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