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Steps Toward Recovering Late Payments

September 1, 2006
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With private pay (good) comes the challenge of collection (not so good). How to do it by James R. Mall, Esq.
BY JAMES R. MALL, ESQ. Steps toward recovering late payments
What to do when private payers and their families don't pay their bills A long-term care resident has dementia and is rapidly deteriorating. She is no longer able to manage her affairs, including paying the long-term care facility's monthly bill. Her successful and well-established son has power of attorney to manage her finances and see that her bills are paid. But as her assets appear to dwindle and her bills mount, the son refuses to pay the bills from his mother's bank account, which he views as his rightful inheritance. And it seems he has been transferring her assets into offshore accounts.

Such circumstances are not rare. With millions of Americans in the long-term care system today and with still many millions more soon to join them, the payment failure rate in this field is growing-and rapidly. The reasons may surprise you. While there are indeed financially struggling residents, many long-term care residents have, or once had, significant resources that family members have misappropriated. What should a long-term care facility do when residents and their families will not pay despite having the apparent wherewithal to do so? How does the facility go about collecting for its services, especially when the resident continues to receive ongoing care?

Rather than rushing to file a civil lawsuit, long-term care facilities should begin in Probate Court, also known in various states as Orphans' or Surrogate Court or Court of Ordinary. By petitioning the court for a "rule to show cause," the facility can request the court to order an accounting to learn precisely how the son has been spending his mother's pension or retirement checks-i.e., money which had been properly allocated for her long-term care needs.

To keep her son honest, the court will require an accounting of all financial records in connection with the son's service as attorney-in-fact for his mother. This court oversight is often sufficient incentive for any family member to come clean with stashed money. Seeking such relief initially in a Probate or Orphans' Court is a relatively cost-effective way to obtain information to better evaluate whether further court action is warranted. If the resident has recently passed away, Probate Court is also the starting point to obtain payment from the estate. If no estate has been opened, the long-term care facility, as a creditor, can compel the estate to be opened.

When an accounting reveals that assets have been fraudulently dissipated, additional legal recourse, such as a civil lawsuit, may be necessary-but a facility should evaluate other factors before taking this step. If the amount due is relatively low, pursuing court action may not be cost-effective. In addition, going to court means carefully examining the resident's medical records to ensure that the treatment was appropriate under the circumstances. Often, the stated defense for nonpayment is negligent care. In other words, if the facility goes to court, it may be forced to defend itself, even if it has provided top-notch care and there were no prior complaints about the quality of its care.

If a facility chooses to move forward with a lawsuit, disputed amounts of less than $50,000 head to arbitration and are initially heard before a panel of three randomly selected attorneys. In those rare instances in which the facility has allowed the bill to exceed $50,000 without discharging the individual, the case is tried before a judge or jury, typically beginning 6 to 18 months after a case is filed. Keep in mind that these time frames vary from state to state, and often from county to county.

If a judge or jury renders its decision in favor of the long-term care facility, the facility must now begin what can become a long and tedious search for hidden assets. A facility can help its attorneys in the collection process by obtaining as much financial information as possible during the admission process and by informing its attorneys of any suspicious activity, such as the person with power of attorney transferring pension checks to someone other than the resident or the long-term care facility.

Garnishing bank accounts is the most common method of recovering assets once a judgment has been entered. Keeping copies of payment checks is helpful for this purpose. With the bank name and account number, a facility's attorney will be able to freeze a bank account so that the person with the power of attorney will be unable to withdraw any funds until the bank transfers the funds to pay off the facility's judgment. In many states, a judgment is valid for five years and serves as a lien on real estate if unsatisfied. A facility can renew the judgment for another five years if the bill hasn't been paid in full after the first five years.

Any long-term care facility considering legal recourse should do so quickly. The older the debt, the harder it is for anyone to collect late payments.

Many long-term care facilities, particularly small and midsize facilities, are struggling to stay afloat in an era of shrinking support from government and insurance carriers. The timely payment of invoices by patients and residents is necessary to keep many facilities operating in the black each month. It is important for facilities to understand that there are options available for recovering payments from residents and their families who for one reason or another choose not to pay for medical or nursing care rendered by the facility. A facility's attorneys can help determine the best course of action.

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