January 20, 2021

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Discharging the Nonpaying Resident: Appeals You Should Never Lose

There are signs of economic hard times everywhere. Some people see this in their paychecks, others in difficulty getting personal or commercial loans. In our long term care practice, we see it directly in the number of SNF discharges based on a resident’s failure to pay for services provided in a nursing facility. Under 42 CFR 483.12, a nursing facility is entitled to discharge a resident when the resident, a legal representative with control over the resident’s funds, or a third-party payor like Medicare or Medicaid fails to pay for services provided.

Other reasons allowing discharge include an improvement in a resident’s health so that he or she no longer needs skilled nursing services, a decline in their health status so they need more acute care, or because the resident presents a danger to the health or safety of other residents in the facility. But it’s the discharges based on nonpayment that have spiked in our practice over the past few months.

Why? There are probably several reasons:


  1. Everyone, including nursing facilities, just has less money available. Facilities are less able financially now than in the past to carry accounts receivable that don’t appear to have a reasonable chance of being satisfied in the foreseeable future.
  2. Attorneys practicing elder law are getting more creative at financial arrangements involving residents who have income but manage to convey it to family members, spouses or ex-spouses in ways that make the Medicaid agency disregard that income when determining a resident’s eligibility for Medicaid. (I’m going to catch grief for this one from my elder law attorney friends, but too bad, it’s all true.) We’ve seen, of late, all sorts of creative arrangements, including "separations with divorce" resulting in property settlements to the spouse living at home; alimony payments (which DMA generally disregards when determining a resident’s eligibility) couched  as transfers of the income source (such as a pension) being legally transferred to a community spouse so that the resulting income is not alimony being paid by the SNF resident to a separated or ex-spouse, but an actual legal transfer of title in the pension to the community spouse; and a host of other such arrangements. As these arrangements become more prevalent, facilities are finding that their "private pay residents" suddenly have no income to pay their bills but also have too much income to qualify for public assistance, because DMA often disregards these arrangements.
  3. These same attorneys then appeal the discharge notice, claiming that they are appealing a denial of benefits by DMA or the local Department of Social Services, or that a Medicaid "application" is pending, when in fact it’s already been denied and there’s a reapplication or an appeal. Neither of the latter situations precludes a provider from discharging a resident whose bill has not been paid.
  4. Finally, many providers, or at least many of our clients, are simply tired of being held at bay for payment while these complex "asset shifting" arrangements are pursued, denied and often appealed by counsel for the resident or family.

If an outstanding balance is owed, no initial Medicaid application is pending that hasn’t already been denied and no other third-party payor is stepping up to pay the bill, facilities are authorized to discharge the resident. If an appeal of the discharge follows, you should rarely ever lose if you’ve properly prepared for the discharge.

Here are some tips that will help you avoid losing discharge appeals based on a resident’s failure to pay for services.


  • If the resident or family asks you to help apply for Medicaid or play any role in helping navigate that process, which they often do, immediately ask for a written consent/authorization form (create a simple form and have them handy) that authorizes the local Department of Social Services to talk with you about the application. The DSS will handle the initial application and decision process. In some counties, DSS will willingly talk with the facility without a formal consent, but in many they won’t. This becomes very important because without the consent, you may not be able to learn anything about the status of the application, even though knowing if it’s been approved or denied or is still pending directly affects your decision to discharge or retain a resident based on nonpayment.
  • Also, if you later discharge for nonpayment and the resident or family appeals, they may claim there is a pending Medicaid application, which, by law, precludes you from discharging. Sometimes this is true and sometimes not. Either way, you must be able to find out for yourself in order to rebut such claims at the discharge appeal hearing. Without a consent authorizing DSS to talk with you, it will not be able to provide the information you will need to address this issue. We have seen several elder care attorneys, of late, argue to the DMA hearing officer that a Medicaid application was pending, hoping to thwart the discharge, when, in fact, this was not true or that a Medicaid application may have been pending, but not for institutional nursing facility care (i.e., perhaps for in-home assistance, which DMA calls "private living arrangement" assistance, and does not qualify as nursing facility care)
  • In a discharge for nonpayment situation, beware a resident’s elder care attorney arguing to the hearing officer some complex new arrangement that is designed to pass a resident’s assets or income to a spouse or family member solely to qualify the resident for Medicaid. Some of these arrangements are appropriate in order to avoid impoverishment of the spouse still living at home. But we are seeing an increasing number of arrangements that are simply designed to keep the community spouse from having to provide for the institutional spouse. DMA is "on" to these arrangements and is cracking down on them. At the discharge hearing, these issues are not relevant. The only relevant issues in the discharge hearing are whether there is an unpaid balance (of any amount) owed to the nursing facility and whether there is a pending Medicaid Application that will cover that balance. If there is not a pending application, another issue is whether the facility properly gave notice of the discharge (with all lines on the discharge notice properly completed) and provided or tried to provide sufficient orientation and planning to caregivers at home (if home is the location of discharge) for the discharge.
  • Most providers understand some of the basic eligibility rules for Medicaid, but these rules are complex and, frankly, how they are applied varies from one county DSS office to another. But you should know that the elder care attorneys who practice in this field know these rules inside out. If you run into one of them in a discharge appeal setting, get some help. Knowing these rules and how they are applied can be the difference between prevailing at the discharge hearing and getting bamboozled by a better prepared and more knowledgeable adversary who will try to persuade the hearing officer that you are precluded from discharging while they pursue appeals of Medicaid denials with DMA.
  • Remember that if you lose a discharge appeal where the ..discharge is based on nonpayment, you have to start all over again, including filing a new 30-day notice, before you can correct any mistakes that prevented you from prevailing the first time. That means more unpaid care at a time when few facilities can afford it. So, get it right the first time.
  • Proper preparation means making sure you have records of ..unpaid bills, letters to the resident or his or her responsible person demanding payment, notes of in-person discussions about the unpaid balance, warnings that discharge will occur if the bills are not paid, efforts to discuss discharge planning with the responsible person (including where the resident is going; documentation that you’ve provided lists of community resources the family might need after discharge, such as home health, home care, personal care providers and/or other local facilities), and documentation of your efforts to meet with family members or the responsible person to provide training for home care, where applicable, based on the resident’s health conditions. You should also ensure that you have an updated FL-2 assessment form, prepared by the attending physician as close to the date of proposed discharge as possible, reflecting that the resident can be safely cared for in the setting to which he or she is being discharged.
  • When a resident appeals a discharge notice, you will get a letter from the hearing officer at DMA asking for certain documents, which must be in the hands of the hearing officer and the resident/responsible person at least five days before the hearing. Take the time to organize these documents in the order in which you’ll address each issue at the hearing (e.g., the reason for discharge, documentation of the balance and efforts to collect it, notices to the  resident/responsible party of the discharge and the reason, and your efforts to coordinate with the resident’s receiving facility or caregiver for a safe and orderly discharge).
  • Also, remember that a family’s refusal to cooperate with you in the discharge planning process should not block the appeal. You just have to show that you’ve made repeated and sincere efforts to plan for discharge with the receiving caregiver, and the family caregivers have refused to cooperate.
  • Finally, if you use counsel to help you with the discharge appeal, which providers are increasingly doing, these same preparation steps will make it easier for your lawyer to put on a strong case and will save you money in the end. If your attorney has to spend hours on the phone with you chasing down documents, requesting updated FL-2s or financial documents, or organizing stacks of documents you’ve sent, it’ll get expensive.
© 2009 Poyner Spruill LLP. All rights reservedNational Law Review, Volume , Number 227



About this Author

Kenneth L. Burgess, Health Care Litigation Attorney, Poyner Spruill Law firm

Ken is a health care attorney with more than 28 years of experience advising clients on a wide range of regulatory, reimbursement, litigation, compliance and operations issues.  His practice has focused heavily, but not exclusively, on issues affecting long term care providers.  He has advised them on a wide variety of legal planning issues arising in the skilled nursing facility setting, assisted living setting, hospice, home health and other spheres of long term care. He also frequently represents ancillary service providers (pharmacy, DME, therapy and similar...