Nursing Home Contracts: Clauses to Review Before You Sign

The admissions coordinator slides a thick stack of papers across the desk. Your parent is being discharged from the hospital in 48 hours. The nursing home has a bed available right now. The pressure to sign everything and deal with the details later is enormous.

This is exactly how families end up personally liable for tens of thousands of dollars in nursing home costs they never agreed to pay. The federal Nursing Home Reform Act (OBRA 1987) gives residents and families specific protections — but those protections only work if you know what to look for before you sign.

The Responsible Party Clause

This is the single most dangerous provision in any nursing home admission agreement. Here's how it works:

The contract asks you to sign as the "responsible party" for your parent's care. The language sounds administrative — someone needs to be the contact person, right? But buried in the fine print, "responsible party" often means "financially liable party." If your parent's savings run out or Medicaid hasn't kicked in yet, the facility will send the bills to you personally.

What federal law actually says: Under 42 CFR § 483.15(a)(3), a nursing home that participates in Medicare or Medicaid cannot require a third party to guarantee payment as a condition of admission. They can require you to sign as a representative who will help manage your parent's finances and apply for benefits on their behalf — but they cannot make you personally responsible for the bill.

What to do: Cross out any language that makes you a "guarantor" or creates personal financial liability. Write in "signing as representative only, not as guarantor" next to your signature. If the facility refuses to admit your parent without a personal guarantee, that's a federal violation — document it and contact your state's long-term care ombudsman.

Pre-Dispute Arbitration Agreements

Many nursing home contracts include a binding arbitration clause, sometimes as a separate document stapled to the back of the admission packet. By signing it, you waive your right (and your parent's right) to sue the facility in court — even for neglect, abuse, or wrongful death. Instead, disputes go to a private arbitrator, often one with financial ties to the nursing home industry.

What the rules say: CMS issued a final rule in 2019 prohibiting facilities from requiring arbitration as a condition of admission. The facility can ask you to agree to arbitration, but it must be voluntary and clearly presented as optional. If arbitration language is embedded in the main admission agreement rather than presented as a separate, clearly optional document, that's a compliance problem.

What to do: Decline the arbitration agreement. Simply don't sign it. If the admissions office tells you it's "required" or "part of the standard package," ask them to show you the specific CMS regulation. They can't, because it doesn't exist. Keep a written record of any pressure to sign.

In the UK, care home contracts are governed by the Consumer Rights Act 2015, which makes unfair contract terms unenforceable. Arbitration clauses that restrict a resident's access to courts would likely be deemed unfair. The CQC does not regulate contract terms directly, but you can report unfair practices to your local trading standards office.

Discharge and Transfer Terms

The contract should specify exactly when and how the facility can discharge or transfer your parent. Federal law limits involuntary discharge to six specific reasons — the facility's needs aren't one of them:

1. The transfer is necessary for the resident's welfare and needs can't be met there
2. The resident's health has improved enough that they no longer need the services
3. The safety of other residents is endangered
4. The health of other residents is endangered
5. The resident has failed to pay after reasonable notice
6. The facility closes

What to watch for: Language that gives the facility broad discretion to discharge for "behavioural issues" or "non-compliance with facility rules." These vague terms can be used to push out residents with dementia-related behaviours — exactly the residents who are hardest to place elsewhere.

The facility must give 30 days' written notice before any involuntary discharge, and you have the right to appeal. Make sure the contract doesn't waive this notice period.

Rate Increase and Fee Provisions

Nursing home costs in the US average $9,733 per month for a semi-private room (2025 Genworth data). The admission agreement locks in your initial rate, but check how increases work:

• How much notice is required before a rate increase? 30 days is standard; anything less is aggressive.
• Is there a cap on annual increases? Most contracts don't include one, but it's worth asking.
• What services are included in the base rate vs. billed separately? Incontinence supplies, therapy sessions, specialty diets, and one-on-one supervision are common add-ons that can increase monthly costs by $500 to $2,000+.
• What happens when your parent transitions from private-pay to Medicaid? Some contracts include provisions that change the room assignment or care level when Medicaid coverage begins. Understand this before signing.

In Australia, Basic Daily Fees ($66.80/day as of 2026) are set nationally and indexed to the Age Pension. Means-tested contributions are calculated by Services Australia. But additional service fees for things like pay TV, hairdressing, or premium meal options are set by the provider — review these carefully.

The Bed-Hold Policy

If your parent is hospitalised, will the nursing home hold their bed? Under Medicaid, states set their own bed-hold policies — some guarantee the bed for up to 20 days during a hospitalisation, others offer no guarantee at all.

Private-pay residents should have bed-hold terms written into the contract. Without them, you could be paying $300+ per night for an empty bed during a hospital stay, or lose the placement entirely.

What an Elder Law Attorney Reviews

Having an elder law attorney review the admission agreement typically costs $500 to $2,500 depending on complexity. It's worth the investment if:

• Your parent has significant assets that need Medicaid spend-down planning
• There's a family dispute about who has authority to sign
• The contract contains unusual provisions you don't fully understand
• Your parent lacks a valid, active power of attorney

For families who want to do their own first-pass review, our Nursing Home Selection and Quality Checklist includes a line-by-line contract audit template that flags the specific clauses covered in this article — responsible party language, arbitration agreements, discharge provisions, and fee structures — so you know exactly what to question before your meeting with the admissions office.