Guardianships Used by Nursing Homes to Collect from Residents

Lillian Palermo tried to prepare for the worst possibilities of aging. An insurance executive with a Ph.D. in psychology and a love of ballroom dancing, she arranged for her power of attorney and health care proxy to go to her husband, Dino, eight years her junior, if she became incapacitated. And in her 80s, she ended up in a nursing home as dementia, falls and surgical complications took their toll. He sings her favorite songs, feeds her home-cooked Italian food, and pays a private aide to be there when he cannot. But one day last summer, after her husband disputed nursing home bills that had suddenly doubled Mrs. Palermo's copays, and complained about inexperienced employees who dropped his wife on the floor, Mr. Palermo was shocked to find a six-page legal document waiting on her bed. It was a guardianship petition filed by the nursing home, Mary Manning Walsh, asking the court to give a stranger full legal power over Mrs. Palermo, now 90, and complete control of her money.

A New York Times article titled "To Collect Debts, Nursing Homes Are Seizing Control Over Patients" states that few people are aware that a nursing home can do this. Guardianship cases are usually confidential, but the Palermo's situation isn't uncommon.

More than 12 percent of guardianship cases are brought by nursing homes. Many of these may have been brought as a means of bill collection, which was never intended when the New York legislature enacted the guardianship statute. Some courts have ruled that this legal tactic by nursing homes is an abuse of the law, but these petitions—even if unsuccessful—make families spend time and money in costly legal ordeals.

Guardianship transfers a person's legal rights to make some or all decisions to someone appointed by the court, usually an attorney. Guardianship is designed to protect people who cannot manage their affairs because of incapacity, and who lack effective help without court action. In effect, it can legally trump a power of attorney and a health care proxy. Although it can be a drastic measure, nursing home lawyers say that using guardianship to secure payment for care is better than suing an incapacitated resident who is unable to respond.

A court evaluator said that Mr. Palermo was the appropriate guardian and wanted to know why the petition had been filed. Mr. Palermo agreed to pay any arrears once Medicaid completed a recalculation of the bill, but his expenses in fighting the issue were more than $10,000. Medicaid's recalculation eventually put his wife's monthly copay at $4,500, about $600 less than the nursing home claimed, but more than the $2,600 that Mr. Palermo had been paying under an earlier Medicaid calculation.

The nursing home cashed Mr. Palermo's check for the outstanding balance and withdrew the guardianship petition. The New York Times pointed out that a petition is supposed to be brought only by someone with the person's welfare at heart, and tailored to individual needs, taking into account the person's wishes.

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Reference: New York Times (January 25, 2015) "To Collect Debts, Nursing Homes Are Seizing Control Over Patients"