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The Tennessee Supreme Court held that a power of attorney for health care decisions authorized the attorney-in-fact to enter an arbitration agreement on the principal’s behalf because the decision to sign the arbitration agreement was necessary to implement the underlying health care decision – namely, the decision to admit the principal into a nursing home.
In Owens v. National Health Corp., No. M2005-01272-SC-R11-CV, 2007 WL 3284669 (Tenn. Nov. 8, 2007), Mary King executed a Durable Power of Attorney for Health Care Decisions authorizing Gwyn Daniel, as her attorney-in-fact, to make health care decisions on her behalf. The power of attorney also authorized Daniel to execute “any waiver, release or other document which may be necessary in order to implement the health care decisions.”
Three weeks later, King was admitted to a nursing home run by National Health Corporation (NHC). Daniel signed the admission contract as King’s attorney-in-fact. The admission contract included an arbitration agreement that called for either the American Arbitration Association (AAA) or the American Health Lawyers Association (AHLA) to serve as the administrator.
When King sustained injuries at the nursing home, her conservator sued NHC on several theories of liability. In response, NHC moved to compel arbitration. King opposed the motion on several grounds. The trial court denied the motion on the ground that the power of attorney did not authorize Daniel to make “legal decisions” on King’s behalf.
On appeal, the Tennessee Court of Appeals reversed the trial court’s ruling and remanded the case with instructions to compel arbitration. See Owens v. National Health Corp., No. M2005-01272-COA-R3-CV, 2006 WL 1865009 (Tenn. Ct. App. June 30, 2006). The Tennessee Supreme Court (the Court) allowed King to appeal that decision.
The principal issue before the Court was whether the power of attorney authorized Daniel to enter the arbitration agreement on King’s behalf. On this issue, King argued that the decision to sign an arbitration agreement is a legal decision, not a health care decision, and thus not authorized by the power of attorney.
The Court held that the power of attorney authorized Daniel to enter the arbitration agreement on King’s behalf because assent to the arbitration agreement was necessary to implement the underlying health care decision – namely, the decision to admit King to a nursing home. In rejecting the “purported distinction” between legal decisions and health care decisions, the Court explained that such a distinction would create uncertainty over health care contracts and undermine the purpose of a power of attorney by “mak[ing] it more difficult to obtain health care services for the principal.”
Alternatively, King argued that the arbitration agreement was unenforceable because both of the named administrators – the AAA and the AHLA – have policies whereby they refuse to administer the arbitration of patient health care disputes in the absence of a post-dispute arbitration agreement. See the AAA’s Healthcare Policy Statement; 2006 Amendments to the AHLA’s ADR Rules. The Court rejected this argument for two reasons. First, King submitted no evidence that the designated administrator was an integral part of the arbitration agreement. Second, the AHLA policy yields to a court order compelling arbitration.
King also raised the argument that the arbitration agreement violated a federal law which precludes nursing homes from requiring a Medicaid recipient to provide “other consideration” as a precondition to residency in the home. See 42 U.S.C. § 1396r(c)(5)(A)(iii). The Court joined several other jurisdictions in rejecting this argument.
Lastly, King cited the AAA/ABA/AMA Healthcare Due Process Protocol in arguing that predispute arbitration agreements in nursing home admission contracts violate public policy. The Court rejected this argument on the basis that this protocol does not apply to nursing home contracts. Moreover, as the Court noted, public policy concerns are a matter for the legislature.
The Court was unable to resolve King’s unconscionability challenge because the factual record was incomplete. Accordingly, the Court remanded the case for further proceedings on the unconscionability question.
The California Court of Appeal has also held that a power of attorney for health care decisions authorizes the attorney-in-fact to enter an arbitration agreement on the principal’s behalf. See Hogan v. Country Villa Health Services, 55 Cal.Rptr.3d 450 (Cal. Ct. App. 2007). The Mississippi Supreme Court has gone a step further and held that a health care surrogate has statutory authority to enter an arbitration agreement when admitting the principal to a nursing home. See Covenant Health Rehab of Picayune, L.P. v. Brown, 949 So.2d 732 (Miss. 2007).
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