It’s surely a sign of economic times that Poyner Spruill’s long term care lawyers have seen a marked increase in the number of clients calling us for assistance with nonpaying residents. While providers have seen facility-based reimbursement shrink from Medicaid and Medicare, and the number of private paying residents decline, residents too are feeling the pinch of devalued retirement investments, families are less able to help pay for their care, and other financial strains. Add to that the aggressive efforts of federal officials to “audit” and recoup dollars already paid to providers from RAC audits, ZPIC audits, and a host of other “look back” and recoupment efforts, and you have the perfect storm.

Given all that, we thought it would be a good time to review with providers and hopefully dispel some common notions about provider options for dealing with nonpaying residents.

I have a nonpaying resident I cannot discharge because no other facility will take them.

We hear this one a lot, and it comes from federal OBRA requirements allowing a facility to discharge a resident who has failed to pay for care and services provided to a resident and the corresponding requirement that facilities ensure a “safe and orderly” discharge for the resident. Many providers interpret this to mean that they are responsible for finding a new location for the resident (whether an adult care home for residents who no longer need SNF care; home health services, or another SNF) and for working out the payment arrangements for that care and/or assuring the receiving provider of a payment source. Many elder care attorneys who represent residents appealing a notice of discharge also make this argument. However, it’s legally incorrect. The Interpretive Guidelines to Surveyors published by CMS define a “safe and orderly” discharge as one in which the provider has made arrangements for safe travel to the resident’s new location, and coordinates delivery of necessary records and paperwork to the new facility or care provider. This requirement does not require the discharging facility to guarantee payment to the new provider for services provided to the resident. In fact, legally a discharging provider has met its burden if and when it finds a new location, with the appropriate level of care, that will take the resident, assuming payment terms are met. It’s very important in a discharge appeal before a hearing officer (these are handled by six or seven hearing officers from the Division of Medical Assistance) to remind him or her of this meaning of “safe and orderly” discharge and that working out payment arrangements is the responsibility of the resident, legal surrogate or family.

I have a resident I can’t discharge because she doesn’t like the discharge location I found.

This is also not a valid legal reason to appeal a notice of discharge. The resident, her legal surrogate or her family is free to select another location for discharge if they choose, but the discharging facility has met its legal burden by finding one facility or service provider of the appropriate care level that will accept the resident. Beyond that, competent residents, their surrogates or their families are free to select a different receiving provider, and the actual physical location to which the resident will be discharged can be changed from the place you designated on the notice of discharge right up to, and even during, a discharge appeal before DMA. As a practical tip, we always advise clients who are issuing a notice of discharge to 1) identify one location for the discharge that has agreed to accept the resident and that offers the appropriate level of care; and 2) include with the discharge notice a printout of every other SNF, adult care home, and/or home health or home care agency in the county or vicinity. This allows the resident or family to select a different location and prevents them from saying the facility gave them only one choice that they found unacceptable. You are not legally required to do this, but it’s very effective in shutting down that argument, which residents, their lawyers and/or their families nearly always raise in discharge appeals.

I issued a discharge notice that was not appealed, but the resident won’t leave the premises.

This is a tough one. Federal law presumes, often incorrectly, that a resident who has been properly “discharged” – e.g. the notice of discharge was proper, a permissible reason for discharge was given, a new location was found and no appeal filed – will simply leave the facility. Increasingly, we see residents, often on the advice of their counsel, who simply refuse to go. State laws often do not directly address what to do in such cases. In North Carolina, we have landlord/tenant laws that apply to any residential lease or rental, but in some counties, local judges or magistrates are reluctant to order an “eviction” of a senior from a nursing home or adult care home. Legally, once that proper notice of discharge has been issued and no appeal filed or appeal won by the provider, the resident is then illegally on your premises. A couple of options are available: 1) seek a summary eviction under North Carolina landlord/tenant laws (there is a defined process, some time frames and some defenses available to the resident under these laws that can be frustrating), 2) seek a criminal warrant for trespass or 3) do both. In tough cases, we usually commence both actions simultaneously. One of the drawbacks to either procedure is that at the end of the day, assuming the provider prevails, local police have to enforce the eviction order or trespass warrant. This means arresting a resident who won’t leave, and many providers are understandably reluctant to take this course of action. Often, respectfully informing the resident, his or her surrogate or family that this will occur resolves the issues, but not in every case. Providers need the advice of experienced counsel, and some patience.

I have a resident with an unpaid balance who has now qualified for Medicaid. Can I still discharge them for nonpayment?

Yes, absolutely. The fact that a resident has found a source of payment going forward for future care and services does not prevent you from discharging a resident with a past unpaid balance, and the size of that balance is irrelevant. Increasingly, we are seeing residents, families, surrogates and counsel simply asking providers to “write off the back balance” and be satisfied getting paid for future services. First, most providers are not in a position to do this these days. Second, doing so creates a possible expectation on the part of other residents or families that they’ll receive the same special treatment. Ultimately, the call belongs to the provider. Legally, you are permitted by federal and state law to discharge any resident with an unpaid balance who is unwilling or unable to pay it, regardless of the amount and regardless of whether a future payment source has been identified, such as Medicaid.

My facility just lost a discharge appeal based on nonpayment. Now what do I do?

When we get this call, we know immediately that the provider tried to handle a discharge appeal on its own. Please, don’t do this. Residents, family members and local attorneys are increasingly getting better at these appeals. In addition, local ombudsmen with no clinical or legal training often appear at these hearings and give “testimony” about the resident’s clinical condition, “unsafe discharge” or other issues designed to help the resident by persuading the hearing officer the resident shouldn’t be discharged. Your best chance to win these appeals is the first time, and you should go into the hearing prepared. Most of these hearings are handled by DMA hearing officers via telephone and last about an hour. Five days before the scheduled hearing you have to have in the hands of the hearing officer, the resident, and the resident’s family or legal representative a complete packet of all documents you plan to rely on at the hearing. Particularly important are financial records showing nonpayment and recent updated clinical or social work records showing clinical condition and social services issues, if applicable. If you lost a discharge hearing based on nonpayment, for whatever reason, you can appeal that to the superior court in your county. But this is time-consuming, expensive and rarely done. You can also issue a new discharge notice and start the entire process again. Especially in nonpayment cases, each new dollar that is billed to the client and goes unpaid is a new “nonpayment” that authorizes you to discharge the resident. But you’ll have to go through the same 30-day notice; wait for a possible appeal; and wait for that to be scheduled, heard and decided while the resident’s unpaid balance continues to increase. The DMA hearing officers who hear these cases are bright, dedicated and committed. But they hear many other types of cases. It’s important for providers to have legal counsel at the hearing to help keep the hearing officers focused on the legal requirements as opposed to the many irrelevant issues residents, family members or their counsel raise in an attempt to block the discharge. There are also important strategies for dealing with any witness – ombudsman, family friend, etc. – who brings up issues that are irrelevant or tries to offer testimony he or she is not qualified to give.

How soon should I begin a discharge for nonpayment?

Most providers want to keep their residents and don’t want to discharge them. So many providers wait for months in nonpayment situations to start discharge proceedings, hoping the resident will qualify for Medicaid or the family will sell some property that is blocking Medicaid eligibility or otherwise find a way to pay. This is laudable. But it often backfires. Many clients come to us with unpaid bills in the tens of thousands, frantically needing to resolve the situation. Our advice is not to wait. If you see balances starting to grow, and you’ve made every effort to help the resident or family find a solution, start the discharge process now. This may seem like cold advice, but it’s important. Remember, discharge for nonpayment requires a 30-day notice. If an appeal is filed, you