A common question that your legal counsel may ask you is whether your resident or patient has a Legal Agent. This is important information to provide to your attorney and document in your records, but what does it mean, and why is it important?
What is a Legal Agent?
A legal agent (“Agent”) is a person who has the legal authority to represent and act for another person (the “Principal”). The relationship between Agent and Principal is described as an agency relationship and is governed by an area of law called agency law. Common examples of an Agent you may encounter in a senior living or LTC healthcare setting include a Power of Attorney, Power of Attorney for Healthcare, Guardian, or Conservator.
What Can a Legal Agent Do?
An Agent generally has the authority to take any action that the Principal could take and enter into legal obligations that are binding upon the Principal. For example, an Agent can sign an Admission Agreement for an Assisted Living Facility or Skilled Nursing Facility on behalf of the Principal. The terms of that contractual agreement would be binding upon the Principal. However, it is essential to know that an Agent can also have “limited” or “special” authority. In these cases, the Agent can only take specific actions. Any actions beyond the scope of the limited authority are improper and will typically not be binding on the Principal.
How is an Agency Relationship Created?
An agency relationship can be voluntarily established by agreement between the Agent and Principal or by operation of law. However, the Principal must retain the capacity to enter into legally valid agreements in order to voluntarily establish an agency relationship.
If the Agent and Principal voluntarily establish an agency relationship, a written document is commonly prepared that lays out the terms and duration of the relationship. An example of such a written document that many folks in the senior living or long-term healthcare industry have encountered is a Power of Attorney document. But it is possible to create an agency relationship without a written document, through verbal representations or other actions by the Principal or Agent. This type of non-written agency relationship may be called “apparent authority.” If you or your facility think you may be dealing with an apparent authority situation, I encourage you to consult with legal counsel for guidance. These situations can be complex and difficult to navigate.
State laws generally provide for the appointment, by the courts, of a legal agent for an individual who is incapacitated due to a physical and/or mental illness. This type of Agent is commonly called a Guardian or Conservator, and their appointment is evidenced by a court order detailing the scope of their authority as the Agent. There are also some scenarios where state law may authorize someone to act on behalf of an incapacitated person without a court order, such as a next of kin having authority to make healthcare decisions for an incapacitated patient in an emergency.
When evaluating an agency relationship, it is important to consider the following:
- Effective Date and Duration. When did the agency relationship begin? When does it end? If there are conditions controlling when the relationship starts and ends (such as the incapacity or disability of the Principal), have those conditions been met and appropriately documented if needed?
- Scope of Authority. Does the Agent have broad/general authority? Or do they have limited authority only to perform specific acts? Is the action the Agent proposes to take or that you are requesting within their authority?
- Successor/Backup. If the Agent doesn’t take needed action, is there a successor or backup Agent named in the document to whom you can turn?
Make sure to keep a copy in your resident’s or patient’s file of any document that claims to establish an agency relationship, even if you determine it is not valid or currently in effect for some reason.
Conclusion and Free Download
It is important to know whether your patient or resident has a Legal Agent with the current authority to act on their behalf. This knowledge will enable you to:
- Ensure that you are communicating with the correct person to make decisions on behalf of your patient or resident;
- Have contracts and other documents signed by someone with legal authority to ensure that they will be valid and enforceable; and
- Be aware of your options for resolving Medicaid eligibility challenges, collections issues, or other AR concerns.
Unfortunately, the family member or friend who is the most responsive and cooperative is not always the Agent. It can be tempting to rely on someone else, especially if working with the Agent is challenging, but this can frequently create more problems than it solves.
Download our free Power of Attorney Evaluation Flow Chart from the SHG Senior Living and LTC Healthcare Provider Resource Library to help guide you or your staff the next time you are presented with a Power of Attorney document!
If you have any questions or need assistance regarding legal agents, please contact Kelly Hayes or Ashley Shudan.
Ashley Shudan has over 10 years of experience representing clients in state and federal trial courts, appellate courts, and before administrative agencies. A Partner at Stotler Hayes Group, Ashley focuses on providing legal services, consulting services, and administrative support to health care providers. Her practice areas include Medicaid reimbursement, probate and estates, Guardianship/Conservatorship, collections, litigation, regulatory compliance, and government benefits. In addition, Ashley serves as the firm’s Client Relations Director.