
What Senator Kohl and I have proposed in our legislation is
to restore the Federal Arbitration Act to its original intent
by requiring that agreements to arbitrate nursing home disputes
be made after the dispute has actually arisen. S. 2838, the
Fairness in Nursing Home Arbitration Act of 2008, will help to
ensure that arbitration is a voluntary process for both parties
involved and not a coerced forum to resolve disputes. Every
American deserves equal protection under the law and the right
to seek legal recourse when they are harmed by others, and I
really do believe that this bill goes a long way in helping to
maintain that balance between the vulnerable population of
nursing home patients and the big businesses that run the
nursing homes.
Thank you, Mr. Chairman.
Chairman Kohl. Thank you, Senator Martinez.
We turn now to our panel of witnesses. Our first witness
will be David Kurth. Mr. Kurth is from Burlington, Wisconsin,
and is an engineering project manager at MedPlast in Elkhorn,
Wisconsin. Mr. Kurth is here to discuss his family's experience
with nursing home arbitration agreements.
Our next witness will be Alison Hirschel. Ms. Hirschel is
the President of the National Consumer Voice for Quality Long-
Term Care, a grass-roots advocacy group. Ms. Hirschel is also
the elder law attorney at the Michigan Poverty Law Program.
Next we will be hearing from Kelley Rice-Schild. Ms. Rice-
Schild is the owner and executive director of Floridean Nursing
Home in Miami, Florida. Floridean is a family-owned long-term
care facility with 60 residents. Ms. Rice-Schild is here
representing the American Health Care Association and the
National Center for Assisted Living.
Our next witness will be Kenneth Connor. Mr. Connor is an
attorney at Wilkes & McHugh, a civil litigation law firm where
he specializes in cases involving nursing home abuse and
neglect.
The final witness will be Stephen Ware. Mr. Ware is a
professor at the University of Kansas Law School where he
specializes in arbitration.
We thank you all for appearing at our Subcommittee's
hearing today, and if you will all now stand and raise your
right hand and take the oath. Do you affirm that the testimony
you are about to give before this Committee will be the truth,
the whole truth, and nothing but the truth, so help you God?
Mr. Kurth. I do.
Ms. Hirschel. I do.
Ms. Rice-Schild. I do.
Mr. Connor. I do.
Mr. Ware. I do.
Chairman Kohl. Thank you so much.
Mr. Kurth, we will take your testimony.
STATEMENT OF DAVID W. KURTH, BURLINGTON, WISCONSIN
Mr. Kurth. Chairman Kohl, Ranking Member Hatch, and
distinguished members of the Committees, thank you for the
invitation to speak to you today. I would also like to
acknowledge my sister, Kim, and my mother, Elaine, who are both
accompanying me here today.
I am here to express my family's support of S. 2838, the
Fairness in Nursing Home Arbitration Act, and I would like to
thank Senators Martinez and Kohl for introducing this bill.
My name is David William Kurth, and my father's name was
William Frederick Kurth. He loved our country and served many
years as an officer in both the United States Army and the
Wisconsin National Guard. My father was an Eagle Scout, a Boy
Scout leader, and served as a volunteer fireman for more than
25 years in our community.
My father entered Mount Carmel Nursing Home in October of
2004. In February, he fell and broke his hip and had to spend
several days in the Burlington Hospital having his hip
repaired. Shortly after returning to Mount Carmel Nursing Home,
his left leg was broken again during physical therapy that was
improperly applied. My mother said that the therapist insisted
that my father's leg must be fully straightened. My mother said
also that my father was screaming in pain and trying his best
to resist their efforts. Yet they did not listen, and as a
result, they broke his leg.
It was at this same time he contracted MRSA infection. Also
during this time, his health care coverage was changed from
Medicare to Medicaid. The very day his coverage changed, he was
moved from his private room in the Medicare wing to a shared
room in the Medicaid wing of the nursing facility. His new room
was filthy and smelled of feces. The bed he was placed in was
coated with dirt. My wife and I had to clean his room and his
bed. The bathroom he shared with three other men had not been
properly cleaned in weeks, possibly months.
On one occasion, I found the room to reek of feces. There
was a rag with feces next to my father's face on his feeding
table. His clean clothes were on the floor intermingled with
several changes of soiled sheets. Even though my father had
contracted the MRSA infection, the staff made no attempt to
protect his roommates, his visitors, or even their own staff
from contracting this very communicable disease.
In April, Dr. Ryan found two or three small bedsores on my
father's backside and instructed the wound care nursing team to
give special attention to these wounds. What we did not know
was that around this same time the management of the facility
had made a cost-cutting move and disbanded the wound care team.
What this meant was that the wound care for over 150 patients
that had previously been done by a team of people was now to be
attended by only one nurse. Records show that this sole wound
care nurse never attended to my father's wounds during the
months of April or May, even after it was brought to her
attention by the visiting doctor.
After examining my father again prior to Memorial Day, the
doctor immediately rushed my father to the emergency room. The
doctor told us how shocked he was at the poor care my father
had received. He had also told us that my father was terminally
ill and that he did not have much chance of surviving his
infections. My father died on June 25, 2005, from sepsis of the
blood due to infections caused by approximately 13 bedsores.
Most of these bedsores ran deep into the bones of his hips and
pelvis. The infections were caused by the excrement and urine
that was not properly cleansed from the wounds for days at a
time. The bedsores were caused by neglect.
The wound care nurse that was responsible for caring for my
father has been charged and found guilty of criminal neglect by
the State of Wisconsin for her actions.
On the day of my father's memorial service, a Kindred
representative contacted me to express her concerns for the way
my father suffered and said they felt responsible and wanted to
pay for my father's funeral expenses. I declined her offer.
To make matters worse, the parent corporation of the
nursing home is hiding behind a mandatory arbitration clause to
prevent the light of truth from being shed on their corrupt
management policies.
How can anyone in good conscience argue that it should be
perfectly legal to trick frail, elderly, infirm senior citizens
during the most stressful time in their lives into waiving
their legal rights?
My sister and I and my mother are here today to plead with
you to help right a great wrong that is being perpetrated on
the elderly of America. It is by God Almighty's hand that you
have come to your position this day for such a time as this.
Please do not let my father's story be allowed to happen to
another innocent American.
Thank you for your time.
[The prepared statement of Mr. Kurth appears as a
submission for the record.]
Chairman Kohl. Thank you very much, Mr. Kurth.
Ms. Alison Hirschel.
STATEMENT OF ALISON E. HIRSCHEL, PRESIDENT, NATIONAL CONSUMER
VOICE FOR QUALITY LONG TERM CARE, EAST LANSING, MICHIGAN
Ms. Hirschel. Good morning, Chairman Kohl, Ranking Member
Hatch, and Senators Martinez and Feingold. Thank you very much
for inviting me to speak on behalf of NCCNHR, the National
Consumer Voice for Quality Long Term Care, and thank you,
Senators Kohl and Martinez, for introducing this important
legislation. I am delighted to note that Lynn Miller, a nursing
home resident who is on the NCCNHR Board, is with us today here
in the front row.
For the past 23 years, I have advised long-term care
consumers about their rights and options, and I know that
residents and families often sign admissions agreements at a
time of great stress in their lives, and they do when decisions
need to be made in a hurry. Most consumers do not notice that
there is a mandatory arbitration provision in the contract they
are signing, and if they do, they might not understand them.
They probably do not know that under these provisions, the
facility chooses the arbitrator. They do not understand that
arbitration can be very costly for consumers, that arbitration
awards are generally significantly lower than jury awards, and
that there is no appeal. And the last thing on most consumers'
minds is how they will seek a remedy if something goes wrong.
They enter a long-term care facility seeking care and
compassion, not litigation or arbitration.
Even if consumers understand the arbitration clause, they
will not challenge it. First, this is not a negotiation between
two equal parties. Consumers sign whatever they need to sign to
get their family member into a facility. Second, nobody wants
to be considered a troublemaker before they have even entered
the facility, and to put the life of a vulnerable resident in
the hands of someone who might already be annoyed at them. And
they especially do not want to be a troublemaker about a clause
in the contract that they do not think will ever affect them.
But, of course, sometimes things do go grievously wrong.
For example, Vunies B. High was a 92-year-old Detroit area
resident with dementia. She happened to be the sister of the
legendary boxer Joe Louis. She was a graduate of Howard
University and a very accomplished woman and a long-time
teacher. Ms. High's family placed her in an assisted living
facility because they thought that she would be safe there. On
a frigid night this past February. the staff failed to notice
when Ms. High wandered out of the facility wearing only her
pajamas. She froze to death right outside her door. Her family
then discovered that the admissions agreement they signed
contained a mandatory, binding arbitration provision that
stated that the provider had the sole and unfettered option to
choose to resolve the dispute in arbitration; the provider
would choose the location, and presumably the arbitrator; the
provider would choose the rules; and the provider retained its
right to go to court if it had any dispute against Ms. High,
though Ms. High was required to give up her right to go to
court if she had a dispute against them.
Because of this agreement, Ms. High's family may not have
an opportunity to seek redress in the courts for her tragic and
preventable death. This is troubling because the potential for
litigation provides an important incentive for facilities to
provide better care. It is a way for individuals who really
have been wronged in sometimes harrowing ways to hold providers
accountable. And it is a method for ensuring, in contrast to
arbitration, that these abuses are brought to light.
At the same time we are seeing more mandatory arbitration
clauses, Government studies continue to provide disturbing
evidence that our enforcement system is not working well. As
Senator Grassley remarked in 2007, ``The enforcement system is
broken.'' In my own State, complaints take an average of 90
days to investigate, and sometimes as long as a year. In that
time, all evidence disappears, and it is impossible to
substantiate even the most serious and legitimate complaints.
And if you cannot substantiate them, you cannot impose a
penalty.
Licensed assisted living facilities in my State are
inspected less often, less rigorously, and inspectors have even
fewer tools if problems are discovered. And there is no
enforcement at all in unlicensed facilities like the one in
which Ms. High's family unwittingly placed her. So enforcement
cannot be an adequate substitute for litigation in really
egregious cases.
I know that opponents of this bill lament that funds that
should be spent on resident care are diverted to pay for
litigation and liability insurance. But I want to be clear
about three important points:
First, what really costs taxpayers unfathomable amounts of
money is poor care itself. For example, when a Wisconsin
nursing home ignored for more than 5 days Glen Macaux's
doctor's orders to inspect his surgical site, the resulting
infection caused septic shock, excruciating pain, severe
depression, and total disability, and hospital bills of almost
$200,000. And this is replicated over and over across the
country.
Second, even if providers were spared the expense of
litigation and high insurance premiums, there is no guarantee
that they would put that money into improving residents' lives.
And, finally, I want to note that anti-arbitration. We are
only opposed to pre-dispute, binding, mandatory arbitration.
Arbitration was not intended as an end run around justice or a
way to keep wrongdoing out of the public eye. In cases in which
consumers have already suffered grievous harm, Congress should
not permit long-term care facilities to add the bitter burden
of denying individuals their fundamental right of access to the
courts.
Thank you.
[The prepared statement of Ms. Hirschel appears as a
submission for the record.]
Chairman Kohl. Thank you, Ms. Hirschel.
Ms. Rice-Schild.
STATEMENT OF KELLEY C. RICE-SCHILD, EXECUTIVE DIRECTOR,
FLORIDEAN NURSING AND REHABILITATION CENTER, MIAMI, FLORIDA
Ms. Rice-Schild. Thank you, Chairman Kohl, Ranking Member
Hatch, and members of the Committee. I am grateful to have the
opportunity to be with you here today and to offer the long-
term care profession's perspective on arbitration. My name is
Kelley Rice-Schild, and I am here today on behalf of American
Health Care Association and the National Center for Assisted
Living.
In addition to representing the long-term care industry, I
am also here as an owner, operator, small businesswoman, and
nursing home administrator. The Floridean in Miami was founded
by my great-grandmother, Florence Dean, in 1944 and is a high-
quality nursing facility that has been operated by a member of
my family ever since. The Floridean is the oldest nursing home
in Miami and serves as many as 60 South Floridians every day.
Our mission is to meet and exceed the expectations of our
patients and their families by providing the highest-quality
care possible.
Before I address the benefits of arbitration as an
alternative to litigation, allow me to take a moment to assure
the Committee that the troubling anecdotes presented today
represent the exception rather than the rule within our long-
term care community.
I am proud of the advances our profession has made in
delivering high-quality care, and we remain committed to
sustaining these gains in the future when demand for care will
dramatically increase.
Data tracked by CMS clearly illustrates improvements in
patient outcomes, increases in overall direct care staffing
levels, and significant decreases in quality of care survey
deficiencies in our Nation's skilled nursing facilities. We
remain committed to building upon these quality improvements
for the future.
In the late 1990s, our profession was subject to an
increasingly difficult legal environment. Long-term care
operators were forced into making difficult decisions,
including potential closure of facilities and corporate
restructuring. In addition to pursuing tort reform, we sought
alternatives to traditional litigation, including arbitration.
This trend was especially true in States such as Texas,
Arkansas, and my home State of Florida, where State laws
fostered an exponential growth in the number of claims filed
against long-term care providers, even those like mine with a
history of providing the highest-quality care.
This led to an explosion in the cost of maintaining
insurance to protect operators from the risks associated with a
tort environment that often encouraged unsubstantiated claims,
featuring highway billboards and other advertising encouraging
consumers to sue their long-term care provider.
In 2001, tort reform legislation passed in Florida.
Unfortunately, insurance is still not widely available and is
unaffordable for most operators. Today in my facility, I am
covered by a $25,000 general and professional liability policy
for which I pay $37,000 a year. To carry more insurance would
simply make my facility a target for litigation, despite our
over 60-year history of providing nothing but the highest level
quality of care.
In order to serve the good steward of my family's long-time
business and to continue to operate in such an environment, I
turned to arbitration. I was not alone. In 2002, American
Health Care developed a model arbitration agreement form for
possible use in admission process as a service to our member
facilities and the residents they serve. This model agreement
in no way alters the rights of remedies available to the
resident under State tort law. It states that entering into an
arbitration agreement is not a condition of admission to the
facility. It is clearly free and voluntary. The form also
provides a 30-day window for the resident or their
representative to reconsider and rescind the arbitration
agreement.
We support the use of arbitration because, unlike
traditional litigation, our experience is arbitration is more
efficient, less adversarial, and has a reduced time to
settlement. A recent Aon report found arbitration reduces the
time to settlement by more than 2 months, on average, and that
very few claims actually go all the way to arbitration, as most
claims are settled in advance.
The Aon report also finds that 55 percent of the total
amount of claims costs paid by the long-term profession is
going to directly to attorneys. It is unfortunate to
sensationalize this debate with anecdotes and misinformation
perpetuated by high-profile trial attorneys who are the primary
beneficiaries of eliminating arbitration and long-term care. In
fact, Mr. Connor's testimony last week before the House
Judiciary Subcommittee inaccurately portrayed the manner in
which arbitration agreements are presented to residents and
their families upon admission.
We believe that legislative proposals to limit arbitration
and undermine the FAA is bad public policy. We strongly support
the use of arbitration as a reasonable option to resolve legal
disputes and aggressively oppose efforts to diminish the use of
arbitration.
Thank you for this opportunity to offer comments today. I
look forward to your questions.
[The prepared statement of Ms. Rice-Schild appears as a
submission for the record.]
Chairman Kohl. Thank you, Ms. Rice-Schild.
Mr. Connor?
STATEMENT OF KENNETH L. CONNOR, ESQ., WILKES & MCHUGH, PA,
WASHINGTON, D.C.
Mr. Connor. Thank you, Senator Kohl, Ranking Member Hatch,
Senator Martinez. I would like to thank you, Senator Kohl, and
you, Senator Martinez, for your sponsorship of this very
important legislation.
Senator Hatch has rightly outlined, I think, some of the
major crises that are facing our country. I would submit to you
that we also have an unacknowledged crisis of care with respect
to our elderly and long-term care facilities in this country. I
know because I have seen it firsthand. I have tried cases
involving abuse and neglect of nursing home residents from
Florida to California. I have seen nursing home residents who
had pressure ulcers as big as pie plates. Their wounds
oftentimes were so putrid and foul-smelling that you could
smell the resident walking down the hall before you ever
entered their room and saw them. I have seen them with gaunt
faces and hollow eyes, suffering from avoidable malnutrition,
their tongues too parched and swollen to speak because they are
suffering from preventable dehydration. Sometimes they are
victims of sexual abuse by their caregivers or physical abuse
by other demented patients who are not properly supervised. And
most of the times, these problems are rooted in the failure of
nursing homes to maintain sufficient staff to take care of
their residents. And the reason that is the case is that labor
costs are the biggest single item in a nursing home budget. And
when you are dealing with a capitated system where they are
paid a flat fee for the care of residents, the way you increase
profits is by reducing costs. And so they short the staff, and
then in our experience often falsify the records to reflect a
false and inaccurate picture of the care that is being given in
the nursing home.
Now, historically, the means of redress for these kinds of
injuries has been to resort to the courts--that is, the right
to a jury trial that was so cherished by our forefathers that
many refused to sign the Constitution until they agreed to
secure it in the Seventh Amendment.
I can tell you as a practical matter, these problems are
only going to get worse with time. We have got an enormous age
wave coming. We have a veritable senior tsunami on the horizon.
Dr. Leon Kass has rightly said that we are rapidly becoming a
mass geriatric society, even as we are facing the pressures
that you, Senator Hatch, have identified in terms of the crisis
in our Medicare and Medicaid systems. And at the same time, we
are experiencing a shift in the cultural consensus about the
way we view the elderly and handicapped especially. We are
moving away from a sanctity-of-life ethic to a quality-of-life
ethic, and old people suffering from dementia in the nursing
home do not score well using quality-of-life calculus. They do
not perform well on functional capacity studies, and they cost
more to maintain than they produce, and they are often the
victims of abuse and neglect in nursing homes.
And I respectfully dispute what Ms. Rice-Schild has said.
All you have to do is look at the briefs and memos that our
office has filed on multiple occasions in court, along with
that of others.
You know, in any other setting if you took advantage of an
elderly person whose eyes were dim and whose hearing was dull
and who lacked mental capacity or perhaps is on medication that
impaired their mental faculties, and you talk them into
forfeiting important legal rights or forfeiting the important
right to recover money for their damages, in almost any other
setting, the perpetrators of that kind of conduct would be
prosecuted. Yet it is an approved process in nursing homes.
Nursing homes take advantage of frail, vulnerable residents who
are mortified and terrified that they are about to be left by
their families in an institution. The families themselves are
stricken with grief and guilt over the fact that they cannot
care for their loved one anymore and they have to turn them
over.
The last thing on their mind when they come to the nursing
home is that they are going to be required to forfeit their
legal rights. All they are concerned about is getting care for
their mother or grandmother whom they know they cannot care for
any longer.
These agreements are often sandwiched at the end of a 50-
or 60-page admitting packet. They are rarely ever explained.
Oftentimes we find that people who explain them do not even
know or understand the consequences.
If arbitration is such a good remedy--and I would submit to
you that arbitration can be an appropriate means of alternative
dispute resolution, then let's foster it after the dispute
arises, not before the dispute arises, when the victims of
abuse and neglect and their families do not have a clue about
what they are suffering. If your goal is to hold wrongdoers
fully accountable for the consequences of their wrongdoing and
to see to it that innocent victims of wrongdoing are
compensated fairly for what they have suffered, I would suggest
to you you ought to support this important legislation.
Thank you.
[The prepared statement of Mr. Connor appears as a
submission for the record.]
Chairman Kohl. Thank you, Mr. Connor.
Mr. Ware.
STATEMENT OF STEPHEN J. WARE, PROFESSOR OF LAW, UNIVERSITY OF
KANSAS, LAWRENCE, KANSAS
Mr. Ware. Chairman Kohl, Ranking Member Hatch, Senator
Martinez, members of the Committees. Thank you for having me
here today. My name is Stephen Ware. I am a professor of law at
the University of Kansas. I speak to you today not on behalf of
my university, but as an individual scholar who specializes in
arbitration law. I have written two books on the subject and 20
arbitration articles in scholarly journals. Within my field of
arbitration law, I have focused on the arbitration of disputes
involving ordinary individuals, and it is safe to say that for
the last 15 years, the bulk of my professional life has been
devoted to studying the law, economics, and policy of such
arbitrations. It is based on this experience that I oppose S.
2838 because I believe it will tend to harm those it aims to
protect, that is, nursing home residents and their families.
I have three points I want to make about arbitration. The
first point, which Senator Kohl alluded to, is that to the
extent we have reliable empirical evidence comparing
arbitration and litigation, arbitration does tend to be a
quicker, cheaper method of dispute resolution. So the savings
that Senator Hatch alluded to are backed up by empirical data.
That leads me to my second point, which is that advocates
of this bill often praise arbitration and allude to those
benefits of arbitration and say that while we are going to keep
arbitration, we like arbitration, all this bill will do is ban
pre-dispute arbitration agreements. That, however, sets up a
false choice. If you ban pre-dispute arbitration agreements,
you effectively end virtually all arbitration of this sort of
dispute, and that is because parties rarely enter into post-
dispute arbitration agreements. The vast majority of
arbitration arises out of pre-dispute arbitration agreements.
The fact that parties rarely enter into post-dispute
arbitration agreements does not reflect badly on arbitration.
What it reflects is the perspective the disputing parties have
after a dispute arises. At that time, parties and their lawyers
can assess a case, and they try to maneuver into a forum that
advances the self-interest of that side of the case. In other
words, one party may be attracted to litigation precisely
because it is not as fast or as cheap as arbitration. That can
give a strategic advantage to that side. So we rarely see post-
dispute arbitration agreements. Enacting a bill like this, I
expect, will virtually eliminate arbitration of these sorts of
disputes.
That then brings me to my third point, which is the
fairness of arbitration. I think it is important to avoid
generalizing here because there are a wide variety of
arbitration agreements out there and a wide variety of things
happening in arbitration. And here is where I really believe we
have a sensible system under the Federal Arbitration Act as it
stands now, with courts refusing to enforce arbitration
agreements that are unfair, that would lead to an unfair
arbitration process. So as Senator Martinez says, we all want
to hold nursing homes accountable for their negligence.
Certainly the sort of atrocious care Mr. Kurth described, we
all want to hold nursing homes accountable for that sort of
care. The question is: Will arbitration do that? And sometimes
the answer is yes, sometimes the answer is no. It depends on
the particular arbitration agreement, the particular
arbitrators involved.
So what we have now is a very sensible system in the law
where courts decide on a case-by-case basis which arbitration
agreements to enforce and which ones are unfair and should not
be enforced. I think that is a better system, case-by-case
adjudication of these fact-intensive issues, than legislation
which would pain with a broad brush and would be overinclusive.
Thank you very much.
[The prepared statement of Mr. Ware appears as a submission
for the record.]
Chairman Kohl. Thank you, Mr. Ware.
A question for you, Mr. Connor. Ms. Rice-Schild says that
Mr. Kurth's case, as we heard about it today, is ``the
exception and not the rule.'' I would ask you how prevalent are
arbitration agreements in admissions contracts and how common
are stories like Mr. Kurth's that we heard today.
Mr. Connor. Mr. Kurth's story is all too common. There are
many nursing homes in this country that give high-quality care,
but Mr. Kurth's story and the story that was outlined by Ms.
Hirschel are very, very common. I have reviewed hundreds and
hundreds of charts from nursing homes all over the country and
see these systemic problems. These are not isolated problems.
They are systemic. And we also see systemic fraud in the
industry. In fact, in 2000, the DOJ commented at one of these
hearings that fraud had been built into the business model of
the nursing home industry. And I can tell you that in the
ensuing time since that statement was made, it has been
validated time and time again in the cases that I have been
involved in where nursing homes try to conceal the true
staffing picture and the true nature of the care that is being
given.
We encounter these nursing home pre-dispute arbitration
agreements, I would estimate, in 60 to 70 percent of our cases,
and that percentage is rising over time, because it is a
tremendous advantage to the nursing home to enter into these
agreements. These proceedings are often secret. They are not
exposed to public opprobrium like they would be in a public
trial or in the case of a public jury verdict. They often are
able to shift the costs of arbitrating to the plaintiffs in
this case. It often is cheaper for the defendant nursing homes.
But at bottom, I would suggest to you, the inherent unfairness
that arises from taking advantage of a frail, elderly person to
get them to forfeit important legal rights before a dispute
arises is just simply unconscionable and ought not to be
sanctioned by this Congress.
Chairman Kohl. Thank you.
Ms. Hirschel, long-term care facilities claim that without
arbitration, their costs would increase and access to quality
care will decrease. I am concerned about our seniors having
access to quality long-term care, as we all are. Will this
bill, as they say, result in fewer facilities to care for our
aging population?
Ms. Hirschel. Senator Kohl, I do not think so, and I would
like to caution us not to equate the legitimate issue that
Senator Hatch raised of rising health care costs across the
board with the specific issue of consumers' rights to go to
court in truly egregious cases. There are lots of other ways
that facilities can control costs and keep their doors open and
provide access.
The first thing is they can provide good care. There is no
evidence of a spate of frivolous lawsuits. In fact, the Harvard
study in 2003 showed that in more than half the cases that were
filed against nursing homes, the resident died. So these are
not--even defense lawyers for the industry have acknowledged
that these cases are not frivolous. If you provide good care,
you do not get sued for those very expensive, egregious cases.
The second thing I think would be very interesting is to
look at how the insurance industry sets its rates for nursing
home liability insurance. The Center for Medicare Advocacy did
a study that showed that those rates increase exponentially and
not directly related to civil litigation costs, but to a host
of other factors. And I think we really need to see whether
those rates are truly based on rising litigation or on other
factors that are not legitimate, and whether the insurance
companies, in fact, are bleeding profits out of nursing homes
that should be spent on care.
And, finally, I think we need to look at the private equity
firms, which I know that you and Senator Grassley have looked
at very carefully. They are bleeding resources out of
facilities and putting profits over residents. If we ensured
that the funds that should be spent on resident care stayed in
the facility instead of in the private equity investors'
pockets, that would also allow facilities to continue providing
quality care and keeping their doors open.
So, in sum, I would just say that nursing homes can keep
their doors open if they provide good care, if they have
responsible corporate policies, and if we ensure that liability
insurance rates are fair and reasonable. Thank you.
Chairman Kohl. Thank you.
Senator Martinez?
Senator Martinez. Thank you, Mr. Chairman.
I want to thank all the witnesses for very compelling
testimony. The fact is that these are difficult issues. We are
talking about issues that are really at the heart of a cycle of
life where we need to show the kind of care and concern that I
know all of you passionately care about.
Ms. Rice-Schild, I also want you to know that I am certain
your establishment gives quality care. I am sure there are
places where quality care happens. I also have faith in the
judicial system to ferret out the frivolous from the
legitimate. And I think at the end of the day, while a lawsuit
might be filed, before a lawsuit ultimately comes to being a
collectible verdict, that there needs to be a process in place
that is fair to all concerned.
I was intrigued by something you said, and I want to
clarify it. You mentioned that in Florida we had tort reform,
and I believe you said in 2001, I believe. But yet your
insurance rates did not drop significantly. Is that right?
Ms. Rice-Schild. No, Senator. The insurance companies, the
major carriers, are not writing medical malpractice insurance
in Florida.
Senator Martinez. But that was in spite of tort reform, so
tort reform really did not alter the insurance situation.
Ms. Rice-Schild. I think there needs to be a track record
before the insurance companies will come back to the State, and
slowly but surely we are all hoping that will happen and it
will be affordable.
Senator Martinez. But at this current time, you do not find
that there is affordable insurance in Florida?
Ms. Rice-Schild. No, Senator. It is almost dollar for
dollar. The last time that I was able to get real medical
malpractice insurance was 1999. I had $1 million/$3 million
coverage, and I paid $24,000. I have an almost pristine record.
Then after the bottom dropped out, I was reduced to having to
get a $25,000. Now if I wanted to get $1 million/$3 million--I
spoke to an insurance agent just recently on my renewal--it
would be close to $800,000.
Senator Martinez. So essentially tort reform did not alter
the equation in terms of--
Ms. Rice-Schild. Not yet, Senator. We are hoping that it
will.
Senator Martinez. Okay. And it is almost a decade, so I am
wondering what it really is the solution that it is held out to
be. I am sure when you were advocating for tort reform in
Florida, you were assured that this would drop your rates, and
you were probably telling legislators at the time that that
would happen. And, unfortunately, it happens, and that is my
point.
Ms. Hirschel, in the limited time I have, let me move
along. Folks who come into a situation and they are presented
an arbitration agreement, do they get a discount? Do they pay
less in any way?
Ms. Hirschel. No, sir, they do not.
Senator Martinez. And is it your experience--
Ms. Hirschel. Not in my experience. I am sorry to
interrupt, but certainly not in my experience. I have not heard
that.
Senator Martinez. And do you believe that people are in
anyway informed at the time of signing of that contract as to
what they are doing in terms of giving up their legal rights?
Mr. Connor mentioned that sometimes these might be sandwiched
in the back of a package. I took my dad to a nursing home and
grabbed him out of there in about a week because I was appalled
myself. That is just my own little experience. But, anyway, I
remember signing a lot of stuff. And, frankly, as I have sat
here, I wondered if I signed an arbitration agreement as part
of that. I do not know.
Ms. Hirschel. Well, my sense is that different facilities
have very different practices. Some do explain the process, and
I know that some defense attorneys for nursing homes suggest
that their facilities have a video that explains the entire
process, although the defense lawyer whose paper I read said
that none of his clients have chosen to do that.
So some do and some do not. I have certainly seen the
admissions contracts where those arbitration clauses are
absolutely buried and use very difficult legal language. But as
I said in my testimony, even in the cases where clients, where
applicants understand that there is an arbitration agreement,
they are afraid to ask to have that removed. They just want to
get their family member in, and they do not think it is going
to apply to them.
Senator Martinez. Mr. Ware, I was intrigued by your faith
in a two-proceeding system. I understand that alternative
dispute resolution is a very progressive way of resolving legal
disputes, and I have participated in them on many occasions in
different settings. And I think that they are appropriate.
However, when you recommend that essentially there be an
arbitration process and then it be taken before a court so that
on a case-by-case basis a court can then decide if it was
fairly entered into? I am not sure I understand that.
Mr. Ware. No, Senator. I recommend the law as it is right
now, the current law, which is when people agree to arbitrate,
if they choose to arbitrate, they just go ahead and arbitrate.
If one of the parties wants to get out of the arbitration
agreement, they can go to court and a court assesses whether
the agreement should be enforced or not.
Senator Martinez. But then that forces them into
litigation.
Mr. Ware. Certainly, right. The choice to try to back out
of one's arbitration agreement gives you the alternative of a
court to back you up on that and let you out of the arbitration
agreement.
Senator Martinez. But do you find that when people enter
into these arbitration agreements, particularly in nursing home
settings, that they are aware of the legal rights that they are
giving up and that they in any way have any sort of an equal
bargaining position? I mentioned in my opening statement about
my belief that arbitration really has its fruits in resolving
business disputes where there is some sort of an equilibrium,
if you will, in the bargaining position of the respective
parties.
Do you think that exists in this situation? And does that
concern you?
Mr. Ware. Well, that is, again, where I would hesitate to
generalize. I mean, part of my job as a law professor is to
imagine extreme cases on either side. So I can imagine extreme
cases where people would say, yes, this arbitration agreement
was fairly, voluntarily entered into, and ought to be enforced,
just like I can imagine extreme cases on the other side. And
then there is a lot of gray area in the middle where reasonable
people can disagree. And that, again, is why I believe we have
got such fact-intensive, case-by-case, issues arising here, so
rather than the broad brush of litigation, this is better
resolved case by case by courts looking at individual facts.
Senator Martinez. Thank you, Mr. Chairman. My time is up.
Chairman Kohl. Thank you, Senator Martinez.
Senator Feingold?
STATEMENT OF RUSSELL D. FEINGOLD, A U.S. SENATOR FROM THE STATE
OF WISCONSIN
Senator Feingold. Well, thank you, Mr. Chairman, for
holding this hearing and for your leadership on this issue.
I want to first welcome Mr. Kurth from Burlington,
Wisconsin, and his family members, and express my deepest
sympathy for the loss of your father and the ordeal you and
your family have undergone. That was very powerful and,
frankly, very disturbing testimony. Thanks for coming here to
tell your story and to try to help other families.
One of the most fundamental principles of our justice
system is the right to take a dispute to court. I have been
concerned for many years that mandatory arbitration clauses in
all sorts of contracts that consumers and employees must sign
are slowly eroding the legal protections that should be
available to all Americans. I have introduced legislation to
make these provisions unenforceable basically in all contexts
because I believe they are inherently unfair, other than some
of the commercial situations that Senator Martinez was just
referring to.
Arbitration is an important form of alternative dispute
resolution, but it should never be forced on someone,
particularly not on someone with unequal bargaining power
before a dispute even arises. People who sign contracts to go
into a long-term care facility are among the most vulnerable of
our citizens, whether they are seniors or their families. They
sign papers that are handed to them in often very difficult and
emotional circumstances. They are not represented by lawyers to
review the fine print. As we have heard from the witnesses
today, residents and their families typically have no
opportunity to negotiate the terms of the contracts they sign.
Often they believe or they are told the contracts are take-it-
or-leave-it propositions. In some cases, the facility, but not
the resident, retains the right to modify the contract and even
to pursue a collection action in court. If the dispute goes to
arbitration, the secret proceedings often severely restrict
discovery and impose limits on witnesses, experts, and
information sharing.
So I am pleased to cosponsor the Nursing Home Contract
Arbitration Fairness Act introduced by Senator Martinez and my
senior colleague from Wisconsin Senator Kohl. The bill will
restore access to the courts for nursing home residents who
have suffered abuse and neglect. That access in the end helps
improve the quality of care for our seniors. Mr. Chairman, the
rule of law means little if the only forum available to those
who believe that they have been wronged is an alternative
unaccountable system that they have not chosen voluntarily when
the laws do not necessarily apply. This legislation protects
seniors from exploitation while still allowing alternative
methods of dispute resolution to be chosen by the parties. I
applaud you, Senator Kohl and Senator Martinez, for introducing
the bill, and I hope this hearing will move us closer to
enacting it.
[The prepared statement of Senator Feingold appears as a
submission for the record.]
Mr. Kurth, thank you again for coming and testifying. One
thing you talk about in your testimony is how the secrecy of
arbitration is used as a shield for corporations to hide
behind. Is one of the reasons that you wanted to have a real
trial in court that you wanted to help educate the public and
talk about what your family has been through in an open
proceeding?
Mr. Kurth. Yes, sir. We live in a small community, and what
we saw was that even though this happened, this terrible thing
happened, nobody knew about it unless they knew our family. Yet
other members of the community were continuing to enter the
facility; they had no idea what they were getting into or what
they were being asked.
When I was there, in one of the other rooms was somebody
that taught us biology in high school. This is all about public
safety and public awareness and fairness as well. We just want
to make sure that this does not happen to other people from our
community.
Senator Feingold. Thank you.
Mr. Connor, in Ms. Rice-Schild's testimony she claims that
you misrepresented how arbitration agreements are presented to
potential residents. She also claims that potential residents
at her facility are not required to sign the arbitration
agreement and that several have chosen not to do so.
In your 25 years representing residents and nursing homes,
have you found that residents are generally told that they do
not have to sign the arbitration clause?
Mr. Connor. No, that would be in my experience the
exception rather than the rule, and, in fact, as Ms. Hirschel
has pointed out, oftentimes residents and their families are
reluctant at the very outset to buck the system and to buck the
proposals. They do not want to be deemed to be problem
oriented. But in any number of instances, residents have been
told that if they do not sign the agreement, then they will not
be permitted to gain admission to the facility. And this is
simply not acceptable in many instances because it may be many
miles to the next nearest facility, and they will not have an
opportunity to visit their loved ones as they otherwise would.
These agreements are often sugar-coated in very soothing
tones and vague terms. They are told if there is a dispute, we
will be able to quickly resolve it at minimal expense.
Well, the extent of the rights that one is giving up are
dramatic, and the minimization and expense is to the nursing
home. It is not to the resident. Oftentimes, the filing fees
alone in arbitration cases run into the thousands and thousands
of dollars. That is not true with filing fees for a court,
plain and simple.
Senator Feingold. Ms. Hirschel, just following up on
something Senator Martinez was talking about, Mr. Ware argues
that the bill we are discussing today is unnecessary because
courts can still find an arbitration agreement unconscionable
if it is blatantly unfair to one of the parties. Now, that, of
course, requires a lawsuit to be filed, which I thought
arbitration was supposed to avoid. But leaving that aside, do
you think that the fact that courts can theoretically find an
agreement unconscionable is enough protection for vulnerable
citizens in this situation?
Ms. Hirschel. Well, first, Senator Feingold, I think that
in my understanding of these arbitration agreements, they are
unfair because the nursing home picks the arbitrator and
because the arbitrator is often a health care industry lawyer
who has an interest in finding for the facility and having low
awards so that they will get repeat business from that long-
term care facility. The facility picks the location. There are
costs, as Mr. Connor was just referring to, that do not occur
in litigation. So I think that these agreements just are
unfair, especially when you think about the very vulnerable
people who are asked to sign them.
Second, as you suggested, I think it is really very
cumbersome, very costly, and perhaps unrealistic to suggest
that every time a family finds themselves in a situation like
the Kurths or in the situation of Joe Louis' sister that they
would first go through a court proceeding and then, if they
lose, have to go through arbitration as well.
Senator Feingold. Mr. Connor, do you want to comment on
that?
Mr. Connor. Yes, Senator Feingold. I should point out that
increasingly we are seeing provisions in the arbitration
agreement that indicate that if there is a dispute about the
appropriateness or propriety of the arbitration, that will be
resolved by the arbitrator as well. There just--I think it is
just important to understand the reality of the situation.
These are agreements that are tilted against the resident and
in favor of the nursing home. The business is provided to the
arbitrators that are involved. They typically are health care
lawyers who have a very cozy and close relationship with the
defendant nursing homes.
Now, if you had a judge who was hawking his venue as a
business-friendly environment and whose fees and salary were
being paid by the defendants in that case, you would say he has
a conflict of interest or she has a conflict of interest, and
they are not qualified to serve. This is an unlevel playing
field that results in the abuse of nursing home victims who
already have been abused and neglected by their caregivers.
Senator Feingold. Thank you, Mr. Connor.
Thank you, Mr. Chairman.
Chairman Kohl. Thank you, Senator Feingold.
Senator Salazar?
Senator Salazar. Thank you very much, Chairman Kohl, for
holding this hearing on this very important issue, and to you,
Mr. Kurth, I give you my condolences for the loss of your
family member.
I have a general question, and that is--and maybe you can
answer this. My sense is that when people go into a nursing
home, they sign a whole set of documents, kind of like a house
closing where you have a number of maybe 10, 15, 30 pages that
you are signing. And my question to you is: How knowingly are
people about the arbitration provisions and the agreement at
the time that they are actually signing it? Is it something
that you believe they actually focus on and they know that they
are signing an agreement that says if there is a dispute with
the nursing home, it is going to go to arbitration? Or do you
think this is part of the boilerplate that they end up signing?
Who wants to take that question? Kelley? Ms. Rice-Schild?
Ms. Rice-Schild. I will take the question since I probably
have the most experience explaining admission to residents. The
residents, when they are admitted--and I will speak for my
facility. Many times it is not on the day of admission, and I
know that a lot of my peers, it is not on the day of admission,
because it is a hectic and emotional day. And in our case, the
arbitration agreement needs to be initialed and explained. So
before the patient or representative initials that section, you
explain to them exactly what it means. And it is also
voluntary, just like admission to the facility is voluntary.
You do not have to--you are not forced to stay in the facility
if you experience bad care. You are not forced to sign the
arbitration agreement. It is 100 percent voluntary, and you can
cross it out if you wish, and it makes no difference.
Senator Salazar. And how many of the patients that you
admit actually cross it out?
Ms. Rice-Schild. I have had about four or five cross it
out.
Senator Salazar. Four or five out of--
Ms. Rice-Schild. Four or five since we have started using
arbitration clauses in admission agreements. I know for other
facilities it is about 90 percent that do sign the arbitration
agreement, 10 percent that do not.
Senator Salazar. So most people will go ahead and sign it.
Ms. Hirschel?
Ms. Hirschel. Yes, Senator, I think it was really telling
that Senator Martinez himself said that he really did not know
if the admissions paper he signed for his family member
included a mandatory arbitration provision. And I know
absolutely that if I were to poll all of the clients I have had
in the last few years about what the--not just whether there
was arbitration, but what most of the provisions in the
admissions contract were, my clients would not be able to tell
me that. And certainly not all facilities have the practices
that Ms. Rice-Schild has described.
So I think that the combination of the fact that these are
sometimes varied, they are in legalese in many cases, and there
is just too much going on means that families simple do not
understand them.
Senator Salazar. Let me ask another question related to
arbitration. You know, as a lawyer practicing in the private
sector for a long time, I often would talk to my own clients
about looking at less expensive ways of being able to resolve
disputes by going through mediation and going through
arbitration and avoiding the high costs of a full-blown court
dispute. It seems to me that since the Federal Arbitration Act
was passed for nursing homes in 1925, a lot has happened. And I
would ask the question whether we just need to reform the
mediation, arbitration, dispute resolution provisions of the
law, or do you think we just need to throw them all out? Who
wants to take that one? Yes, at the very end, Professor?
Mr. Ware. Senator Salazar, I think you raise an important
question because the Federal Arbitration Act has been serving
this Nation for 80-some-odd years now. And I think part of the
genius of this act is that it does give the courts on a case-
by-case basis the power to decide the variety of issues that
have been raised by the witnesses here.
For example, Ms. Hirschel refers to arbitration agreements
that allow the facility to choose the arbitrator. That is
something I have never seen, and occasionally I have seen
outside of the nursing home context an agreement allowing the
party that drafted the arbitration agreement to choose the
arbitrator, and courts, I have seen--every time I have seen
this--hold that unconscionable, unenforceable. Some of the
other clauses the witnesses have mentioned also, courts
frequently hold unconscionable, such as overly high fees for
the consumer or one-way arbitration that Senator Feingold
referred to where only one party is bound to arbitrate.
In other words, these are the sorts of extreme clauses that
are one-way, that are favorable to one side. The law is working
in that courts do refuse to enforce them.
Senator Salazar. Let me just ask a question of all of you
and just ask you to raise your hands. I will give you three
options. If you were Queen for the Day and you had to choose
between three options--one, throwing out the Federal
Arbitration Act, leaving it silent; two, reforming it to take
care of some of the abuses that people have talked about; or,
three, just keeping it the same, keeping it as it is.
So throw it out, how many would just throw it out? Raise
your hand if you would just throw it out.
Okay. How many of you--you might want to throw it out, you
might want to think about it.
How about reform? How many of you would want to reform it
and it needs change? So three of you.
And how many of you would say keep it as it is? Okay. Thank
you very much.
Thank you, Mr. Chairman.
Chairman Kohl. Thank you, Senator Salazar.
Ms. Rice-Schild, according to stats that I have seen, close
to 70 percent, 65 to 70 percent of people admitted to long-term
care facilities have some form of dementia or serious mental
impairment. Under what conditions could we imagine that they
are qualified to make the kind of a judgment that we are
talking about here at this hearing?
Ms. Rice-Schild. Chairman Kohl, if a patient has dementia
or is unable to sign for themselves, then in Florida there is a
State law that requires a health care proxy. The person that
has been designated to make health care decisions on behalf of
the person because they are not mentally capable to would be
responsible for all health care facilities, including signing
the admission contract.
Chairman Kohl. But isn't it true that when you are dealing
with a class of people, the ones that we are primarily focusing
on, when you are dealing with people who have such impairments,
it is not possible for them to be making these kinds of
decisions that we are talking about right now.
Ms. Rice-Schild. Yes, that is correct, Senator. That is why
somebody has been appointed to make those decisions for them.
Chairman Kohl. I want to ask this question: In our bill, we
are suggesting that the decision as to whether or not we engage
in arbitration or go to court should be made after a dispute
arises. That presupposes that both parties will decide, and,
you know, they will figure out what they believe to be the most
appropriate way. Whether they have their day in court, which
is, you know, part of the American basic fabric of justice, or
whether they choose to go to arbitration, now we are making a
judgment here. I mean, you know, obviously things are not--but
isn't that the most reasonable way to litigate? Decide what is
going to be done in the event that an issue arises, that after
the issue arises, the party has a right to go to arbitration,
or the party has a right to go to court? If as you say, Mr.
Ware, they will always decide to go to court, well, not
necessarily. But if they would, that is the American way. So
what is the issue, Mr. Ware?
Mr. Ware. Well, the issue is whether people should have the
option to agree at the pre-dispute stage to bind themselves to
this contract.
Chairman Kohl. Well, why should they do that? I mean, why
don't we just abolish court proceedings altogether in
everything and just say the American way from now on is
arbitration, we do not go to court, we do not deal with juries,
we do not deal with that whole process? What is so different
about long-term care facilities that it should be accepted as
the common way in which we handle disputes in our society?
Mr. Ware. Well, Senator Kohl, as even Senator Feingold
alluded to earlier, there are cases where everyone agrees
arbitration is desirable, and an agreement of parties to use it
should be enforced, whether it is a business-to-business case
or whatever. And my point, again, is there is lots of gray
area. There are lots of intermediate cases between the extremes
on one side, where nobody would want the agreement enforced,
and extremes on the other side, where everybody would. And the
question again is: Should you resolve that through legislation,
which paints with a very broad brush? Or should you leave it to
the courts assessing the nuances of each case on a fact-
intensive basis?
Chairman Kohl. I am not sure I understand that.
Mr. Connor?
Mr. Connor. Senator Kohl, I think it speaks volumes that
Professor Ware says that given the option about whether to
choose arbitration or litigation after the dispute has arisen
speaks volumes about the perceived fairness of the remedy at
issue. He is concerned that if you pass this, nobody will pick
it. Well, why won't they pick it? Because they are getting the
shaft in the current system.
But I can tell you, for instance, there might very well be
instances involving post-dispute arbitration where a nursing
home resident who is still alive, who was not killed by the
abuse or neglect, would prefer to have the case arbitrated and
brought to a quicker resolution so that they could get the
benefit of the monies to be awarded to augment the care that
they would receive going forward into the future.
But I just think it speaks volumes about the fairness, or
lack thereof, of this kind of decisionmaking when the
professor, who studied this for 15 years says, you know, if you
give a person a shot at it after the dispute arises, they are
not going to take it, and it is going to gut pre-dispute
arbitration.
Mr. Ware. Senator Kohl, the reason parties do not agree to
post-dispute arbitration very often is because it takes two to
tango. It takes two to form an arbitration agreement. If either
side of the dispute thinks litigation is more favorable to them
than arbitration, then there is no post-dispute arbitration
agreement. They end up litigating. Sometimes it is the
plaintiff who says I have got a strategic advantage here from
litigation; it enables me to do something to club this
defendant that arbitration does not enable me to do. Sometimes
it is the defendant who says litigation gives me a strategic
advantage; it allows me to do something to club the plaintiff
that arbitration does not allow me to do.
In other words, the burdensome procedures of litigation,
the elaborate pleadings and discovery and motion practice and
all, sometimes that is a tool the plaintiffs can use; sometimes
that is a tool defendants can use. Arbitration's a quicker,
cheaper process, gives both sides fewer of those clubs to hit
the other side with.
Mr. Connor. All of which, Senator, I would suggest speaks
to the fact that people are not making an informed judgment.
They are not giving informed consent on the front end when they
enter into these agreements.
Chairman Kohl. Ms. Rice-Schild?
Ms. Rice-Schild. It just seems to me that doing it post
would be similar to closing the barn door after the horse is
gone. It is a very emotional time. It is an adversarial time.
And if you are going to be clear-headed, I think it needs to be
done prior to any incidents that would arise.
Chairman Kohl. Yes, Ms. Hirschel?
Ms. Hirschel. Thank you, Senator. I want to say that I
really share your confusion about why these cases would be
considered different and why, if the arguments here apply, we
would not just throw out our whole civil justice system
altogether. And I think that neither our civil justice system
nor families like the Kurths should be vilified. If there are
costs to litigation, I want to note that there are also
extraordinary benefits to that litigation, including the public
disclosure of wrongdoing, appropriate penalties for facilities
that really have done something terribly wrong; and also, the
fact that through allowing civil litigation, we do promote
citizens' belief that the system is just, and that is
important, too.
Chairman Kohl. That is a very important point, and I would
like to ask you that, Ms. Rice-Schild. One of the things that
keep our society honest is that, you know, people are exposed
for wrongdoing in addition to being condemned and fined. Why
should your industry be any different?
Ms. Rice-Schild. I do not in any way support poor care, and
I apologize also to Mr. Kurth because I feel it is deplorable
that conditions should arise like that. I am not here today to
support any poor-performing facility. I am here really to say
that we need to have some protection so that the good
facilities, like my facility, will not go bankrupt with one
lawsuit. And that could very easily happen. After 60 years,
four generations, one lawsuit, because I cannot afford
insurance because in Florida it is not written, my facility
could be gone. So we do not need to throw the baby out with the
bath water.
Chairman Kohl. Again, I want to make the point or ask the
question. One of the purposes of the system, whether it be in
your industry or any other industry, is that exposure to
wrongdoing if convicted, you know, has an adverse impact on
future business opportunity. Now, why should your industry be
excepted from that?
Ms. Rice-Schild. It seems that we currently are included
with all other businesses in the Arbitration Act, and we are
being singled out in this bill. I do not know that I can answer
your question because I feel like skilled nursing facilities
and, from my experience, 25 years of trying to in joint
partnership provide very quality care with my patients and
families, are being singled out.
Chairman Kohl. You know, one of the things that we are
working on in our Committee--and we have succeeded in getting
it--is a public rating of all facilities so that people who are
thinking about placing a loved one into a facility can look on
the website and see what the rating is, one star, two, three,
four, five stars. Transparency, in other words, which is really
important. I am sure you understand when people choose where to
enter themselves or enter a loved one in terms of a long-term
care facility, it is very helpful to know which ones have great
records and which ones have blemished records.
Now, this process tends to obscure that, and we are looking
for transparency. The process that we are discussing today and
your advocacy of it, Mr. Ware, obscures that. Now, that is
pretty important, isn't it, Mr. Ware?
Mr. Ware. Yes. I think it is important to remember that the
public accountability we all want for negligent nursing homes
can come through arbitration just as through litigation. People
have used the word ``secret'' to describe arbitration. But,
again, that gets to the rare arbitration clause that requires
parties to the dispute to keep the dispute confidential, and
courts tend not to enforce those. That is another one of those
red buttons where courts find unconscionable such agreements.
So parties to arbitration who want to expose to the public the
negligence are free to do so.
Chairman Kohl. Yes, but that is a voluntary thing. When you
go to court, it is not voluntary.
Mr. Ware. Well, that is certainly true that the public,
members of the public, can walk into a courtroom uninvited and
typically cannot do that in arbitration. That is right. But the
people who have an incentive to make publicly known negligence
or a dispute in arbitration, the parties and their lawyers are
free to do so.
Chairman Kohl. Yes, but they could be paid, as so often
occurs in other situations, a certain amount of money to keep
it confidential.
Mr. Ware. Oh, yes, Senator. But when you come to a
settlement agreement that has a confidentiality clause, that is
an important issue that I know you have worked on. But it is an
important issue in arbitration and in litigation equally. That
concern of settlement secrecy is not something particular to
arbitration.
Chairman Kohl. Yes, but when you go to court and have a
jury trial, that is public, isn't it, Mr. Connor?
Mr. Connor. It is, and I would submit, Senator Kohl, that
sunshine is one of the best disinfectants for the industry.
Just to give you an example, I recently tried a case in
Santa Ana, California, where a woman died from horrific Stage
IV pressure ulcers to the bone on both heels. In the aftermath
of that trial, there was a television news clip that ran on the
news for 2 days that referenced the facility, Sunrise Senior
Living of Laguna Hills, California. And it referenced it about
four times in the news clip.
Now, I am sure that the owners of Sunrise Senior Living
were mortified about it, but the public benefit to be derived
from the public learning about what went on in that facility
was tremendous. And I guarantee you many more people learned of
the poor quality of care in that facility than they would have
picked up from an Internet site that had some rating system.
Chairman Kohl. Anybody else have comments to make on this
hearing, any issues, implications, inferences, something we
have not covered that you think needs to be discussed,
mentioned?
[No response.]
Chairman Kohl. Well, I want to thank you all for being here
today. I think that we have fairly brought to the surface all
the different issues, the angles, and the implications of what
we are talking about. And, without objection, letters of
support for the bill or against the bill from anybody--AARP,
the Alzheimer's Association, numerous consumer groups, as well
as any other group--will be included in the record. The record
will remain open for a week for additional statements,
comments, questions, and we thank you again for being here.
This hearing is adjourned.
[Whereupon, at 11:53 a.m., the Subcommittees were
adjourned.]
[Questions and answers and submissions for the record
follow.]
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