[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]


 
                       FAIRNESS IN NURSING HOME 
                        ARBITRATION ACT OF 2008

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 6126

                               __________

                             JUNE 10, 2008

                               __________

                           Serial No. 110-182

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

           Subcommittee on Commercial and Administrative Law

                LINDA T. SANCHEZ, California, Chairwoman

JOHN CONYERS, Jr., Michigan          CHRIS CANNON, Utah
HANK JOHNSON, Georgia                JIM JORDAN, Ohio
ZOE LOFGREN, California              RIC KELLER, Florida
WILLIAM D. DELAHUNT, Massachusetts   TOM FEENEY, Florida
MELVIN L. WATT, North Carolina       TRENT FRANKS, Arizona
STEVE COHEN, Tennessee

                     Michone Johnson, Chief Counsel

                    Daniel Flores, Minority Counsel


                            C O N T E N T S

                              ----------                              

                             JUNE 10, 2008

                                                                   Page

                                THE BILL

H.R. 6126, the ``Fairness in Nursing Home Arbitration Act of 
  2008''.........................................................     3

                           OPENING STATEMENTS

The Honorable Linda T. Sanchez, a Representative in Congress from 
  the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................     1
The Honorable Tom Feeney, a Representative in Congress from the 
  State of Florida, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................     7
The Honorable Hank Johnson, a Representative in Congress from the 
  State of Georgia, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................     8
The Honorable Chris Cannon, a Representative in Congress from the 
  State of Utah, and Ranking Member, Subcommittee on Commercial 
  and Administrative Law.........................................     9

                               WITNESSES

Dr. William J. Hall, M.D., AARP, Washington, DC
  Oral Testimony.................................................    13
  Prepared Statement.............................................    15
Ms. Linda Stewart, RN, MBA, Houston, TX
  Oral Testimony.................................................    27
  Prepared Statement.............................................    28
Gavin J. Gadberry, Esquire, Underwood, Wilson, Berry, Stein and 
  Johnson, PC, Amarillo, TX
  Oral Testimony.................................................    30
  Prepared Statement.............................................    32
Kenneth L. Connor, Esquire, Wilkes & McHugh, P.A., Washington, DC
  Oral Testimony.................................................    36
  Prepared Statement.............................................    38

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable Chris Cannon, a 
  Representative in Congress from the State of Utah, and Ranking 
  Member, Subcommittee on Commercial and Administrative Law......    10
Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, 
  Chairman, Committee on the Judiciary, and Member, Subcommittee 
  on Commercial and Administrative Law...........................    11
Prepared Statement of the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Member, 
  Subcommittee on Commercial and Administrative Law..............    12

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the American Association of Homes and 
  Services for the Aging (AAHSA).................................    55
Response to Post-Hearing Questions from William J. Hall, M.D., 
  AARP, Washington, DC...........................................    57
Response to Post-Hearing Questions from Linda Stewart, RN, MBA, 
  Houston, TX....................................................    62
Response to Post-Hearing Questions from Gavin J. Gadberry, 
  Esquire, Underwood, Wilson, Berry, Stein and Johnson, PC, 
  Amarillo, TX...................................................    64
Response to Post-Hearing Questions from Kenneth L. Connor, 
  Esquire, Wilkes & McHugh, P.A., Washington, DC.................    72


                       FAIRNESS IN NURSING HOME 
                        ARBITRATION ACT OF 2008

                              ----------                              


                         TUESDAY, JUNE 10, 2008

              House of Representatives,    
                     Subcommittee on Commercial    
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:11 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable Linda 
Sanchez (Chairwoman of the Subcommittee) presiding.
    Present: Representatives Sanchez, Johnson, Lofgren, Cannon, 
and Feeney.
    Staff present: Norberto Salinas, Majority Counsel; Daniel 
Flores, Minority Counsel; and Adam Russell, Majority 
Professional Staff Member.
    Ms. Sanchez. This hearing of the Committee of the judiciary 
Subcommittee on commercial and administrative law will now come 
to order. Without objection, the Chair will be authorized to 
declare a recess of the hearing at any time. I will now 
recognize myself for a short statement.
    During this Congress, this Subcommittee has held four 
hearings on issues and legislation related to the Federal 
Arbitration Act. We have heard from attorneys, professors, and 
individuals about unfortunate experiences with the arbitration 
process.
    Erika Rice, a witness from our auto arbitration hearing, 
described her troubling situation of trying to remedy the 
purchase of a faulty car from an automobile dealer. Jordan 
Fogal, a witness from our consumer hearing, thought she had 
purchased her dream home, which turned out to be a poorly 
constructed nightmare and a legal headache to repair. And 
Deborah Williams, a witness from one of our legislative 
hearings, testified that while she thought she had a bright 
future after purchasing a Coffee Beanery franchise, the extreme 
contractual requirements she could not afford to meet resulted 
in her losing the franchise and landing in financial ruin.
    Although Ms. Rice, Ms. Fogal, and Ms. Williams initially 
experienced emotional distress during their predicaments, it 
was in seeking a cure to their problems that they experienced 
financial suffering. Each learned that mandatory arbitration 
agreements can disadvantage consumers and franchise owners and 
make their hope of a fair resolution nearly impossible. Sadly, 
the mandatory arbitration clauses in their contracts prevented 
them from regaining their previous financial stability, and 
with it their emotional security.
    Unfortunately, the inclusion of arbitration clauses in 
long-term care facility contracts is even more emotionally 
heartbreaking. By 2040, the demand for long-term care services 
will more than double. The long-term care industry is 
increasingly including pre-dispute arbitration clauses in its 
``take it or leave it'' admission agreements for prospective 
residents. And for desperate family members who are unable to 
provide adequate care in their home setting, the need for an 
immediate placement for their loved one makes the ``take it or 
leave it'' choice really no choice at all.
    Families who are in the midst of the heartbreaking decision 
to place a parent in a nursing home rarely have the time or 
wherewithal to fully and thoughtfully consider mandatory 
arbitration clauses. Simply dealing with the emotional and 
traumatic process of searching for a long-term care facility 
makes it impossible for residents and their families to worry 
about the potential loss of their constitutional right to a 
jury trial. What is real and immediate is not some future 
dispute, but the proper care of a loved one.
    The emotional toll and the sense of vulnerability when 
moving a loved one into the care of strangers at a nursing home 
is something that I am all too familiar with. My father, who 
has been diagnosed with Alzheimer's, was recently placed into a 
nursing home, and one of the last things I wanted to worry 
about when searching for that perfect placement was whether he 
was foregoing his legal rights. Instead, I wanted to focus 
solely on the quality and range of services the facility would 
provide him. As it turned out, my family chose a facility that 
met our requirements, but also had a mandatory arbitration 
clause in its contract.
    Now, I want to make it clearly known that I am completely 
supportive of the principles of arbitration and the arbitration 
process. However, the process should remain fair. Parties to a 
contract should have the option to choose whether or not they 
arbitrate their disputes. For these reasons, I introduced H.R. 
6126, the Fairness in Nursing Home Arbitration Act of 2008, to 
make pre-dispute mandatory arbitration clauses in long-term 
care contracts unenforceable, and to restore to residents and 
their families their full legal rights. This legislation would 
allow families and residents to maintain their peace of mind as 
they look for that perfect long-term care facility.
    I am proud to note that H.R. 6126 is supported by several 
significant groups who advocate on behalf of seniors and 
consumers, including AARP, which is providing a witness at this 
afternoon's hearing, the National Senior Citizens Law Center, 
the Alzheimer's Association, and the National Association for 
Consumer Advocates. Additionally, Senators Mel Martinez and 
Herb Kohl have introduced a similar bill in the Senate, S. 
2838. Accordingly, I look forward to hearing from this 
afternoon's witnesses about arbitration agreements in contracts 
between long-term care facilities and residents, and about 
their views on H.R. 6126.
    [The bill, H.R. 6126, follows:]

    
    
    
    
    
    
    
    
    Ms. Sanchez. At this time I will now recognize my 
colleague, Mr. Cannon, for his opening remarks.
    Mr. Cannon. Madam Chair, do you expect other Members of the 
Committee to make opening statements? I think on our side Mr. 
Feeney would like to do that.
    Ms. Sanchez. I believe we do have other Members that would 
like to make opening statements.
    Mr. Cannon. Then I ask unanimous consent that they be 
allowed to make an opening statement. If the Chair is willing, 
then I would be willing to defer my opening statement block to 
Mr. Feeney and other Members of----
    Ms. Sanchez. Without objection. Mr. Feeney is recognized 
for his opening statement.
    Mr. Feeney. Well, thank you. The Ranking Member and the 
Chair are very kind, and I appreciate that.
    Importantly, I want to recognize a good friend here today, 
my friend Ken Connor. And he is a leader in Florida, both in 
elder care and compassion, and in a lot of regards, you know, a 
great friend of Floridians and people throughout the country.
    I want to tell you that no State has a greater interest in 
balancing the needs of the elderly than the State of Florida. 
We are sort of the demographic bell-weather for the rest of the 
country in terms of an aging population, and we are going to 
sometimes do it right and sometimes get some things wrong. And 
hopefully we can fix it when we get things wrong, but 
simultaneously the rest of the country can learn from our 
successes and our failures as well.
    The question in today's hearing is not so much about the 
big picture as to whether or not we ought to essentially 
prohibit the use of pre-dispute mandatory binding arbitration 
in nursing homes and assisted living contracts. The Fairness 
Nursing Home Arbitration Act essentially, as I understand it, 
would gut the current balance that Congress has tried to put in 
place between the interests of, on the one hand, providing 
affordable access to elderly care, and also protecting the 
rights of victims of abuse, misdeeds, and some malfeasance in 
homes.
    I will tell you that Florida has seen the effects of costly 
litigation on the one side, and at one point had a crisis of 
nursing homes going out of business. On the other hand, I think 
that there is no more eloquent spokesperson than Mr. Connor for 
what happens when the people that are least able to defend 
themselves at the last phase of their lives, are abused or 
neglected. And there is a balance there.
    And let me say this, because I do have to go, but I have 
read the testimony and will be interested in the way this 
develops. Let me say this about my friend Ken Connor: He sounds 
simply like Plato when talking about most things, like Austrian 
economics, for example.
    But Plato described great rhetoricians, and he said that 
there were three parts of any great rhetorical statement. One 
is the ethos, the second--or the ethics of the speaker and the 
credibility--second is the pathos, or the emotion that they 
could solicit, and finally, the logos. I find both on ethos and 
pathos, we have an absolute all-star today in my friend Ken 
Connor. We just sometimes have differences on the logos and the 
logic of how we are getting to a common goal.
    And with that, I am grateful to the Ranking Member, to the 
Chairman, and again, my friend Ken Connor.
    Ms. Sanchez. The gentleman yields back. And I want to say, 
Mr. Feeney, somebody who represents the district in Florida, I 
understand that these issues are probably at the forefront of 
senior issues in your State, and I appreciate your concern 
about the bill. I just wanted to make--point out one small 
point about the bill: The bill does not gut arbitration, it 
merely gives patients the opportunity to choose whether or not 
to arbitrate their disputes. We are talking only specifically 
about pre-dispute mandatory binding arbitration agreements.
    I believe Mr. Johnson has an opening statement. Mr. Johnson 
is recognized for 5 minutes.
    Mr. Johnson. Thank you, Madam Chair. And again, I would 
also like to echo what you have said. H.R. 6126, the ``Fairness 
in Nursing Home Arbitration Act of 2008,'' would not gut 
arbitration as an alternative dispute resolution; it would 
simply bar pre-dispute mandatory arbitration agreements in 
nursing home agreements.
    And I want to thank you, Madam Chairwoman, for holding this 
hearing today. And throughout this session, the Subcommittee 
has held several hearings on pre-dispute mandatory binding 
arbitration agreements. We have explored the use of these 
agreements in automobile leases and purchases, consumer 
employment and franchise agreements, and within the NFL's 
retirement benefit.
    And what has resonated throughout all of these hearings is 
clear: Pre-dispute mandatory arbitration agreements have been 
used across the board by businesses to strip individuals of 
their constitutional right to a jury trial. It is an unequal 
bargaining relationship that has imposed this pre-dispute 
mandatory binding arbitration upon those with less power.
    Today we will continue to examine who these contracts of 
adhesion have become ubiquitous in a type of case that is of 
particular concern to not only you, Madam Chair, but also 
millions of families across this country who have and will be 
faced with the difficult and emotional decision to place their 
loved ones, or loved one, in a nursing home or assisted living 
facility. Oftentimes, finding the appropriate facility is at 
the forefront of people's minds, not the possibility that they 
may be foregoing their legal rights, in the case of a dispute 
that may or may not arise.
    Yet, as families make these difficult decisions, long-term 
care facilities have found yet another way to insulate 
themselves from any possible legal action if a dispute should 
arise. And we are all aware of the tragic stories of elder care 
abuse, neglect, and death. But up until recently, families have 
been able to rely upon our judicial system to secure justice.
    As we will hear today from our witness, nursing home 
facilities have unscrupulously inserted binding pre-dispute 
mandatory arbitration agreements into their contracts, which 
allow them to divert victims and their families into a private, 
for profit judicial system which works mainly for the benefit 
of the nursing home industry. This is a place where hearings 
are held in secret, discovery is limited. The statistics show 
that most of the time individuals lose, and there is no 
meaningful right to appeal once they do lose.
    What makes this situation even more egregious is that even 
if misconduct or neglect is found, arbitrators do not have the 
authority to force facilities to make changes to their policies 
and practices. And as a result, other lives may be in harm's 
way as these facilities remain open for business. As admittance 
into nursing home facilities continues to rise because of the 
increasing numbers of the elderly, with over 1 million 
residents in long-term care today, Congress must step in and 
end this shameful practice.
    I want to thank the Chairwoman for holding this hearing, 
and I look forward to hearing from our witnesses today, and I 
will yield back.
    Ms. Sanchez. The gentleman yields back.
    Mr. Cannon, would you like to make an opening----
    I now recognize the Ranking Member of the Subcommittee, Mr. 
Cannon, for his opening remarks.
    Mr. Cannon. Thank you, Madam Chair, and welcome to our 
witnesses.
    This hearing marks the fourth time in this Congress we have 
met to consider the question of mandatory binding arbitration, 
but the industry before us today is new. Today we consider the 
use of mandatory binding arbitration clauses in nursing home 
and assisted living contracts.
    Once again, we find an industry that has promoted the use 
of mandatory binding arbitration after abusive tort suits and 
runaway jury awards ran up the costs of goods and services, 
hurting companies and consumers. Once again, the industry is 
taking steps to make sure that mandatory binding arbitration is 
used fairly. In this case, nursing homes often do not us 
mandatory binding arbitration to resolve quality of care 
issues.
    The American Health Care Association and the National 
Center for Assisted Living have developed a model arbitration 
agreement and promoted its use for several years. The model 
agreement does not alter rights or remedies available under 
State tort law. The status of an agreement to arbitration is 
not a condition of admission to a nursing home or an assisted 
living facility; it also provides a 30-day cooling off period 
for a resident or representative to reconsider and in writing 
rescind an arbitration agreement, a cooling off period far 
longer than found in other sectors.
    Other important parts of the picture also have not changed. 
Our courts are still overburdened, and arbitration is still 
providing an escape valve for citizens hoping to avoid an 
unresponsive and drawn out judicial system. We should continue 
to do everything we can to protect that, not to undermine it.
    In addition, the hard, representative, incredible evidence 
that mandatory binding arbitration is being widely abused is 
still missing. I expect today that we will hear some testimony 
about problem incidents. I welcome that. If there are problems, 
I am happy to hear about them, and with the witnesses' help, I 
hope that we can understand precisely what they are.
    The system may be working well; we all know that no system 
is perfect. If we know what problems there are, perhaps we can 
help fix them and avoid attempts to fix things that are not 
broken.
    There are two features of this hearing, though, that are 
very new. First, proposals to restrict arbitration in nursing 
home and assisted living sectors point us straight toward 
another perennial issue: tort reform. Because if tort abuse is 
what produced mandatory binding arbitration in these sectors, 
restricting arbitration will only hand the system back over to 
abusive trial lawyers. Second, proposals to restrict 
arbitration in these sectors will produce cost increases that 
will run us straight into what many consider the biggest 
financial crisis looming over the country's future, and that is 
exploding Medicare entitlement.
    I urge those who seek to restrict arbitration to consider 
whether, if they drive up the health care cost in the process, 
will Medicare payouts have to increase, not for the betterment 
of our seniors, but to pay for trial lawyer pocket-lining, or 
will nursing homes have to reduce the number of Medicare 
enrollees because historic benefit levels cannot cover the 
costs of the care due to abusive lawsuits? Either way, our 
seniors lose out.
    I thank you, Madam Chair, and I yield back.
    [The prepared statement of Mr. Cannon follows]:

 Prepared Statement of the Honorable Chris Cannon, a Representative in 
 Congress from the State of Utah, and Ranking Member, Subcommittee on 
                   Commercial and Administrative Law

    Thank you Madam Chair and welcome to our witnesses.
    This hearing marks the fourth time this Congress we have met to 
consider the question of mandatory binding arbitration, but the 
industry before us is new.
    Today, we consider the use of mandatory binding arbitration clauses 
in nursing home and assisted living contracts.
    Once again, we find an industry that has promoted the use of 
mandatory binding arbitration after abusive tort suits and runaway jury 
awards ran up the costs of goods and services--hurting companies and 
customers.
    Once again, the industry is taking steps to make sure that 
mandatory binding arbitration is used fairly. In this case, nursing 
homes often do not use mandatory binding arbitration to resolve 
quality-of-care issues.
    The American Health Care Association and the National Center for 
Assisted Living have developed a model arbitration agreement and 
promoted its use for several years.
    The model agreement does not alter rights or remedies available 
under state tort law. It states that an agreement to arbitration is not 
a condition of admission to a nursing home or an assisted living 
facility. It also provides a 30-day ``cooling off period'' for the 
resident or a representative to reconsider and, in writing, rescind an 
arbitration agreement--a cooling off period far longer than found in 
other sectors.
    Other important parts of the picture also have not changed. Our 
courts are still overburdened, and arbitration is still providing an 
escape valve for citizens hoping to avoid an unresponsive judicial 
system.
    We should continue to do everything we can to protect it--not to 
undermine it.
    In addition, the hard, representative and credible evidence that 
mandatory binding arbitration is being widely abused is still missing.
    I expect today that we will hear some testimony about problem 
incidents. I welcome that. If there are problems, I am happy to hear 
about them, and with the witnesses' help I hope that we can understand 
precisely what they are. This system may be working well, but we all 
know that no system is perfect. If we know what problems there truly 
are, perhaps we can help fix them--and avoid attempts to fix instead 
things that aren't broken.
    There are two features of this hearing, though, that are very new.
    First, proposals to restrict arbitration in the nursing home and 
assisted living sectors point us straight toward another perennial 
issue--tort reform. Because if tort abuse is what produced mandatory 
binding arbitration in these sectors, restricting arbitration will only 
hand the system back over to abusive trial lawyers.
    Second, proposals to restrict arbitration in these sectors will 
produce cost increases that will run us straight into what many 
consider the biggest fiscal crisis looming over this country's future--
exploding Medicare entitlements.
    I urge those who seek to restrict arbitration to consider whether 
if they drive up health care costs in the process will Medicare pay 
outs have to increase not for the betterment of our seniors but to pay 
for trial lawyer pocket lining, or will nursing homes have to reduce 
the number of Medicare enrollees because historic benefit levels cannot 
cover the costs of the care due to abusive lawsuits. Either way our 
seniors lose out.
    I yield back the remainder of my time.

    Ms. Sanchez. The gentleman yields back. Without objection, 
other Members' opening statements will be included in the 
record.
    [The prepared statement of Mr. Conyers follows:]

Prepared Statement of the Honorable John Conyers, Jr., a Representative 
  in Congress from the State of Michigan, Chairman, Committee on the 
 Judiciary, and Member, Subcommittee on Commercial and Administrative 
                                  Law

    The decision to place a loved one in a nursing home is probably one 
of the most difficult decisions families must face. It's loaded with 
emotion, not only for the person being admitted into the facility, but 
also for the family members who have realized that they can no longer 
adequately care for their loved one by themselves.
    When family members put their trust in the hands of the long-term 
care provider, they should be able to expect that their parent or 
grandparent will be kept safe and watched carefully by trained staff.
    Unfortunately, some facilities have broken that trust, by allowing 
abusive and neglectful environments that have resulted in harm to many 
residents, and sadly, even the premature deaths of some.
    Although long-term care facilities are subject to both federal and 
State monitoring, we know that does not necessarily ensure that abuse 
and neglect in these facilities will not occur. So we must also rely on 
other means to encourage the corporations that run these facilities to 
provide truly safe environments.
    Already, some individuals and groups are doing this through 
advocacy, litigation, and by avoiding facilities with records of safety 
violations. Nonetheless, this is not enough, because some facilities 
have discovered a way to conceal their poor safety records, while also 
limiting their legal responsibility.
    What some facilities are doing is including a pre-dispute mandatory 
binding arbitration clause in their contracts with residents. These 
clauses can strip a resident's constitutional right to a jury trial, 
and can artificially limit damages obtained in a verdict, and can even 
discourage plaintiffs from filing a claim.
    Furthermore, these clauses often require that any arbitration 
decision be kept secret, which keeps the incidents of neglect and harm 
to residents out of the public eye.
    Without these restrictive contract clauses, these incidents could 
be brought to light in a court proceeding, and prospective residents 
and their families would know better whether the nursing home or 
facility they are considering does truly provide a safe environment.
    To address the concerns from these arbitration clauses in long-term 
care facility contracts, Chairwoman Sanchez introduced the ``Fairness 
in Nursing Home Arbitration Act of 2008,'' of which I am proud to be an 
original cosponsor.
    This bipartisan legislation accomplishes the critical goal of 
effectively prohibiting pre-dispute mandatory binding arbitration 
agreements in contracts between residents and long-term care facilities 
in several meaningful respects.
    First, this bill will protect residents' constitutional right to a 
jury trial, and the accompanying fairness in the legal system, which is 
sometimes not found in arbitration.
    Second, this legislation will ensure that nursing homes and 
assisted living facilities with poor safety records cannot easily hide 
behind the secrecy of arbitration decisions. Instead, disputes about 
neglect and abuse by staff may be taken publicly to court.
    Third, this legislation will still allow residents and long-term 
care facilities to opt for arbitration, but will ensure that it is with 
the free consent of all parties, rather than a requirement imposed by 
the facility as a pre-condition for admission.
    For example, a resident might negotiate that the arbitration 
decision be made public, so that prospective residents would have a 
clearer picture of the facility.
    I very much look forward to hearing from the witnesses today, and 
hope that other Members will realize the importance of this 
legislation.

    [The prepared statement of Mr. Cohen follows:]

 Prepared Statement of the Honorable Steve Cohen, a Representative in 
   Congress from the State of Tennessee, and Member, Subcommittee on 
                   Commercial and Administrative Law

    As someone with a loved one who is a resident of a long-term care 
facility, the issue of dispute arbitration between long-term care 
facilities and their residents hits close to home for me. As in many 
other contexts, the bargaining power between the corporate entity, on 
the one hand, and the individual consumer, on the other, is very 
unequal. Long-term care facilities should not be permitted to take 
advantage of these unequal bargaining positions to force residents to 
enter into mandatory pre-dispute arbitration agreements as a condition 
of residence. Rather, both parties should be allowed to voluntarily 
consent to arbitration only after a dispute has arisen between them. 
That is why I am a cosponsor of H.R. 6126, the ``Fairness in Nursing 
Home Arbitration Act of 2008,'' which amends the Federal Arbitration 
Act to make unenforceable mandatory pre-dispute arbitration agreements 
between long-term care facilities and their residents. I thank 
Chairwoman Sanchez for her leadership on this issue and urge all of my 
colleagues on the Subcommittee on Commercial and Administrative Law to 
support this measure.

    Ms. Sanchez. I am now pleased to introduce the witnesses on 
our panel for today's hearing. Our first witness is William 
Hall. Dr. Hall, of Rochester, NY, is a member of the AARP board 
of directors. Dr. Hall is director of the Center for Healthy 
Aging and previously served as chief of geriatrics at the 
University of Rochester School of Medicine, where he is the 
Paul Fine professor of medicine.
    Dr. Hall's career in geriatrics has largely focused on the 
preventative aspect of medical care for older adults. He has 
been instrumental in facilitating the development of clinical 
and education programs in the field of aging that have had a 
national impact.
    Dr. Hall's volunteer experience includes serving as medical 
director for the AARP Triumph Classic, a program of exercise 
training, preparing older adults to compete in triathlons. He 
has extensive experience on numerous professional boards, 
including the American College of Physicians, and the American 
Geriatrics Society, and is a past president of the American 
College of Physicians.
    Dr. Hall has testified on numerous health issues before 
Congress, the Department of Health and Human Services, and the 
National Institutes of Health.
    We welcome you to our panel, Dr. Hall.
    Our second witness is Linda Stewart, a Houston, TX 
resident. Ms. Stewart has been in the nursing profession for 28 
years, including 10 years as a captain in the United States Air 
Force.
    Having worked as a critical care and E.R. nurse, Ms. 
Stewart is now administering exercise programs for senior 
citizens. An MBA graduate, she is currently working toward 
another master's degree in nutrition. Ms. Stewart's 
grandmother, Hattie Miller, was a victim of nursing home 
negligence.
    Welcome, Ms. Stewart.
    Our third witness is Gavin Gadberry. Mr. Gadberry is a 
shareholder of Underwood, Wilson, Berry, Stein, and Johnson, 
PC, one of Texas' oldest and Amarillo's largest firm, which 
offers a full service civil practice. He currently serves as 
general counsel of and issue lobbyist for the Texas Health Care 
Association.
    Mr. Gadberry's primary areas of practice are Government 
relations, long-term care, and health care law, administrative 
and regulatory law, and general civil litigation. Mr. Gadberry 
has been a speaker on numerous occasions at the American Health 
Lawyers Association's annual Long-Term Care and the Law 
seminar. He is a contributing author to the Long-Term Care 
Handbook: Regulatory, Operational, and Financial Guidepost, 
Second Edition. Mr. Gadberry received the chair's award at the 
2004 Texas Health Care Association Convention for his efforts 
on tort reform in 2003.
    We welcome you this afternoon.
    And our final witness is Mr. Ken Connor. Mr. Connor co-
founded the Center for a Just Society in 2005, and serves as 
the organization's chairman and one of its principal spokesmen. 
Affiliated with the law firm of Wilkes & McHugh, P.A., Mr. 
Connor recently served as counsel to Governor Jeb Bush in Bush 
v. Schiavo, the matter involving Terry Schiavo and the court 
order to remove her feeding tube.
    Mr. Connor is also an advocate on behalf of nursing home 
residents and was appointed to Florida's task force on the 
availability and affordability of long-term care. He has served 
as the chairman of the State of Florida Commission on Ethics 
and is a member of the State Constitution Revision Commission. 
Mr. Connor has previously testified before the Subcommittee on 
the issue of arbitration.
    We welcome you back before the Subcommittee.
    I want to thank all of the witnesses for their willingness 
to participate in today's hearing. Without objection, your 
written statements will be placed into the record, and we are 
going to ask that you limit your oral testimony to 5 minutes.
    You will note that we have a lighting system that starts 
with a green light. Four minutes into your testimony you will 
see a yellow light; that gives you a warning you have about a 
minute remaining. And then when your time has expired you will 
see the red light.
    We would ask that if you are caught mid-thought or mid-
sentence when the light turns red, we will give you an 
opportunity to finish your final thought before moving on to 
the next witness. After each witness has presented her or his 
testimony, Subcommittee Members will be permitted to ask 
questions subject to the 5-minute limit.
    And with that I am going to invite Dr. Hall to please give 
his testimony. And please make sure your microphone is on.

           TESTIMONY OF WILLIAM J. HALL, M.D., AARP, 
                         WASHINGTON, DC

    Dr. Hall. Chairwoman Sanchez, Ranking Member Cannon, and 
Members of the Subcommittee, I am William Hall, with the AARP 
board of directors, and I really thank you very much for the 
opportunity to testify today.
    Pre-dispute arbitration clauses in long-term care facility 
contracts are harmful to residents and their families. These 
arbitration clauses force a Hobson's choice--waive the right to 
seek redress in the courts or get care in another facility, 
assuming that, in fact, another facility can be found.
    When older adults suffer a decline in health or are 
discharged from the hospital and are unable to care for 
themselves, these individuals and their families are faced with 
a very daunting task of finding nursing home care. More often 
than not, these decisions are made in an absolute crisis 
situation. Individuals may be pressured to accept the first 
available bed without enough time to adequately compare nursing 
homes.
    Moreover, people seeking nursing home admission are among 
the frailest of Americans. In 2006, nearly half of all nursing 
home residents were diagnosed with dementia. In 2004, nearly 80 
percent of residents needed help in four or five of the 
customary activities of daily life. Recently, nursing home 
residents have had higher disease prevalence and multiple 
chronic conditions, indicating an increasingly sicker 
population, often on multiple and complex medications.
    It is often in this context of crisis and vulnerability 
that prospective residents and their families face the nursing 
home admissions process, where they are typically given a 
lengthy, complicated contract. Many facilities include 
provisions in these contracts requiring that residents and 
their families agree to forego the use of the court system to 
resolve future disputes. Instead, they must agree to submit 
their cases to arbitration.
    The admissions contract typically is presented as a ``take 
it or leave it'' situation. When potential residents and their 
families are presented with admissions contracts, they often do 
not know that an arbitration requirement is buried in the fine 
print of the multi-page document.
    Even if prospective residents and their families are aware 
these contracts contain an arbitration provision, they often 
simply do not understand what it means, nor do they realize the 
many rights and protections they would forego in arbitration. 
It places severe restrictions on many of their rights, 
including the ability to obtain documents and other evidence, 
making it difficult to prove their case, and the bases of 
appeal are extremely limited.
    Consumers do not have equal bargaining power with 
facilities, and are virtually powerless to negotiate the 
arbitration provisions, nor are they likely to gain admission 
to the facility if they want to delete the provision. AARP 
believes that it is essential for vulnerable residents to have 
access to the courts when they are injured, neglected, or 
abused. AARP thus supports the bipartisan Fairness in Nursing 
Home Arbitration Act, H.R. 6216, introduced by Chairwoman Linda 
Sanchez and Representative Ileana Ros-Lehtinen.
    This bill would make pre-dispute arbitration provisions 
between long-term care facilities and a resident of the 
facility or a person acting on their behalf unenforceable, 
ensuring that residents of long-term care facilities and their 
families are not forced into arbitration. This legislation 
would provide uniform, nationwide protection against such pre-
dispute arbitration provisions.
    AARP encourages the Subcommittee to pass this legislation. 
As you consider it, we would like to work with you to help 
ensure this bill would apply to all current residents of long-
term care facilities, not just those whose pre-dispute 
arbitration agreements are made, amended, altered, modified, 
renewed, or extended on or after the date of the enactment of 
this bill.
    Thank you, and we look forward to working with you on this 
very important issue for current and future long-term care 
facility residents and their families.
    [The prepared statement of Dr. Hall follows:]

                 Prepared Statement of William J. Hall

























    Ms. Sanchez. Thank you, Dr. Hall. We appreciate your 
testimony.
    Ms. Stewart, I would invite you to give your testimony at 
this time.

        TESTIMONY OF LINDA STEWART, RN, MBA, HOUSTON, TX

    Ms. Stewart. Chairwoman Sanchez----
    Ms. Sanchez. Is your microphone on?
    Ms. Stewart. Testing.
    Ms. Sanchez. Perfect. I think you are ready.
    Ms. Stewart. Okay.
    Chairwoman Sanchez, Ranking Member Cannon, and 
distinguished Members of the Subcommittee, thank you for the 
invitation to testify at this hearing about my experience with 
mandatory arbitration in nursing homes. I would also like to 
acknowledge my attorney, Mr. Cunningham, who has accompanied me 
here today. I am here to testify in strong support of H.R. 
6126, the Fairness in Nursing Home Arbitration Act of 2008, a 
bill that would end mandatory arbitration in nursing home 
contracts so that no other family has to go through what my 
family has been through.
    I have a master's degree in business and am a registered 
nurse. I have been in the nursing profession for 28 years, 
including 10 years as a captain in the United States Air Force. 
I have worked as a critical care nurse, a emergency room nurse, 
as well as a nursing director in a nursing home. My 
professional and personal experience with nursing home care has 
left me devastated, and my hope is that by telling you my story 
today, other families will be protected in the future.
    At the age of 92, my grandmother, Hattie Miller, lived by 
herself in Seguin, TX. She was generally very alert and 
capable, and had control over her own financial affairs. 
However, after she had a mini-stroke and seemed confused, we 
decided to put her into a nursing home.
    The hospital assigned a social worker to my grandmother who 
said that the only home near us with beds available was the 
Guadalupe Valley Nursing Center. After working in a nursing 
home I can tell you that families have very little or no choice 
when it comes to where they have their loved ones admitted 
because space is so limited.
    On the afternoon that my grandmother was admitted into 
Guadalupe Valley, the nursing home called my sister at work. 
They told her that she needed to rush down to the nursing home 
to sign paperwork or my grandmother would be moved out of the 
nursing home. My sister rushed there to sign the paperwork 
because she didn't want our grandmother to lose her place at 
the home.
    When she got there, she told the nursing home 
administrators that she didn't want to sign anything 
financially because she did not have power of attorney over my 
grandmother's affairs. They told my sister that there was 
nothing in the documents except standard forms that needed to 
be signed so that the home could receive my grandmother's 
Social Security check and to make sure that she received 
medications that she needed. They never once mentioned that the 
many documents contained something that would limit our 
family's legal rights.
    About 3 weeks--and I am telling you, 3 weeks--nursing home 
employees were apparently moving my grandmother from her bed to 
her wheelchair and her leg was badly injured. No one ever 
reported the incident to us or anyone else; they simply put her 
back to bed. After we went to see her and she was complaining 
of extreme pain in her leg, we brought her to the hospital.
    It turns out that my grandmother's leg was broken in two 
places. One of these was an oblique or spiral fracture that 
results when the bone is completely twisted. Imagine twisting 
the cap off of the top of a soda; this is a very similar 
motion.
    The follow-up care she received for her leg at the nursing 
home was inadequate, and her injuries were so severe that they 
had to amputate my grandmother's leg a couple of weeks later. 
We couldn't believe that our grandmother had suffered such a 
severe injury in the nursing home and it was never reported to 
us or initially treated by the staff.
    After we filed a lawsuit, the nursing home tried to force 
us into binding arbitration. That was when we learned that 
buried in the documents that my sister had signed that day was 
a binding mandatory arbitration clause. My attorney worked hard 
to have the clause overturned, but the corporation that owned 
the nursing home told us that they would appeal all the way to 
the Texas Supreme Court unless we agreed to settle.
    We couldn't believe that after the way my grandmother was 
treated we didn't have the right to try our case to a jury. We 
also feared that without being able to try our case to a jury, 
no one would know that this had happened. I wonder how many 
other incidents there have been like my grandmother's that no 
one is able to know about because nursing homes are able to 
hide behind these arbitration contracts.
    I have seen the nursing home industry from the perspective 
of a family member and also as a director of nursing at a 
nursing home. Knowing about the quality of care--or lack of 
quality of care--it seems just unimaginable to me that 
corporations that own these homes are allowed to abuse 
residents and not be held accountable in a court of law for 
their actions.
    This is unacceptable to the families that I talk to about 
this, and it should be unacceptable to the Members of this 
Committee. Hopefully my speaking out will assist the effort to 
protect nursing home residents and their families in the 
future.
    Thank you for listening to my story.
    [The prepared statement of Ms. Stewart follows:]

                  Prepared Statement of Linda Stewart

    Chairwoman Sanchez, Ranking Member Cannon and distinguished Members 
of the Subcommittee, thank you for the invitation to testify at this 
hearing about my experience with mandatory arbitration in nursing 
homes. I would also like to acknowledge my attorney, Mr. Cunningham, 
who has accompanied me here today.
    I am here to testify in strong support of H.R.6126, the ``Fairness 
in Nursing Home Arbitration Act of 2008,'' a bill that would end 
mandatory arbitration in nursing home contracts so that no other family 
has to go through what my family has been through.
    I have an MBA and am a registered nurse. I have been in the nursing 
profession for twenty-eight years, including 10 years as a Captain in 
the United States Air Force. I have worked as a critical care and ER 
nurse as well as a nursing director in a nursing home. I am now 
administering exercise programs for senior citizens and am currently 
working towards another Masters degree in Nutrition.
    My professional and personal experience with nursing home care has 
left me devastated and my hope is that by telling you my story today, 
other families will be protected in the future.
    At the age of 92 my grandmother, Hattie Miller, lived by herself in 
Seguin, Texas, which is just outside of San Antonio. She was generally 
very alert and capable, and had control over her own financial affairs. 
However, after she had a transient ischemic attack, also known as a 
mini-stroke, and seemed confused, we decided to put her into a nursing 
home.
    The hospital assigned a social worker to my grandmother who said 
she would help us find a nursing home close by. The social worker 
called all three homes in the area, but the Guadalupe Valley Nursing 
Center was the only nursing home that had any open beds. After working 
in a nursing home I can tell you that generally families have very 
little or no choice when it comes to where they have their loved ones 
admitted. Because space is so limited, most families have to take 
whatever is available at that time and there is no real choice.
    On the afternoon that my grandmother was admitted into Guadalupe 
Valley, the nursing home called my sister at work. They told her that 
she needed to rush down to the nursing home to sign paperwork or my 
grandmother would have to move out of the nursing home. My sister 
rushed there to sign the paperwork because she didn't want our 
grandmother to lose her place at the home. When she got there, she told 
the nursing home administrators that she didn't want to sign anything 
financial because she did not have power of attorney over my 
grandmother's affairs. They told my sister that there was nothing in 
the documents except standard forms that they needed signed just so 
they could receive my grandmother's monthly social security check and 
to make sure that she received the care and the medicines that she 
needed. They never once mentioned that the many documents contained 
something that would limit our family's legal rights. In fact, when the 
nursing home administrator presented the document that contained the 
arbitration clause, my sister asked her, ``What's this?'' The 
administrator replied, ``Oh that's nothing. We just need you to sign 
all of these documents.'' At no time did the administrator explain the 
mandatory arbitration clause. It turns out that the nursing home did 
not even comply with current Texas law which says that this type of 
clause has to also be signed by our attorney in order for it to be 
valid.
    After about three weeks, nursing home employees were apparently 
transporting my grandmother from her bed to her wheelchair and her leg 
was badly injured somehow. No one ever reported the incident to us or 
anyone else; they simply put her back in bed.
    After we went to see her and she was complaining of extreme pain in 
her leg, we brought her to the hospital. It turns out that my 
grandmother's leg was broken in two places. One of these was an oblique 
or spiral fracture which results when the bone is completely twisted--
imagine twisting the cap off a bottle of soda; this is a very similar 
motion. The follow up care she received for her leg at the nursing home 
was inadequate, and her injuries were so severe that they had to 
amputate my grandmother's leg a couple weeks later. We couldn't believe 
that our grandmother had suffered such a severe injury in the nursing 
home and it was never reported to us or initially treated by the staff.
    After we filed a lawsuit, the nursing home tried to force us into 
binding arbitration. That was when we learned that buried in the 
documents my sister had signed that day was a binding mandatory 
arbitration clause. My attorney worked hard to have the clause 
overturned by the court, but the corporation that owned the nursing 
home told us that they would appeal all the way to the Texas Supreme 
Court unless we agreed to settle. Because the Texas Supreme Court has a 
history of upholding this kind of mandatory clause, we were practically 
guaranteed to lose our fight. We were forced to settle the case. We 
couldn't believe that after the way my grandmother was treated we 
didn't have the right to try our case to a jury. We also feared that 
without being able try our case to a jury, no one would know that this 
had happened. I wonder now, after having gone through this, how many 
other incidents there have been like my grandmother's that no one is 
able to know about because the nursing homes are able to hide behind 
these arbitration contracts.
    I have seen the nursing home industry from the perspective of a 
family member and also an employee. As I stated earlier, I was the 
Director of Nursing at a nursing home for one year. I quit my job 
because of the horrible care I witnessed and the impossible situation 
nursing home owners and administrators put their staff members in. To 
put it simply, the quality of care is horrible. For example, in the 
nursing home where I worked, we would run out of towels for each 
resident and the owners and administrators refused to purchase more. As 
a result, there were days when residents went without a bath because 
there weren't enough towels to go around. The majority of the staff 
that worked in the home had minimal education and were barely paid 
minimum wage. There was very little by way of training, background 
checks, and employee supervision. To make matters worse, the 
Administrator of the home that I worked in frequently hired her 
relatives as employees. They made it impossible for me to do my job and 
serve my patients. The only way to complain or change things was to go 
through or around the Administrator, which proved to be an impossible 
task.
    Knowing all of this about the quality of nursing home care in this 
country, it seems just unimaginable to me that the corporations that 
own these homes are allowed to abuse residents and not be held 
accountable in a court of law for their actions. This is unacceptable 
to the families that I talk to about this, and it should be 
unacceptable to the members of this Committee. Hopefully my speaking 
out will assist the effort to protect nursing home residents and their 
families in the future.
    Thank you for listening to my story.

    Ms. Sanchez. Thank you for your testimony, Ms. Stewart. We 
really appreciate it, and I know that is a difficult subject 
matter to talk about, but we do appreciate you coming today to 
testify.
    At this time I would invite Mr. Gadberry to please give his 
testimony.

  TESTIMONY OF GAVIN J. GADBERRY, ESQUIRE, UNDERWOOD, WILSON, 
           BERRY, STEIN AND JOHNSON, PC, AMARILLO, TX

    Mr. Gadberry. Thank you, Chairwoman Sanchez. Now can you 
hear me?
    Thank you, Chairwoman Sanchez, Ranking Member Cannon, and 
Members of the Committee. I am grateful for the opportunity to 
be here with you today, all the way from Amarillo, Texas, and 
to offer the long-term care profession's perspective on 
arbitration. My name is Gavin Gadberry, and I am honored to be 
here today representing the American Health Care Association 
and the National Center for Assisted Living.
    A growing number of health care and long-term care 
providers, including nursing facilities and assisted living 
residences, have incorporated arbitration clauses into their 
admissions materials. When legal concerns arise, we believe 
that arbitration provides a fair and timely resolution for both 
the consumer and the long-term care provider.
    Before I address the benefits of arbitration as an 
alternative to litigation, allow me to take a moment to assure 
the Committee that the troubling anecdotes presented today 
present exceptions instead of the rules in the long-term care 
community. I am proud of the advances our profession has made 
in delivering high quality care, and we remain committed to 
sustaining these gains in the future, when the demand for care 
will dramatically increase.
    We have been actively engaged in a broad range of 
activities which seek to enhance the overall performance and 
excellence of the long-term care sector. As I detailed more 
fully in my written statement, we have partnered with CMS and 
others to enhance care through this culture of cooperation. 
Quality is improving. While keeping patients and their care 
needs at the center of our collaborative efforts, we continue 
to challenge ourselves to improve and enhance quality.
    And as a side note, I am proud to say in Texas last year 
the use of restraints was the largest percentage decrease than 
anywhere in the Nation.
    In the late 1990's, however, our profession started having 
difficulty with increased litigation. Long-term care operators 
were forced into making difficult decisions, including 
potential closures of facilities and corporate restructuring. 
In addition to pursuing tort reform, the profession sought 
alternatives to traditional litigation, including use of 
arbitration.
    In 2002, AHCA was in the lead. It went out, and it said, 
``We need to develop--if our membership wants to use an 
arbitration provision, we want to go out and develop a 
reasonable arbitration clause.'' The model agreement in no way 
alters the rights or remedies available to a resident under 
State tort law. Not whatsoever.
    It still has the same causes of action; it still has the 
same damages. The only thing that is taken away is the right to 
a jury trial, and it is specifically set out in an agreement. 
It is one page; it is in simple, plain-to-read English. More 
importantly, the form provides a 30-day out, so if they sign 
the agreement and they are pressured into it, they have a 30-
day time period in which to rescind the agreement.
    Ms. Stewart's example is unfortunate. I am familiar with 
the clause that was involved in her case, and it is one page, 
but there was not an out-clause in it. But the AHCA provision 
does have that provision.
    Also, with regard to Ms. Stewart's explanation today, I am 
familiar with the county in which it is located. There are six 
facilities in that county; it is close to San Antonio, and the 
population is large. It is not like rural Texas.
    We support the use of arbitration because unlike 
traditional litigation, our members have experienced that 
arbitration is more efficient, less adversarial, and has a 
reduced time to settlement. A recent Aon report found that 
``arbitration reduces the time to settlement by more than 2 
months, on average,'' and ``very few claims actually go all the 
way to arbitration,'' and as Ms. Stewart's claim, they are 
often settled.
    We believe that the Fairness in Nursing Home Arbitration 
Act is a misguided attempt to restrict and weaken the Federal 
Arbitration Act, a policy of this Nation that has been in place 
for more than 80 years. We agree that entering into a nursing 
facility or assisted living residence is often a time of 
uncertainty and apprehension. The notion that family members 
are threatened into signing arbitration agreements are simply 
not true.
    As I stated earlier, AHCA developed a policy where they 
give family members or the patient the opportunity to back out 
of an arbitration agreement within 30 days. Also, it does not 
have an effect on whether the person is admitted to the 
facility.
    It is important for this Committee to recognize that the 
Federal Arbitration Act does not inherently foster or sanction 
any disregard for traditional notions of fair play. In fact, 
State courts have done a good job in looking at agreements 
where they are unreasonable, where there are provisions that 
limit damages, where there are provisions that require the 
loser to pay, where there is a venue that is unreasonable or a 
long ways away from the facility.
    This bill needlessly discriminates against long-term care 
providers, and more importantly, the patients. Pre-dispute 
arbitration agreements are a viable legal option for long-term 
care consumers and should not be eliminated.
    Public sentiment is opposed to eliminating the use of 
arbitration to resolve disputes. A U.S. Chamber of Commerce 
poll, recently conducted, found that given the choice, voters 
would rather have arbitration.
    Like the vast majority of Americans, we believe that 
legislative proposals to limit arbitration and undermine the 
Federal Arbitration Act is bad public policy. We strongly 
support the use of arbitration and the policy that has been in 
place by this Government since the early 1920's.
    Thank you for the opportunity to offer these comments 
today, and I look forward to responding to your comments.
    [The prepared statement of Mr. Gadberry follows:]

                Prepared Statement of Gavin J. Gadberry

    Thank you Chairwoman Sanchez, Ranking Member Cannon, and members of 
the Committee. I am grateful for the opportunity to be with you here 
today--and to offer the long term care profession's perspective on 
arbitration. My name is Gavin Gadberry, and I am honored to be here 
today representing the American Health Care Association and the 
National Center for Assisted Living (AHCA/NCAL).
    In the increasingly litigious environment, a growing number of 
health care and long term care providers--including nursing facilities 
and assisted living residences--have incorporated arbitration clauses 
into their admissions materials given to residents when being admitted 
to the facility or residence. AHCA/NCAL supports the use of arbitration 
agreements as a viable option for long term care providers and their 
residents to resolve legal disputes. Arbitration is less adversarial 
than traditional litigation, produces quicker results and has been 
determined to be both fair and appropriate by our courts.
    AHCA/NCAL and our members are committed to ensuring that long term 
care facilities place paramount importance on the delivery of high 
quality care and provide a safe and secure environment for the millions 
of Americans residing in our nation's nursing facilities and assisted 
living residences. When legal concerns arise, we believe that 
arbitration provides a fair and timely resolution for both the consumer 
and long term care provider.
    On behalf of the profession responsible for caring for our nation's 
most vulnerable citizens, I am proud of the advances we have made in 
delivering high quality long term care services and we remain committed 
to sustaining these gains in the years and decades ahead--when, as we 
all know, demand for long term care will by all accounts dramatically 
increase.
    Americans are living longer and our nation's aging population is 
growing--many of whom have significant medical or cognitive conditions 
which require care in a nursing facility. Currently more than three 
million Americans rely on the care and services delivered in one of the 
nation's nearly 16,000 nursing facilities each year, and the demand for 
such services is going to increase dramatically every year. A March 
2008 report from the National Investment Center for the Seniors Housing 
& Care Industry (NIC) indicates that the demand for long term care 
services will more than double by 2040.
    The efforts and initiatives advanced by the association that I 
represent today seek to enhance and improve quality of care and 
services provided in our nation's nursing facilities and assisted 
living residences each day.

                     QUALITY--AHCA'S FIRST PRIORITY

    Before I address the benefits of arbitration as an alternative to 
litigation in resolving disputes, allow me to take a moment to assure 
the Committee that the troubling anecdotes presented today represent 
the exception instead of the rule within the long term care community. 
Long before the words quality and transparency were the catch words of 
the federal government and their oversight of healthcare, they were 
truly the compass for AHCA/NCAL and its member facilities.
    Our association's long-held mission clearly states, ``our goal is 
to provide a spectrum of patient/resident-centered care and services 
which nurture not only the individual's health, but their lives as 
well, by preserving their connections with extended family and friends, 
and promoting their dignity, respect, independence, and choice.''
    AHCA/NCAL has been working diligently to change the debate 
regarding long term care to focus on quality--quality of life for 
patients, residents and staff; and quality of care for the millions of 
frail, elderly and disabled individuals who require our services. We 
have been actively engaged in a broad range of activities which seek to 
enhance the overall performance and excellence of the entire long term 
care sector. While keeping patients and their care needs at the center 
of our collective efforts, we continue to challenge ourselves to 
improve, and enhance quality.

    THE FACTS SPEAK FOR THEMSELVES--QUALITY & OUTCOMES ARE IMPROVING

    The Online Survey, Certification and Reporting (OSCAR) data tracked 
by the Centers for Medicare and Medicaid Services (CMS) clearly point 
to improvements in patient outcomes, increases in overall direct care 
staffing levels, and significant decreases in quality of care survey 
deficiencies in our nation's skilled nursing facilities.
    A few examples which highlight some of the positive trends in 
nursing facility care according to data tracked by CMS:

          Nationally, direct care staffing levels (which 
        include all levels of nursing care: Registered Nurses (RNs), 
        Licensed Practical Nurses (LPNs) and Certified Nursing 
        Assistants (CNAs)) have increased 8.7 percent between 2000 and 
        2007--from 3.12 hours per patient day in 2000 to 3.39 hours in 
        2007;

          The Quality Measure \1\ tracking pain for long term 
        stay residents vastly improved from a rate of 10.7 percent in 
        2002 to 4.6 percent in 2007--more than a 50 percent decrease;
---------------------------------------------------------------------------
    \1\ Quality Measures track nursing facility residents who have and 
are at risk for specific functional problems needing further 
evaluation. Improvements in these measures indicate positive trends in 
patient outcomes, but it is important to clarify that the quality 
measures do not reflect a percentage of the entire population, rather 
the percentage of those who are at risk and have the condition.

          The Quality Measure tracking the use of physical 
        restraints for long stay residents dropped from 9.7 percent in 
---------------------------------------------------------------------------
        2002 to 5.6 percent in 2007;

          The Quality Measure tracking pressure ulcers for 
        post-acute skilled nursing facility patients (many of whom are 
        admitted to the nursing facility with a pre-existing pressure 
        ulcer) improved by 23 percent over the course of four years, 
        from 20.4 percent in 2003 to 15.8 percent in 2007; and

          Substandard Quality of Care Citations as tracked by 
        CMS surveys were reduced by 30 percent in five years--from 4.4 
        percent in 2001 to 3.1 percent in 2006.

          In January 2006, the Government Accountability Office 
        stated that from 1999-2005 there was a nearly 50 percent 
        decrease in the ``proportion of nursing homes with serious 
        quality problems.''

    Satisfaction of patients and family members is a critical measure 
of quality. AHCA has recognized this vital link between satisfaction 
and performance, and has urged facilities to conduct such assessments 
for more than a decade. In recent years, we have encouraged assisted 
living and nursing facilities to use a nationally-recognized company, 
My InnerView, to conduct consumer and staff satisfaction surveys to 
establish a national database for benchmarking and trend analysis. The 
most recent independent survey of nursing home patients and their 
families released a few weeks ago indicates that a vast majority (82%) 
of consumers nationwide are very satisfied with the care provided at 
our nation's nursing homes and would rate the care as either good or 
excellent.
    We remain committed to sustaining--and building upon--these quality 
improvements for the future.

        CULTURE OF COOPERATION--LEADING TO CONTINUED IMPROVEMENT

    Positive trends related to quality are also evidenced by 
profession-based initiatives including Quality First and the Advancing 
Excellence in America's Nursing Homes campaign--both of which are 
having a significant impact on the quality of care and quality of life 
for the frail, elderly and disabled citizens who require nursing 
facility care.
    Quality First, which was established in 2002, set forth seven core 
principles that reflect long term care providers' commitment to 
continuous quality improvement, leadership and transparency. This 
profession-based initiative led not only to improvements in care and 
processes, but to the development of the National Commission for 
Quality Long-Term Care. In December 2007, the Commission released its 
final report which addressed four critical components of long term 
care--quality, workforce, information technology & financing. We 
encourage Congress to take the recommendations of this commission under 
consideration--and further investigate their feasibility.
    Quality First and other initiatives have been commended by former 
Secretary of Health & Human Services Tommy Thompson, by former 
Administrator of CMS Dr. Mark McClellan, and by former CMS Acting 
Administrator Leslie Norwalk. Last year Ms. Norwalk stated in a column 
she wrote for Provider magazine: ``Nursing home providers have been on 
the leading edge of this quality movement. Long before hospitals, 
doctors, home health providers, pharmacies, dialysis facilities and 
others came to the table, the nursing home industry was out front with 
Quality First--a volunteer effort to elevate quality and accountability 
. . . Quality measurement has worked in nursing homes. . . . 
Collaborating to measure quality of long-term care, report it, support 
it, and improve it--that's the best path to a high-quality, patient-
centered, provider-friendly system that everyone can afford.''
    AHCA is a founding partner of the Advancing Excellence in America's 
Nursing Homes campaign--a coordinated initiative among providers, 
caregivers, consumers, government and others that promote quality 
around eight measurable goals. This campaign takes a step further than 
previous initiatives. It not only measures outcomes, but it establishes 
numerical targets and benchmarks. It also promotes best practices and 
evidence-based processes that have been proven to enhance patient care 
and quality of life.
    This voluntary initiative is working--and outcomes and processes 
are improving in the nearly 7,000 participating facilities. In December 
2007, the campaign announced that for the first three-quarters of the 
campaign, there was progress in reducing the incidence of pressure 
ulcers in nursing homes, reducing the use of physical restraints, 
managing pain for long term nursing home residents, and managing pain 
for short stay, post-acute nursing home residents. Our association is 
diligently working to increase the number of facilities that actively 
participate in this program and embrace the concepts embodied in the 
Advancing Excellence in America's Nursing Homes campaign.
    In his November 2007 testimony before the U.S. Senate Special 
Committee on Aging, Acting CMS Administrator Kerry Weems praised the 
Advancing Excellence in America's Nursing Homes campaign, stating, 
``This campaign is an exceptional collaboration among government 
agencies, advocacy organizations, nursing home associations, 
foundations, and many others to improve the quality of nursing homes 
across the country.''
    Further, in the CMS 2008 Action Plan for (Further Improvement of) 
Nursing Home Quality, the agency states that it ``plan[s] to strengthen 
our partnerships with non-governmental organizations who are also 
committed to quality improvement in nursing homes . . . The 
unprecedented, collaborative [Advancing Excellence in America's Nursing 
Homes] campaign seeks to better define quantitative goals in nursing 
home quality improvement. The purpose of this campaign is to align the 
strategies of the many partners who have expressed their commitment to 
excellent nursing home quality.''
    We applaud CMS for their commitment to further enhance care quality 
and outcomes through this partnership of stakeholders. The effort truly 
embodies the culture of cooperation which is critical in effectively 
enhancing care and sustaining quality improvements.
    NCAL also is committed to quality care and services for nearly 1 
million assisted living residents. We have developed Guiding Principles 
on Quality which serve as a roadmap for our members to ensure quality, 
resident-focused care delivery.
    In total, the increased focus on resident-centered care, actual 
care outcomes, increased transparency and public disclosure, enhanced 
stakeholder collaboration and the dissemination of best practices 
models of care delivery is working. AHCA/NCAL remains committed to its 
long-standing practices and programs which seek to improve the quality 
of care for our nation's most frail, elderly and disabled who require 
long term care services, and enhance the quality of life for patients 
and caregivers alike.

              ARBITRATION--A FAIR & EFFICIENT ALTERNATIVE

    In the late 1990's, the long term care profession was subject to 
excessive liability costs, which were exacerbated by an increasingly 
litigious environment. As a result, operators of nursing facilities and 
assisted living residences were forced into making difficult decisions 
including potential closure or divestiture of facilities, and corporate 
restructuring. In addition to pursuing state and national tort reform 
legislative initiatives to enable facilities to continue to operate and 
provide essential long term care services in a difficult environment, 
the profession sought alternatives to traditional litigation including 
arbitration. This trend was especially true in states such as Florida, 
Arkansas, and my home state of Texas, where state laws fostered an 
exponential growth in the number of claims filed against long term care 
providers--even those with a history of providing the highest quality 
care.
    Arbitration is a legal process where the parties enter into an 
agreement to resolve disputes by an unbiased, unrelated third party. 
AHCA/NCAL represents the vast majority of our nation's nursing 
facilities and assisted living residences and supports the use of 
arbitration clauses as a viable option for long term care providers to 
resolve legal disputes. When legal concerns arise, we believe that fair 
and timely resolution--the kind that is often the product of 
arbitration--is in the best interest of both the consumers and their 
care providers.
    Over the course of the past ten years arbitration has became a more 
widely used alternative in long term care. This growth has been across 
the board for long term care providers--from single owner facilities to 
national chain facilities; and for non-proprietary and for-profit 
organizations. As a service to our member facilities and the residents 
they serve, in 2002 AHCA/NCAL developed a model arbitration agreement 
form for possible use in the admission process.
    This model agreement in no way alters the rights or remedies 
available to a resident under state tort law. It states in plain 
English that entering into the arbitration agreement is not a condition 
of admission into the facility. Further, the model form provides a 30-
day window for the resident or their representative to reconsider and, 
in writing, rescind the arbitration agreement. This 30-day ``cooling 
off period'' far exceeds the period of time found on most arbitration 
clauses.
    AHCA/NCAL supports the use of arbitration because unlike 
traditional litigation, our members have experienced that arbitration 
is more efficient, less adversarial, and has a reduced time to 
settlement. As this Committee is no doubt aware, most cases are 
resolved through settlement. Arbitration facilitates that process. As a 
recent Aon Global Risk Consulting report entitled ``Long Term Care--
2008 General Liability and Professional Liability Actuarial Analysis'' 
found, ``Arbitration reduces the time to settlement by more than two 
months on average.'' It further found that ``very few claims actually 
go all the way to arbitration [as] most claims are settled in 
advance.''
    Timely resolution of disputes is of unique importance to residents 
of long term care facilities and their families. Often the individuals 
are very frail elderly in their twilight years and it is a comfort for 
families to reach a settlement during their loved one's lifetime.
    In addition, because it vastly reduces transaction costs, 
arbitration may also enable patients and their families to retain a 
greater proportion of any financial settlement than with traditional 
litigation. The same report found that ``currently, 55.2% of the total 
amount of claims costs paid for GL/PL claims in the long term care 
industry is going directly to attorneys. This means that less than half 
of the dollars spent on liability is actually going to the patients and 
their families.'' The decreased transaction costs associated with 
arbitration means more of any award received goes to the party whom is 
most deserving--the patient or resident, not their legal 
representative.

          ``FAIRNESS IN NURSING HOME ARBITRATION ACT OF 2008''
                    _AN UNFAIR & INAPPROPRIATE BILL

    We believe that the recently introduced Fairness in Nursing Home 
Arbitration Act of 2008 (H.R. 6126 and S. 2838) is a misguided attempt 
to restrict and weaken the Federal Arbitration Act (FAA), which has 
been in place for more than 80 years. The FAA appropriately recognizes 
the strong national interest in disputes being resolved in a forum 
other than the courts when both parties agree to do so. We firmly 
believe that this legislation and other efforts to undermine the FAA is 
bad public policy and a step in the wrong direction.
    Unfortunately, this debate is colored by anecdotes and 
misinformation perpetuated by high-profile trial attorneys who 
traditionally oppose any effort to bring balance to the personal injury 
playing field, and who give too little consideration to the harmful 
consequences on the long term care industry that follow from the high 
transaction costs of traditional litigation and the resulting financial 
drain on the system. In fact, Mr. Connor's testimony of October 2007 
before this same subcommittee inaccurately portrayed the manner in 
which arbitration agreements are presented to perspective residents and 
their families upon admission to the facility. While we agree that 
entering into a nursing facility or assisted living residence often is 
a time of uncertainty and apprehension, Mr. Connor's notion that family 
members are threatened into signing the arbitration agreement is simply 
untrue. As I stated earlier, AHCA/NCAL developed a model arbitration 
agreement that was provided to members which clearly states that there 
is a 30-day ``out clause'' and that declining to sign the form will not 
have an affect on admission to the facility.
    It is important for this Committee to recognize that the FAA does 
not inherently foster or sanction any disregard for traditional notions 
of fair play when it comes to entering an arbitration contract. The FAA 
simply requires that an arbitration agreement be enforced ``save upon 
such grounds as exist at law or in equity for the revocation of any 
contract.'' Numerous courts across this nation have not hesitated to 
invalidate nursing home arbitration agreements when they have found 
that a representative lacked authority to act for the resident, a 
resident lacked the capacity to enter the agreement, or that an 
arbitration agreement was otherwise unconscionable, either in the 
substance of its terms or in the way it was presented to and signed by 
the resident or the resident's representative.
    The Fairness in Nursing Home Arbitration Act of 2008 needlessly 
discriminates against long term care providers and more importantly the 
patients and residents in our nation's nursing facilities and assisted 
living residences by eliminating their federal right to agree to 
arbitrate future disputes. Pre-dispute arbitration agreements are a 
viable legal option for long term care consumers and providers, and 
their use should not be eliminated by misguided policies--nor should 
the consumer's choice to agree to arbitrate pre-dispute be denied as is 
the legislation would do. It is clear that if the legislation were to 
become law, even residents who voluntarily chose to submit to pre-
dispute arbitration would have that right to choose denied, a right 
that is not denied in any other consumer transaction.
    A May 1, 2008, letter to Congress signed by twenty business 
organizations including the Business RoundTable and the U.S. Chamber of 
Commerce echoes our concerns with this bill--and other legislative 
efforts to limit the use of arbitration. The letter states, ``Even 
though arbitration has been used to amicably resolve disputes for more 
than 80 years, those who wish to dismantle the arbitration system are 
attempting to effectively abolish all pre-dispute arbitration by using 
anecdotes and a handful of poorly designed or inaccurate studies to 
validate their unfounded claim that the system is broken.''
    Public sentiment is also opposed to eliminating the use of 
arbitration to resolve disputes. In fact, the U.S. Chamber of 
Commerce's Institute for Legal Reform recently conducted a national 
poll which found that ``given the choice, voters strongly prefer [82%] 
arbitration over litigation to resolve any serious dispute with a 
company.'' The bipartisan survey, which was released in April 2008, 
also concluded that ``voters strongly believe Congress should NOT 
remove arbitration agreements from the contracts consumers sign with 
companies providing goods and services (71%).''
    Like the vast majority of Americans, AHCA/NCAL believes that 
legislative proposals to limit arbitration and undermine the FAA is bad 
public policy. We strongly support the use of arbitration as a 
reasonable, intelligent option for both patients and providers to help 
assist in the resolution of legal disputes, and aggressively oppose 
efforts to diminish the use of arbitration by American businesses, 
especially those unfairly targeting long term care consumers and 
providers.
    Thank you for the opportunity to offer these comments on behalf of 
millions of professional, compassionate long term caregivers and the 
millions of frail, elderly, and disabled Americans they serve each day. 
I look forward to responding to your questions.

    Ms. Sanchez. Thank you for your testimony, Mr. Gadberry. We 
appreciate it.
    And I would now invite Mr. Connor to please give his 
testimony.

           TESTIMONY OF KENNETH L. CONNOR, ESQUIRE, 
             WILKES & McHUGH, P.A., WASHINGTON, DC

    Mr. Connor. Thank you, Madam Chairman and Ranking Member 
Cannon, Members of the Committee. I appreciate this opportunity 
to come and share some thoughts with you about this proposed 
bill.
    If you believe that accountability and responsibility run 
hand-in-hand, you ought to support this bill. If you believe 
that wrongdoers ought to be held fully accountable for the 
consequences of their actions and that innocent parties who are 
the victims of wrongdoing ought to be fully compensated for 
what they have suffered, then you ought to support this bill.
    The sad fact of the matter is that we have a crisis of care 
in long-term care facilities in this country, not withstanding 
what Mr. Gadberry has said. I have seen it up close and 
personal for almost 25 years. I have represented victims of 
abuse and neglect from Florida to California.
    And Mr. Cannon, I can only say that I would hope that the 
energy and antipathy that you have for abusive trial lawyers 
would be redirected to abusive nursing homes.
    I have seen pressure ulcers that were completely avoidable, 
that were as big as pie plates, that went all the way to the 
bone, that were so putrid and foul-smelling that when you 
walked down the hall, you could smell the resident before you 
could see him. I have seen residents who have suffered from 
malnutrition and dehydration. Their gaunt faces and hollow eyes 
were testament to the shortages of staff available in a 
facility because the owners of the facility made the decision 
to cut labor costs in an attempt to increase profit.
    The abuses that we see in long-term care facilities around 
this country are horrific, and they are only going to grow, due 
to the demographic and economic and cultural pressures that are 
coming to bear. The Chair has rightly pointed out that we have 
got a veritable ``senior tsunami'' coming with the graying of 
America and are rapidly approaching mass geriatric society, 
even as we have a reduced resource base available in the 
Medicare and Medicaid program, and even as we have shifted from 
a sanctity of life ethic in this country to a quality of life 
ethic in this country.
    Old people don't typically score very well under quality of 
life calculus; they don't perform well under functional 
capacity studies. And they are more and more vulnerable to 
exploitation, and will suffer as these pressures come to bear 
in the future.
    I think it is important to understand that historically the 
courts have been one of the key means of holding wrongdoers 
accountable and ensuring that they were required to compensate 
innocent victims for the consequences of their wrongdoing. What 
has happened in the long-term care industry is that having been 
faced with the high price of that kind of accountability, the 
long-term care industry has taken advantage of the elderly and 
their families at perhaps their most vulnerable point in time, 
which is when they bring their loved one for admission to a 
long-term care facility.
    It is a time that is fraught with tension and anxiety; 
emotions run high. The prospective resident is fearful of being 
placed in an institution. The family feels guilt and grief at 
the fact that they can't meet their needs.
    The families and residents are commonly presented with a 50 
to 60-page admissions packet. The arbitration agreement--the 
pre-dispute arbitration agreement--is sandwiched toward the 
end. It is rarely ever explained, or if explained, is not in 
terms unlike those Mr. Cannon used; it is to prevent having to 
involve greedy trial lawyers to save time when in fact, the 
purpose is to cover the flanks of abusive nursing homes and to 
limit their liability and minimize their exposure for their 
wrongdoing against the frailest and most vulnerable members of 
our society.
    I urge you with every fiber of my being to stop this 
inequitable and unjust practice. There is nothing wrong--in 
fact, I would encourage, as would the Chair, arbitration as an 
alternative dispute resolution once the dispute arises and the 
parties know what is at stake.
    I, for one, having practiced law for 35 years, and being a 
conservative Republican, continue to retain confidence in our 
fellow members of our society. I believe that the good sense 
and ordinary judgment of common, ordinary people who are 
members of our society is really quite excellent. They 
understand when someone has been wronged, and they understand 
how to assess and value that wrong, and they understand the 
importance of holding wrongdoers fully accountable for the 
consequences of their actions.
    Thank you, Madam Chair.
    [The prepared statement of Mr. Connor follows:]

                Prepared Statement of Kenneth L. Connor

    Madam Chairwoman, Ranking Member Cannon, and Members of the 
Subcommittee:
    I want to express my appreciation to you and to your colleagues and 
to Senator Martinez for taking the lead in sponsoring the ``Fairness in 
Nursing Home Arbitration Act of 2008.'' This legislation is vitally 
important to protect the rights of frail, vulnerable nursing home 
residents who have suffered abuse or neglect at the hands of their 
caregivers. The current system which allows for pre-dispute mandatory 
binding arbitration results in a gross miscarriage of justice to 
victims and their families and promotes irresponsible and reckless 
conduct on the part of providers who are not held fully accountable for 
the consequences of their wrongdoing.
    We have an unacknowledged crisis of care in this country when it 
comes to the institutionalized elderly. I know this because I have seen 
it first hand. For almost 25 years, I have represented victims of abuse 
and neglect in long term care institutions across America. All too 
often, the story is the same: avoidable pressure ulcers (bed sores) 
penetrating to the bone; wounds with dirty bandages that are infected 
and foul smelling; patients languishing in urine and feces for hours on 
end; hollow-eyed residents suffering from avoidable malnutrition, 
unable to ask for help because their tongues are parched and swollen 
from preventable dehydration; dirty catheters clogged with crystalline 
sediment and yellow-green urine in the bag; residents who are victims 
of sexual and physical abuse from caregivers; short-handed staff who 
are harried and overworked because their employers decided to increase 
profits by decreasing labor costs; ``charting parties'' where these 
same staff ``doctor'' charts to make it appear that care was given even 
though there was no time to give it; ``ghost aids'' or ``dummy aids'' 
who were never on the floor, but whose names appear on assignment 
sheets just in case state inspectors ask to see staffing records.
    These problems are not isolated. They are systemic and they are 
going to get worse. We are on the threshold of a veritable ``Senior 
Tsunami.'' America is graying and as Dr. Leon Kass has said, we are 
rapidly becoming a ``mass geriatric society.'' The over 85 age group is 
the fastest growing age group in America. Millions of Americans will 
need long term care, even as our Medicare and Medicaid resources are 
shrinking. Our society is rapidly embracing a ``quality of life'' ethic 
in the place of a sanctity of life ethic. But, old people do not score 
well using quality of life calculus and they perform poorly on 
functional capacity studies. They cost more to maintain than they 
produce and they are vulnerable to abuse and neglect by unscrupulous 
nursing home operators who are willing to put profits over people.
    Historically, victims of nursing home abuse and their families have 
been able to resort to the courts to secure justice. In recent years, 
however, nursing home operators have bypassed the courts and cleverly 
limited their liability for wrongdoing by requiring nursing home 
residents or their families to sign their rights away through the 
execution of agreements requiring pre-dispute binding mandatory 
arbitration. An admissions packet of 50-60 pages is often presented for 
review by the patient or their family. The briefest of explanations is 
offered and the patient or their representative is asked to sign on 
multiple pages. The agreement for pre-dispute binding mandatory 
arbitration is commonly sandwiched toward the end of the documents and 
is explained, if at all, in the briefest of terms and in the most 
soothing of tones. Prospective new residents frequently suffer from 
dementia, or are on medication, or are otherwise mentally compromised. 
Often they suffer from poor vision or illiteracy. Rarely do they have 
the capacity to understand the significant and complex documentation 
with which they are presented. Many times, the nursing home 
representative doesn't even understand the significance of the 
arbitration agreement they are asking the resident or their family 
member to sign. That, however, is inconsequential. The goal is to get 
the patient's or family member's signature or mark on the document. If 
the family balks, they are told that admission will be denied. That is 
not acceptable to most family members since the next nearest available 
nursing home is often miles away and it will be extremely difficult to 
visit their loved one on a regular basis. Equality of bargaining 
position between the nursing home and the resident or their family does 
not exist.
    The admissions process is stressful for the resident and their 
family. They don't have a clue about the problems that persist in the 
nursing home industry. Protecting their legal rights is the last thing 
on their radar screen. No lawyer is present to advise them. They don't 
expect to be confronted with a waiver of their legal rights. They just 
know that the family can no longer provide the care needed by their 
aging parent or grandparent and their local nursing home has assured 
them that it can do so. They need the nursing home's help and they need 
it now.
    The terms of the binding mandatory arbitration agreement are often 
as unconscionable as the circumstances under which the agreement is 
executed. There is no mutuality. The residents and their families 
typically aren't afforded an opportunity to negotiate the terms. The 
agreements are drawn by the nursing home's attorneys who craft the 
terms so as to favor the nursing home and disadvantage the residents. 
As to the proposed agreement, the resident or their family must ``take 
or leave it.'' The nursing home often retains the right to modify the 
contract, but that same right is not afforded to the resident or her 
family. The nursing home reserves the right to pursue a collection 
action in the courts against the resident or their family, but the 
resident is usually left with only the right to pursue any claims 
against the facility through arbitration.
    Discovery pursuant to the agreement is emasculated. The agreement 
typically imposes draconian limits on (1) the number of witnesses who 
can be deposed or called at the arbitration, (2) the number of experts 
who can be called, (3) the number of interrogatories, requests for 
admission and requests for production that can be filed, and (4) the 
length of time to be allotted for the arbitration hearing. These 
limitations do not permit the claimants to adequately present their 
case. The arbitrator or arbitral forum is typically selected by the 
nursing home and often the home (or the chain of which it is a part) 
provides repeat business for the decision maker. This is a process 
which hardly leads to a fair and just result for the resident who is a 
victim of abuse and neglect in a nursing home. Not surprisingly, 
therefore, arbitration awards are usually substantially lower than 
court awarded jury verdicts.
    Nursing home residents should not be required to check their rights 
at the door of the nursing home. Nevertheless, that is exactly what 
pre-dispute binding mandatory arbitration agreements do. By their 
terms, the residents and their families are typically required to waive 
their right to a jury trial, their right to attorney fees, their right 
to the full measure of their compensatory damages, and their right to 
punitive damages. The net effect is that residents are short-changed by 
the agreement and their caregivers are relieved of the consequences of 
their wrongdoing.
    In a just society, wrongdoers are held fully accountable for their 
conduct and innocent victims are compensated for the full measure of 
their loss. The failure to require such an accounting or to punish 
wrongdoers for their reckless conduct means that the wrongful conduct 
will multiply in the future. Congress should act swiftly and decisively 
to outlaw pre-dispute binding mandatory agreements in nursing home 
settings. Their continued use and approval means that victims of abuse 
and neglect in nursing homes will be abused yet again by the very 
people who were supposed to take care of them.

    Ms. Sanchez. Thank you, Mr. Connor.
    We appreciate all of your testimony. We are going to begin 
our round of questioning, and I am going to begin by 
recognizing myself first for 5 minutes of questions.
    Dr. Hall, I would like to start with you. In your written 
testimony, which I read last night, you discussed a very sad 
situation involving the death of Ruth Painter soon after she 
was admitted into a New Mexico nursing home. And based on your 
experience, I am curious to know, is the example of Ruth 
Painter common where an arbitration clause is included in the 
admission documents, the death of the nursing home resident is 
caused by staff negligence, and the family then successfully 
appeals to a court to declare the arbitration clause 
unenforceable? Is that the typical scenario?
    Dr. Hall. Well, I can't say that it is the typical 
scenario, but it is very clear that there is a great 
variability in how the courts look at these arbitration 
agreements, so that there is no uniform national standard. So 
it varies tremendously. But in point of fact, there is enough 
precedence to suggest that in many cases, the limitations put 
on individuals and their families with pre-dispute arbitration 
agreements severely limits their ability to get any redress 
whatsoever.
    Ms. Sanchez. Thank you, Dr. Hall.
    Ms. Stewart, I really again want to thank you for being 
here today and telling us your story. We have had other 
witnesses appear before the Subcommittee to tell us about their 
horror stories with mandatory binding arbitration, but none of 
them have had the experience that you have had with the death 
of a family member because of it, and I really think it shows 
an incredible degree of strength to come and testify.
    Now that you are aware of the arbitration clauses in 
nursing home contracts generally, have you spoken with other 
people, other families, and shared similar experiences with 
those--you know, who have had similar experiences with those 
types of clauses? Because I believe Mr. Gadberry said that 
stories like yours are the exception and not the rule. And so I 
am interested in knowing if you have had contact with other 
families who have had similar types of situations.
    Ms. Stewart. Well, as a matter of fact, I have. There was 
another patient in this same nursing home that had had some 
issues and had--the family members wanted to sue, and they 
found out also, in that same nursing home, that they had signed 
that same paper. So it does take place probably more frequently 
than we are willing to admit. And so there are other people, 
yes, that have had the same experience.
    Ms. Sanchez. Thank you, Ms. Stewart.
    Mr. Connor, do you think that stories like Ms. Stewart's 
are the exception rather than the rule?
    Mr. Connor. They are not the exception, and they are sadly 
the rule. And I would like to controvert, if I may, two points 
that Mr. Gadberry made. First of all, I think it is important 
to understand Federal Arbitration Act trumps State law. And as 
a practical matter, the provisions of State law that would 
provide greater protection for nursing home residents are often 
preempted by the Federal Arbitration Act and the provisions of 
the arbitration agreements that are entered into.
    Secondly, with respect to the so called ``30-day cooling 
off period,'' when people have an opportunity to rescind the 
agreement, the first time that most families learn that they or 
a member of their family signed an arbitration agreement is 
after a lawsuit has been filed and a motion to compel 
arbitration is filed by the defense. They----
    Ms. Sanchez. They don't typically discover it 30 days after 
signing----
    Mr. Connor. They do not. And they do not understand what 
they have signed, and that is by design, in my experience, on 
the part of the nursing homes. Again, if they view arbitration 
as such a great means of alternative dispute resolution, then 
they should embrace it after the dispute has arisen, not 
before. It is absolutely unconscionable the way it is handled 
now.
    Ms. Sanchez. Thank you, Mr. Connor.
    Mr. Gadberry, you indicated in your written statement, and 
also in your oral testimony, that public sentiment is opposed 
to eliminating the use of arbitration to resolve disputes, and 
I just want to draw your attention to a poll that the AARP 
conducted. They conducted a poll of Arkansas residents in 
January 2007 which found that 85 percent of respondents 
strongly support the right of nursing home residents and their 
families to take nursing homes to court for neglecting and 
abusing nursing home residents. And a more recent May 1, 2008 
Peter Hart Research Associates, Incorporated poll revealed that 
when given neutral information about arbitration, 66 percent of 
respondents disapproved of mandatory binding arbitration.
    So I just want to point that out because I think that, to 
say generally speaking that public sentiment is opposed to 
eliminating the use of arbitration, that may have been the 
results of polling that you did, but a with many statistics, 
the way the questions are framed and the way that information 
is given to the respondents, I think, affects their response to 
the polling question. So I just want to again reiterate that 
when given neutral information about arbitration, 66 percent of 
respondents disapprove of binding arbitration.
    My time has expired, so at this time I will recognize Chris 
Cannon for 5 minutes of questions.
    Mr. Cannon. Thank you, Madam Chair. I appreciate that.
    This is a complicated subject, and let me point out, Mr. 
Connor, that I actually don't have antipathy toward trial 
lawyers, but I really am concerned about how we use our 
resources appropriately. The purpose of this hearing is to try 
and figure out how we can do that, and it is a complicated 
issue. It is clear that there is much abuse in nursing homes, 
and you said that it is the rule, in fact, not just the 
exception.
    If that is the case, then our concerns are probably much 
deeper and greater. And of course you have Ms. Stewart----
    In fact, Ms. Stewart, your grandmother suffered this injury 
and the person who inflicted it upon her wasn't known. I 
suspect you couldn't even find out who had been the person that 
did it, right?
    Ms. Stewart. They never knew.
    Mr. Cannon. And how long after it happened could you tell--
obviously you wouldn't know the time it happened or you would 
know the person, but how long after it happened did your family 
discover that your grandmother was in pain?
    Ms. Stewart. Yes. My grandmother was only in the nursing 
home approximately 3 weeks when they actually--we discovered 
that there was something wrong with her leg, so in response to 
what he said, she didn't even make the 30-day period. She was 
there 3 weeks when they broke the leg.
    Mr. Cannon. Could it have been, like, in the first week and 
she suffered for 2 weeks?
    Ms. Stewart. Oh yes, at least. Because even on the 
documentation in the nurse's notes, no one, you know, even 
wrote up an incident that it happened.
    Mr. Cannon. She complained to you----
    Ms. Stewart. Yes.
    Mr. Cannon [continuing]. Or your family, so you knew that 
she was in pain----
    Ms. Stewart. Yes.
    Mr. Cannon [continuing]. She had been complaining to the 
nursing home, and they didn't keep track of her complaints.
    Ms. Stewart. Yes. She had already been complaining to the 
nursing home when we decided that something was wrong and we 
needed to take her to the hospital. And that is when we 
discovered it was fractured.
    Mr. Cannon. Did you have to work with the nursing home to 
get her to the hospital?
    Ms. Stewart. Oh no. I just told her they were going to take 
her to the hospital. I am a nurse. I knew she was going to go.
    Mr. Cannon. You put her in a wheelchair and just took her 
out to your car or something?
    Ms. Stewart. Oh no, no. I mean, I told the Administration 
that she needed to go and someone needs to release x-rays to 
see what was wrong. And that is when we found out it was broken 
in two places.
    Mr. Cannon. Were the x-rays done by the nursing home or 
were they done at the----
    Ms. Stewart. Oh no. At the hospital.
    Mr. Cannon. So you got her physically out of the hospital--
or out of the nursing home--and took her to a hospital?
    Ms. Stewart. To the hospital, and the hospital did the x-
ray, and that is when they found it was fractured.
    Mr. Cannon. And I take it, Mr. Connor, these are the kinds 
of--the failure of reporting an injury and letting a patient 
suffer for maybe two or 3 weeks with a painful injury--are the 
kinds of things that you are suggesting are the rule at the 
nursing home?
    Mr. Connor. I am not saying they are the rule; I am saying 
that the problems are systemic and pervasive. There are many 
nursing homes that provide good care, but there are many, many 
instances all over this country where instances of abuse and 
reckless conduct occur.
    The nursing homes that are providing good care don't need a 
pre-dispute arbitration agreement. That is inherently a system 
that is precooked and that is going to weigh favorably in terms 
of the outcome for the nursing home and against the resident.
    What I am suggesting simply is that in those instances, 
where nursing hoe residents suffer from abuse and neglect, 
there ought to be a level playing field through which they can 
fully recover for the injuries----
    Mr. Cannon. I understand that is your position. What I am 
wondering is if there is not a way that we can do something 
that creates a system that works better than just either 
opening the door for every trial lawyer and every minor 
complaint, but on the other hand closes the door to the kind of 
injuries that Ms. Stewart's grandmother suffered.
    You suggested something that I am actually quite interested 
in. You said that a quality nursing home doesn't need mandatory 
arbitration agreement.
    Mr. Connor. Pre-dispute. Pre-dispute.
    Mr. Cannon. Are there nursing homes that hold themselves 
out as not having, or do you think that the market would 
encourage people who--nursing homes--to come forward and say, 
``We take good care of people that come into our care, and 
therefore we don't need this,'' and advertise the fact that 
they give the kind of quality care that would avoid that?
    Mr. Connor. Well look, I think nursing homes ought to be 
willing to trust the members of their community to make 
judgments about whether or not----
    Mr. Cannon. The time is almost up, but I would really 
like--it seems to me that this would be a great way to get in 
the business, and that is to say, ``We don't do mandatory 
arbitration because we take good care.
    Mr. Connor. Well, I would certainly encourage that. But 
further, for those that wish to use arbitration as an 
alternative form of dispute resolution, I think it is a viable 
alternative. It ought to be used in situations after the 
dispute arises so that people can----
    Mr. Cannon. Let me make some sense, because you do 
alternative dispute resolution----
    Mr. Connor. Sure.
    Mr. Cannon [continuing]. You get the solution much faster. 
So in the case of Ms. Stewart, her family may have said, ``You 
know, look, Grandma is old, and if she is going to have some 
benefit we probably ought to do it quickly.''
    And what was inflicted upon her is so clear, so you are 
suggesting that they worked.
    Mr. Connor. Yes. There are advantages to arbitration. The 
inequity here is in deceiving the prospective resident and 
their family about what is at stake at the very beginning, and 
before a dispute arises.
    Mr. Cannon. Madam Chair, if you would indulge me in just 
one more question, are you aware of any nursing homes that 
would actually promote the idea of not using pre-dispute 
mandatory arbitration because they promote quality of care that 
means it is not necessary?
    Mr. Connor. I am not aware of any that have that view, and 
in fact, I think that they feel it is to their economic 
advantage to continue to use this policy and to fall back on 
the Federal policy embodied in the Federal Arbitration Act, and 
to use that to their advantage and to the disadvantage of their 
frail, vulnerable residents.
    Mr. Cannon. Thank you, Madam Chair, for your indulgence, 
and I yield back.
    Ms. Sanchez. The gentleman yields back. I would recognize 
the gentleman from Georgia for 5 minutes for his questions.
    Mr. Johnson. Thank you, Madam Chair.
    Ms. Stewart, why did you agree to settle your dispute with 
the nursing home rather than continue to fight the battle in 
court?
    Ms. Stewart. Well, I stated earlier they said they would 
take it all the way to the Supreme Court if we didn't settle, 
so we went back--to dispute, and my attorney--if you would like 
to ask any things that are more legal he would answer them for 
me. But it is because they just refused to negotiate with us.
    Mr. Johnson. Did it appear to your lawyer that if it went 
all the way through the court system that you would lose----
    Ms. Stewart. Lose.
    Mr. Johnson [continuing]. If forced into the arbitration 
process?
    Ms. Stewart. Yes. It was pretty much understood that the 
chances of winning were slim, so that was sort of one of the 
reasons also.
    Mr. Johnson. All right. And in your opinion, did you take 
less in settlement than you felt was fair?
    Ms. Stewart. Well yes, because my grandmother was still 
active. You know, I think sometimes when people say they are 90 
years old you think that they are not responsible, but my 
grandmother was actually still cooking. And so when we took her 
to the nursing home, and within 3 weeks they took her from a 
viable adult to amputating her leg. So I think we shouldn't 
have had a one size fit all sort of litigation here.
    Mr. Johnson. Okay. Well let me ask Mr. Connor the question 
this way: How does mandatory dispute resolution and arbitration 
of these nursing homes--how does that force settlements in 
terms of what Ms. Stewart went through?
    Mr. Connor. Mr. Johnson, the reality of pre-dispute binding 
mandatory arbitration is that the awards are going to come at a 
tremendous discount to what juries ordinarily would award. Our 
experience has been, typically, that these awards are about 10 
percent of what would be recoverable by a jury. Bringing 
nursing home cases often can cost several hundreds of thousands 
of dollars. They are very expensive, they are very complex, and 
they are often very protracted.
    And our experience has been that jurors are mortified and 
horrified at what these people suffer at the hands of the 
people that they are supposed to be caring for. And oftentimes 
they will award punitive damages in an attempt to send a 
message to the nursing home that it is going to cost more to do 
business the wrong way than it does to do it the right way. 
None of that takes place in the arbitration setting.
    Mr. Johnson. All right. Thank you.
    And this arbitration setting, Mr. Gadberry, is pretty much 
held in private, correct?
    Mr. Gadberry. That is one of the concepts with arbitration, 
that----
    Mr. Johnson. It is a secret process?
    Mr. Gadberry. No. It is not a secret process----
    Mr. Johnson. Well, there are no published calendars so that 
the public can come in and observe a public trial, if you will.
    Mr. Gadberry. Well, like Mr. Connor, I have tried lawsuits 
and been involved in litigation, and a lot of times that is the 
exception that a case goes to trial----
    Mr. Johnson. Well, no, no, no. I am saying that in an 
arbitration proceeding there is not going to be a published 
trial calendar, and the public doesn't have notice that this 
may be something that I would like to come and take a look at, 
just to see how the system works.
    Mr. Gadberry. There is not a public docket that would be 
available. However, nursing homes are one of the most highly 
regulated professions in the country----
    Mr. Johnson. And I understand that, and we are talking 
about, dispute that arises that has to go and be settled, 
either by judge and jury or by an arbitration panelist or 
panel. And this arbitrator is pretty much selected by the 
nursing home industry, correct?
    Mr. Gadberry. In our form, we offered up several different 
alternatives----
    Mr. Johnson. And those on your preferred list, or actually 
your list that limits the arbitration groups that can hear the 
arbitration case, those groups depend on the nursing home 
industry for the referrals, and the nursing home industry pays 
them. Isn't that correct?
    Mr. Gadberry. There are fees associated with arbitration 
just like anything else.
    Mr. Johnson. And they are paid by the----
    Mr. Gadberry [continuing]. For the service.
    Mr. Johnson. They are paid for the service, and they are 
paid by the nursing homes and they would not have that stream 
of income were it not for the referrals from the nursing home 
industry. Isn't that correct?
    Mr. Gadberry. That is a broad brush, because there are a 
lot of services to choose from, and to use, and----
    Mr. Johnson. Well, you are typically limited to only two, 
maybe three forums in the arbitration agreement, correct?
    Mr. Gadberry. They could choose whoever they would like to 
have----
    Mr. Johnson. Within the context of the selectees that have 
already been decided by the nursing home. But now let me ask 
you something: In these nursing home proceedings, the rules of 
evidence don't apply, necessarily?
    Mr. Gadberry. It depends on the service that you use. The 
one we recommend----
    Mr. Johnson. It is not mandatory.
    Mr. Gadberry. The one we recommend uses--has procedures, 
has notice provisions, and has evidentiary provisions. There 
are also rules that go into great detail about discovery----
    Mr. Johnson. But that is not required--is it?
    Mr. Gadberry. The most important thing about arbitration is 
that the parties are supposed to cooperate and exchange stock, 
and then if there is a need----
    Mr. Johnson. If it doesn't happen and the arbitrator 
perhaps may not even be an attorney, it certainly has no 
judicial code of ethics to abide by, does he or she?
    Mr. Gadberry. Most arbitration services require their 
arbiters to sign an agreement that they will comply with their 
arbitration rules, but more importantly they have to comply 
with the party's rules. If, like, the AHCA arbitration 
provision has language in it that says that the State law--
there is no limitation on recovery or the remedies that are 
available in litigation.
    Mr. Johnson. And most of the time----
    Ms. Sanchez. The time of the gentleman has expired. I am 
sorry.
    Mr. Johnson. Thank you, Madam Chair.
    Ms. Sanchez. Perhaps we will do a second round of questions 
if there is interest in further questions.
    At this time I would like to recognize the gentlewoman from 
California, Zoe Lofgren, for 5 minutes of questions.
    Ms. Lofgren. Thank you, Madam Chairwoman. I am glad that 
this hearing is being held; I think it is a very important 
issue. As America ages, this issue of quality of nursing home 
care is more and more on the minds of Americans, and I actually 
hear about it a lot from people who have older parents and who 
worry about whether they are going to be treated properly or 
not. And sometimes they are not.
    You know, the testimony, Dr. Hall, that you provided to us 
indicates--on page seven you indicate that decisions and facts 
about the dispute typically are confidential, an issue that Mr. 
Gadberry has just given a contrary point of view on. Can you 
tell me what you base that testimony upon?
    Dr. Hall. Well, in the surveys that AARP has done, and 
speaking as the representative of AARP for our 40 million 
members, it is pretty clear that all of the data, all of the 
determinations, all of the rationale is very rarely available 
to families without recourse to some kind of very expensive 
legal help, which very, very, very few of them can afford.
    Ms. Lofgren. You know, I think there is value, oftentimes, 
in having some public information out there, and these--you 
know, if people know things, they can make decisions 
accordingly. So I think, you know, that is a serious downside 
for arbitration. I am not opposed to arbitration in every case. 
There is a real value sometimes for arbitration quickly getting 
to a solution, but usually it is the arbitrations where the 
parties agree to arbitrate.
    And I am troubled, and I am glad I am a co-sponsor of the 
bill, that, you know, to do this, especially for people who 
are, you know, they wouldn't be going into the facility if they 
weren't in trouble in some way--there is an inherent power 
differential there that is disadvantageous to the nursing home 
resident. And I just think, you know, understanding that there 
can be value in arbitration, that would be served, you know, if 
there were an incident.
    And I also think, you know, people--it is expensive to 
bring lawsuits, and if you don't win you have to pay for it. 
And so there really is a disincentive to proceed in a frivolous 
manner. And I, you know, I think there are some just built-in 
protections in our system.
    So I think certainly, Mr. Connor, your testimony is 
riveting. I no longer have either one of my parents, but I 
was--my father-in-law is 90 years old, and the saying, ``It is 
not how old you are, but how you are old,'' couldn't be more 
true about him. I mean, he is just tremendously fit; he works 
half-time. I mean, he is just awesome.
    But, you know, there are many people his age who aren't so 
fortunate, and to think that you would have that kind of 
experience is really chilling. And certainly I have had family 
members in facilities that were excellent, and I don't want to 
over-par the nursing home industry. I mean, obviously we need 
that sector of our country to be well run, but I think that for 
those who would not really adequately care for a vulnerable 
older person who is so dependant on the care, I mean, there has 
to be a deterrent from that.
    And yes, there are regulations, but, you know, I earlier 
this year looked at, really, at the request of many of my 
constituents, some additional nursing home provisions because 
of problems. And the regulatory scheme, although well intended, 
in many cases in various States is not working that well.
    And I don't know, Mr. Connor, if you would have a comment 
on that, but in some of the States where we have looked, I 
mean, it is not really very tight.
    Mr. Connor. Well in fact, Consumer Reports did a study a 
couple years ago and reported that since their previous study, 
they had found that nursing home care declined, that 
inspections were down, that citations were down, that the 
gravity of the citations were down, that the survey system was 
being relaxed for the benefit of the homes, that in many 
instances this relaxation stemmed from political motivation. 
And the sad reality is--and I think we have to keep in mind--
that human nature is such that if wrongdoers aren't held fully 
accountable for the consequences of their actions, they are 
likely to repeat it.
    And the problem is that when you start out with somebody 
who is frail and vulnerable in the beginning, the magnitude of 
the damages they suffer escalate very, very quickly. And I 
promise you that if these injuries and damages were to be 
manifest at places like Guantanamo or Abu Ghraib, there would 
be no end----
    Ms. Lofgren. Yes.
    Mr. Connor [continuing]. To the congressional hearings or 
the headlines that would be covering that.
    Ms. Lofgren. My time has expired. Thank you.
    Ms. Sanchez. The time of the gentlewoman has expired, but I 
will grant the gentlelady, under unanimous consent, one 
additional minute for questions if she would be so kind to 
yield it----
    Ms. Lofgren. Oh no, I am fine. This is very helpful.
    I will yield it to you. Yes, I will do that. I was a little 
slow on the uptake there.
    Ms. Sanchez. Thank you. I just have one final question that 
I want to close the hearing with, and I am going to pose it to 
all of our witnesses.
    What is so wrong with saying to the consumer or the 
potential resident or patient, ``If you want to choose to 
arbitrate--if something should happen to you in your care and 
you should want to choose to arbitrate, you can choose to do 
that at a later time, but we are not going to force you to 
arbitrate should something arise regarding your standard of 
care while you are in the facility''?
    Dr. Hall, do you think that that is----
    Dr. Hall. Well, we are talking about----
    Ms. Sanchez [continuing]. That that is an unreasonable 
thing?
    Dr. Hall [continuing]. Post-dispute arbitration that is 
willingly entered into by the patient and the family and the 
facility. Well, you know, our position there is that if people 
can become informed and still have not given up the right of 
legal redress, of course that is an option and it might work in 
many circumstances. It is really the pre-dispute binding 
arbitration that bothers us and bothers the organization.
    It is indescribable to--the situation that people are in 
when they make this decision. There are many perversities. The 
Medicare system, in an acute hospital, really insists that 
people leave the hospital when there is no legitimate acute 
medical reason why they should be there. This often comes as a 
surprise to patients, even those who are completely lucid, and 
often isn't the situation.
    And this entire sort of decision has to be made in 24 hours 
in a situation that none of us would tolerate in any other 
venue that I am aware of. So that is what makes this special 
and why, in particular, the pre-dispute arbitration binding 
clauses really bother us a great deal.
    Ms. Sanchez. Thank you, Dr. Hall.
    Ms. Stewart, you were forced into mandatory binding 
arbitration. Would you have preferred, after a situation arose 
with your grandmother, to have the choice whether or not you 
wanted to pursue litigation or arbitration?
    Ms. Stewart. Yes, and I think that is the problem I have 
with it. I mean, I don't think arbitration is wrong. It is just 
the way of the deception that they put the paper in there and 
let us sign it, and then didn't tell us.
    And I also told the nurse, because I am a nurse, I told the 
nurse on duty, ``You know, this was an accident until they 
covered it up; then it became a crime.'' And she looked at me 
as thought she had seen a ghost because, you know, maybe the 
person that did break her leg didn't mean to do it, but they 
put her back to bed and did nothing with it, then the crime was 
committed.
    So I have no trouble with the arbitration. It is just that 
you put papers--we left my grandmother's, she had dentures, two 
pairs of shoes, three gowns, and then arbitration, in the same 
list--they were listing her clothes and possessions, and 
something as important as an arbitration agreement along with 
it. So I just think that that is more deception which, in the 
medical community, it just boggles my mind as a nurse that I 
would give you a medication and deceive you and make you think 
that it was one medicine, and I was giving you something else. 
I think the deception is what bothers me.
    Ms. Sanchez. Thank you, Ms. Stewart.
    Mr. Gadberry, what is the problem? You are such an ardent 
supporter of arbitration and it is such a great thing. Why not 
let residents choose whether or not they want to arbitrate if 
they think it will save them time and money and effort? Why not 
let them make an informed choice?
    Mr. Gadberry. They have that opportunity, and if--you know, 
I can't tell you that all of AHCA's members or all nursing home 
facilities follow the concept contained in the arbitration 
provisions that we have developed as a model. But, you know, 
the Supreme Court, they said, ``We agree with Congress, that 
when they enacted this law, it had the needs of the consumers 
as well as others in mind.'' So not just business was intended 
back in 1924 when the Federal Arbitration Act was created.
    What we are doing with this bill is, you are saying that 
there will be no pre-dispute arbitration----
    Ms. Sanchez. But it doesn't preclude arbitration.
    Mr. Gadberry. There is pre-dispute arbitration in all other 
consumer contexts--in credit cards, you have had hearings on 
that, on mortgage loans, though, on banking agreements you have 
those type of pre-dispute arbitration agreements in place.
    Ms. Sanchez. But you don't agree with Dr. Hall, that this 
is perhaps a unique case where you have to make quick decisions 
or forego the opportunity to have certain, and oftentimes the 
arbitration agreement--consumers aren't even aware that they 
are there, and they are worried about their health?
    Mr. Gadberry. Yes. I would love to respond to that.
    Chairwoman Sanchez, I have a grandmother in a nursing 
facility, and my parents went through the process of placing 
her. And it is a process; it doesn't usually happen overnight. 
You don't show up to a nursing home like you show up to an 
emergency room in an ambulance with the siren and the lights 
flashing. It is a process.
    Generally, most nursing facilities will allow you, for 
coming to visit and looking for a facility, will let you look 
at the packet and may even give you a copy to take home. So 
they have the opportunity to look at the packet.
    One of the things that was said today is that an admissions 
packet is about 50 pages long. I want your help. I am asking 
for your help there. One of the reasons the admissions packet 
is so long is that the Federal regulations and State 
regulations require all sorts of disclosures involving Medicare 
and Medicaid.
    And one of the things that is interesting--Medicare and 
Medicaid are so complex, and I beg for your help there for 
nursing home residents. Medicare and Medicaid Part A, Part B, 
Part D--there are all other provisions in there--they have to 
be explained and signed off by the family, responsible party of 
the patient, or the patient themselves in that process.
    Ms. Sanchez. Your point is well taken, although I will say, 
however, there is generally no explanation given of the 
mandatory binding arbitration agreements that are slipped into 
these very long contracts, and that being the difference 
between those two.
    Mr. Gadberry. If I may respond, they are not generally 
slipped in. In our recommendations to the nursing facilities, 
to our membership, is that you set up a process and a policy 
where they are explained to the membership.
    Ms. Sanchez. But the recommendations that you make aren't 
binding upon your membership. They don't have to follow them. 
They can throw them out the window if they----
    Mr. Gadberry [continuing]. Of the association are made up 
of members that are nursing facilities, and that leadership 
directed us to come up with a reasonable approach, and that is 
what we did.
    Ms. Sanchez. But they are not bound by the recommended 
arbitrations clauses.
    Mr. Gadberry. I can give no assurance that they are going 
to be bound by that----
    Ms. Sanchez. Thank you.
    Mr. Connor, what is wrong with allowing the resident to 
choose whether or not they want to arbitrate if a dispute 
arises?
    Mr. Connor. Nothing is wrong with it after the dispute has 
arisen. Congress passed the Omnibus Budget Reconciliation Act 
in 1997, and rules were adopted pursuant thereto aimed at 
protecting residents' rights. Congress recognized that among 
all of the cohorts in our society, this one is very vulnerable 
and is in special need of protection.
    In any other setting, if someone were to prey upon a frail, 
weak, vulnerable person whose eyes were dim and whose hearing 
was bad, and whose competency was in question, and who might be 
on medication that impaired their judgment, and deprive them of 
their money or substantial legal rights, we would be 
prosecuting. But thanks to the shelter of the Federal 
Arbitration Act and the case law that has been construing that 
act, we are allowing nursing homes pre-dispute to take 
advantage of the frailest and weakest members of our society. 
It is an outrage, and Congress ought not to permit that 
practice to exist anymore.
    Ms. Sanchez. Thank you, Mr. Connor.
    I would recognize Chris Cannon for additional questions.
    Mr. Cannon?
    Mr. Cannon. Thank you, Madam Chair.
    This is a complex issue, and I think, Mr. Gadberry, you 
probably haven't had an opportunity to actually respond to some 
of the issues that have been thrown in your direction. Would 
you mind--I know there are some things you would like to talk 
about--would you also mind talking about Federal preemption and 
how that works in your contract?
    Mr. Gadberry. Well, the Federal Arbitration Act, that is 
its full purpose is to seek out or prevent States from enacting 
laws that discourage arbitration. What the Federal Arbitration 
Act has done in certain States that have restrictions or 
provisions that discourage arbitration, it prevents them. Not 
all States have those.
    In fact, most States have a general arbitration provision 
that is very similar to the Federal Arbitration, which says 
that an agreement will be construed based on the contract law 
of that State. And that occurs right now. The Federal 
Arbitration Act only preempts in situations, laws that States 
have passed that discourage arbitration.
    The States themselves still control what the enforceability 
of the Arbitration Act. And what we are setting up here is a 
provision under the Federal Arbitration Act that targets a 
specific industry and discourages use of pre-dispute 
arbitration, whenever they are encouraged everywhere else.
    That, I think, is one of the main things I wanted to say. 
Didn't get a correct chance to say it----
    Mr. Cannon. Thank you.
    Dr. Hall, it would seem to me that AARP has gone through a 
process, because you talked about the conclusions. In that 
process, have you considered the costs of litigation, vs. 
alternative ways of helping take care of the people Mr. Connor 
calls the most vulnerable in our society?
    Dr. Hall. Absolutely. And we are very concerned about it 
now, and even more concerned for the future. It is one of the 
important challenges to our generation, to begin to solve this 
problem for the next 50 years.
    We--on the backs of the nursing home residents' families. 
They shouldn't be victimized. There are other approaches to 
reducing the cost of long-term care, and it doesn't have to be 
entirely dependent on pre-dispute arbitration contracts.
    Mr. Cannon. Thank you. I know that my staff would like to 
work with you on those alternatives. This is a serious problem.
    Dr. Hall. Yes.
    Mr. Cannon. I think the--and maybe, Mr. Connor, you would 
like to respond to this, which we might have is that you think 
that lawyers are going to come in and protect the most 
vulnerable when in fact, what they will do is come in and take 
the most lucrative cases and that provides a motivation to 
nursing homes to not allow processes----
    But I don't see a system that actually helps nursing homes 
avoid or develop practices that would eliminate problems that 
are going to result in lawsuits.
    Mr. Connor. I think, Congressman Cannon, if you adopt the--
arbitration policy, to the extent that there is a benefit to 
those who suffer--and who have lower case values----
    The reality is, lawyers are business people too, and they 
simply, from an economic feasibility standpoint, can't handle a 
case that is not likely to yield back a return to the client 
and to the lawyer who represents him.
    Now, there would be nothing that would prevent people from 
being presented in----
    Mr. Cannon. Sure, except that what you are going to get is 
a heavy cost to a system that is going to have to be borne by 
Dr. Hall's members.
    Mr. Connor. I don't think the cost----
    Mr. Cannon. Pardon me.
    Mr. Connor. Yes, sir.
    Mr. Cannon. Let me just ask Mr. Gadberry, because at this 
point it seems to me that representing not just as a lawyer 
here, but representing the industry, there have to be attempts 
of people looking at ways to help avoid the kind of problems 
that Ms. Stewart is talking about. That is, you have to have a 
group of people that are looking at this and saying, ``What can 
we do?''
    In the first place, you have got an information system that 
we didn't have 10 years ago. The Internet provides a great deal 
of information. Secondly, there are interests that your people 
have in promoting the understanding of arbitration or dispute 
resolution, and if that becomes a competitive issue, all the 
better for people.
    In the third place, you know, Ms. Stewart could have, 
depending upon her grandmother's status, you know, if you have 
got a robust person, you don't want to be spying on them, but 
if you have got a person who is incapable of turning herself, 
you could have a camera in the room and the family could watch. 
Are you, as an industry, looking at those kinds of issues, that 
help you guys figure out how to take care of people who range 
from robust to incapable?
    Mr. Gadberry. Absolutely. The nursing home profession is 
made up of people. It is not like a production line or anything 
else where you can go fix something. You have to train people, 
and you have to count on people. And when people fail, bad 
things happen. And I can't help but think that if it is as if 
Ms. Stewart said, then there are multiple failures that 
occurred.
    The regulations already have requirements that you report 
injuries of unknown occurrence. There regulations are already 
there, and it should have been reported. If it wasn't, then 
there was somewhere along the way a failure--a human failure--
to make that report.
    Second, there are things that the association has done 
through--with our governmental partners to try to improve care. 
Finally, you are right about the information out there and the 
transparency that is so much better than it was many, many 
years ago.
    In my State, we have what is called a quality reporting 
system. It is a very detailed reporting system that ranks, it 
puts up the survey history, not only health, but life, and life 
safety code history for that facility. It lists whenever 
ownership changes so you know when there are things going on 
with the corporate ownership. It also keeps running track of 
how the performance of the facility has been in the past, and 
if there has been bad performance in the past it is listed, but 
it also lists if you have had zero deficiencies.
    There is also Nursing Home Compare, which is a Medicare 
site, and that site is something relatively new in that it 
lists, similarly, all the deficiencies, the location of the 
facility. But more importantly, recently they started putting 
staffing time periods and amount of staffing that is being put 
in place by the facility. That is one of the most important 
tools, is how many human beings we have out there taking care 
of our patients.
    And we are so far where we were back before OBR 87 went 
into effect. And when OBR 87 went into effect it was a whole 
new ballgame. Things have changed, and things are continuing to 
improve, and our association is improving and embracing, trying 
to get to quality profession.
    Ms. Sanchez. The time of the gentleman has expired----
    Mr. Cannon. Would the Chair indulge me in one additional 
question?
    Ms. Sanchez. Very briefly, one additional question.
    Mr. Cannon. Thank you.
    It just seems to me, Mr. Gadberry and Dr. Hall, that you 
are the two groups--and doing it outside of the legislative 
context may actually be much more appropriate. Is that 
something you have done or would be willing to do, Dr. Hall, 
and then Mr. Gadberry?
    Mr. Gadberry [continuing]. We work together as much as we 
can. And there are times when we have to agree to disagree, but 
they are our friends, and we try to work together for the best 
interests of the frail and elderly of our Nation.
    Dr. Hall. AARP's position is very clear. We are interested 
in quality care for our members and for all older adults in the 
United States. When that quality of care is compromised, we all 
secondarily think that there has to be access to the court 
system, period. We are always willing and go out of our way to 
talk to every agency and individual who wants to participate in 
this dialogue.
    Ms. Sanchez. The time of the gentleman has expired. I will 
recognize myself for 5 minutes, although I don't expect using 
the entire 5 minutes.
    Just one last question, and this is for Mr. Connor: 
Supporters of mandatory binding arbitration agreements contend 
that they are a defense against litigation, and therefore they 
keep costs down for them, which they ultimately pass down to 
consumers, and in this case, residents. How neutral are 
mandatory arbitration agreements if such clauses are seen as a 
defense to lawsuit?
    Mr. Connor. Well, I would have to take issue with the 
premise, which is that arbitration is necessarily cheaper than 
litigation. The filing fees typically are substantially 
greater, and Public Citizen has done a fine job in outlining 
those costs.
    The real reason that these are used in lieu of litigation 
on the part of the nursing home is not to minimize costs. It is 
to minimize exposure for liability. It is to minimize their 
accountability. It is to reduce the awards that will be levied 
against them by a cross-section of the community who hears the 
evidence.
    And as an alternative to that, their preference is to have 
a go-to service or provider that they provide repeat business 
to, whom they know is likely to make an award for the same 
injuries that is dramatically greater than a jury of their 
peers would. That is what pre-----
    Ms. Sanchez. So it is cheaper for the nursing home that has 
not given the standard of care if the award is, in arbitration, 
it is a lower amount that is awarded to a family than a 
comparable court case. Is that correct?
    Mr. Connor. That is exactly right. It is----
    Ms. Sanchez. When they say it is cheaper, they mean it is 
cheaper for the person that is doing the wrongdoing.
    Mr. Connor. That is right, but it is at the cost to the 
resident who suffers horribly.
    Ms. Sanchez. So you would agree with Dr. Hall's assessment 
that there needs to be a way to, perhaps, to increase the 
number of facilities and make it cost effective, but not on the 
backs of victims, who have suffered at the hands of the people 
who were----
    Mr. Connor. There is nothing wrong with making a profit. 
What is wrong is doing it on the back of innocent victims for 
whom you are supposed to be caring.
    Ms. Sanchez. Thank you.
    And I will yield back the balance of my time. I want to 
again thank the witnesses for their participation in our 
hearing today.
    Without objection, Members will have 5 legislative days to 
submit any additional written questions, which we are going to 
forward to the witnesses and ask that you answer as promptly as 
you can so that they can be made a part of the record. And 
without objection, the record will remain open for 5 
legislative days for the submission of any additional material.
    Again, I want to thank all of our panelists for their time 
and patience, and this hearing on the Subcommittee on 
commercial and administrative law is now adjourned.
    [Whereupon, at 3:36 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

      Prepared Statement of the American Association of Homes and 
                     Services for the Aging (AAHSA)

    The American Association of Homes and Services for the Aging 
(AAHSA) appreciates this opportunity to submit a statement for the 
record on H.R. 6128, which would prohibit nursing homes and assisted 
living facilities from asking residents to sign a pre-dispute 
arbitration agreement, even if the arbitration agreement is not 
required for admission.
    AAHSA members help millions of individuals and their families every 
day through mission-driven, not-for-profit organizations dedicated to 
providing the services that people need, when they need them, in the 
place they call home. Our 5,800 member organizations, many of which 
have served their communities for generations, offer the continuum of 
aging services: adult day services, home health, community services, 
senior housing, assisted living residences, continuing care retirement 
communities and nursing homes. AAHSA's commitment is to create the 
future of aging services through quality people can trust.
    Unfortunately, high quality services do not protect even the best 
long-term care providers from lawsuits that may have little merit. 
Litigation against long-term care providers has become a lucrative sub-
specialty among some in the legal profession. Arbitration provides a 
timely and cost-effective alternative for both providers and consumers 
to resolve differences in a fair, reasonable and expeditious manner.
    AAHSA opposes H.R. 6126 because a prohibition on pre-dispute 
arbitration agreements is unnecessary to protect consumers from unfair 
coercion. It is not unusual for not-for-profit nursing homes, assisted 
living, and continuing care retirement communities to use arbitration 
agreements, in accordance with the Federal Arbitration Act and the laws 
of the states in which facilities are located. Properly structured, 
these agreements can give both providers and consumers an expeditious 
alternative to long and costly lawsuits. Federal legislation 
invalidating pre-dispute arbitration agreements in long-term care 
facilities is unnecessary because the states have already developed 
common-sense protections. These protections form the basis of 
recommendations AAHSA has made to its own members.
    First, we recommend to our members that signing an arbitration 
agreement should not be a condition of admission to a nursing home or 
other long-term care facility. State courts have often found 
arbitration agreements to be unconscionable if admission to a facility 
was predicated on signing an agreement. It should be noted, however, 
that the Centers for Medicare and Medicaid Services (CMS) do not 
prohibit arbitration agreements as a condition of admission for 
Medicare patients. CMS leaves it up to the states to determine if they 
will accept mandatory arbitration in Medicaid admissions. We believe 
most of our members do not require arbitration agreements as a 
condition of admission.
    In addition, many agreements have a rescission period, another 
practice AAHSA recommends to its members. This clause gives consumers a 
chance to reconsider and cancel their agreement to arbitrate.
    We also recommend to our members, based on case law, that 
arbitration agreements should not limit a resident's rights and 
remedies under law, other than to specify the forum and procedures for 
dispute resolution. Most if not all states that have addressed this 
issue have found limitations on rights and remedies to be a trigger for 
determining an arbitration agreement was unconscionable. The more 
onerous the contract, the less likely it has been to be enforced under 
existing law and practice. Consequently, most long-term care providers 
do not draw up arbitration agreements that conflict with consumers' 
rights.
    We do not see a need for legislation specifically targeting long 
term care. The high rate of litigation over arbitration agreements in 
this field means acceptable parameters defining substantive and 
procedural requirements for valid arbitration agreements are more 
clearly defined in long-term care than in other areas. Residents or 
their representatives have had significant success in state courts and 
this success is visible in the way providers draft their agreements. 
Among AAHSA's membership, most but not all residents sign arbitration 
agreements that are offered at the time of admission, and most disputes 
are settled regardless of whether there is an arbitration requirement 
or not.
    Quality of care is not determined by the forum chosen for 
resolution of whatever disputes may arise between providers and 
consumers. On behalf of both our members and the residents they serve, 
we urge the Senate not to foreclose recourse to agreements that can 
expedite the resolution of disputes for all parties and prevent 
unnecessary expense that takes resources away from resident services.

                                

 Response to Post-Hearing Questions from William J. Hall, M.D., AARP, 
                             Washington, DC











                                

    Response to Post-Hearing Questions from Linda Stewart, RN, MBA, 
                              Houston, TX





                                

  Response to Post-Hearing Questions from Gavin J. Gadberry, Esquire, 
     Underwood, Wilson, Berry, Stein and Johnson, PC, Amarillo, TX

















                                

  Response to Post-Hearing Questions from Kenneth L. Connor, Esquire, 
                 Wilkes & McHugh, P.A., Washington, DC