How to Compare Nursing Home Contracts: A 10-Point Worksheet for Families

Why Nursing Home Contracts Are Different

If someone you love is moving into a nursing home, you may be handed a contract that looks similar to an assisted living agreement. It is not. Nursing homes are licensed as skilled nursing facilities (SNFs), regulated by both state and federal law under 42 CFR Part 483, and subject to the Nursing Home Reform Act (OBRA 1987). That means the contract must honor a set of resident rights that cannot be waived, no matter what the fine print says.

If you have already reviewed an assisted living agreement, you may find our companion piece helpful: How to Compare Assisted Living Contracts: A 10-Point Worksheet for Families. But the nursing home version involves additional layers: Medicare and Medicaid payment clauses, federally protected discharge rules, and distinctions between skilled nursing and custodial care that directly affect what you pay.

This worksheet walks through all of it.

Key Terminology: Skilled Nursing vs. Custodial Care

The single most important distinction in a nursing home contract is between skilled nursing care and custodial care.

Skilled nursing care requires a licensed professional (a registered nurse, physical therapist, or speech-language pathologist, for example). Medicare Part A typically covers skilled nursing in an SNF for up to 100 days per benefit period, provided the resident meets qualifying criteria. You can review the full eligibility rules at Medicare.gov's Skilled Nursing Facility page.
Custodial care means help with daily activities like bathing, dressing, and eating. Medicare does not cover custodial care. Payment falls to Medicaid (if the resident qualifies), long-term care insurance, or private funds.

The contract should clearly state which services are classified as skilled and which are custodial. It should also explain how a change in classification (for instance, when a resident no longer qualifies for skilled care) affects payment. Look for a clause describing the "level of care" determination process: who makes that decision, and is it the facility's own nurse or an independent assessor?

Medicare and Medicaid Coverage Clauses

Medicare covers the first 20 days of a qualifying SNF stay in full. For days 21 through 100, the resident pays a daily coinsurance amount that CMS adjusts each year. (In 2024, that coinsurance was $204.00 per day; check Medicare.gov's SNF cost page for the current figure.) The contract should state these terms clearly.

Medicaid rules are more complex because eligibility, bed-hold periods, and refund timelines vary significantly by state. Federal law prohibits a nursing home from requiring a Medicaid-eligible resident to pay privately for a minimum period before accepting Medicaid. If you see contract language that conditions admission on a private-pay commitment, that is a red flag.

Bed-Hold Policies

If a resident is hospitalized, Medicaid may require the facility to hold the bed for a set number of days (often 7 to 15 days, depending on the state). The contract should specify the bed-hold period and any daily fee charged during it. Some facilities charge 50% to 80% of the private-pay rate for a bed hold, so ask for the exact dollar amount.

Refund Policies

Many states require a pro-rata refund of prepaid fees if the resident dies or moves out mid-month. The contract should state the refund timeline (commonly within 14 to 30 days) and whether any administrative fees are deducted. If the contract is silent on refunds, request a written policy before signing.

Discharge Policies: Protections and Red Flags

Federal law limits the reasons a nursing home can involuntarily discharge a resident. Under 42 CFR § 483.15, permitted grounds include medical necessity, the resident's safety or the safety of others, nonpayment (after reasonable notice), or the facility ceasing to operate. The contract must list specific discharge grounds and the required notice period, usually 30 days.

Red Flags to Watch For

A clause allowing discharge for "failure to improve." Federal rules do not permit this.
Language permitting discharge for "inability to pay" without a grace period or Medicaid transition process.
Vague language like "at the facility's discretion."

Ask the admissions coordinator directly: "Can you explain the exact process if my parent's Medicare coverage ends? Will they be discharged, or can they stay on private pay or transition to Medicaid?" Request a copy of the facility's written Discharge and Transfer Policy. Under the Nursing Home Reform Act, they must provide it.

Financial Terms: Private Pay, Extra Charges, and Budgeting

The daily rate on the first page of the contract rarely tells the whole story. According to cost surveys such as Genworth's Cost of Care data, the average private-pay rate for a semi-private room in a nursing home ranges roughly from $250 to $350 per day in many parts of the country, with private rooms often running $300 to $500 or more per day depending on the region. These are general ranges; your local costs may differ.

Beyond the daily rate, watch for ancillary charges that add up quickly:

Incontinence supplies: commonly $15 to $50 per day if billed separately.
Therapy co-pays: physical, occupational, or speech therapy sessions not fully covered by Medicare.
Laundry, personal care items, and phone/cable fees.

The contract must itemize all extra charges. If you see a blanket clause like "additional services billed at prevailing rates," ask for a current fee schedule in writing.

Imagine a family budgeting $9,000 per month based on the quoted daily rate, only to discover $1,200 in monthly extras for supplies and therapy co-pays. That gap matters. Ask: "What is the exact process for refunding the deposit and any prepaid days? Are there administrative fees?"

Arbitration and Liability Clauses

Some nursing home contracts include an arbitration agreement, which means disputes would be resolved by a private arbitrator rather than in court. Federal rules from CMS prohibit facilities from making pre-dispute arbitration a condition of admission. The agreement must be voluntary, clearly labeled, and the resident (or their representative) can revoke it within 30 days of signing.

Here is what to look for:

The arbitration clause should be a separate document or addendum, not buried in the body of the contract.
It should not waive the resident's right to bring claims for negligence or abuse.
It must not be presented as mandatory.

Ask plainly: "Is arbitration optional? Can we opt out in writing right now?" If the admissions staff says arbitration is required, that conflicts with federal rules, and you should document the conversation.

Room and Care Level Changes

A resident's needs can change. The contract should address what happens if a room change is needed (for example, moving from a semi-private to a private room, or to a specialized memory care unit). Key questions:

Does the room change require the resident's or family's consent?
How is the new rate determined, and how much notice is given?
If the resident's condition improves, can the facility move them to a lower level of care? Federal law requires any transfer to be medically appropriate and accompanied by proper written notice.

Look for a "level of care upgrade" clause that spells out assessment triggers and family notification requirements. If the contract is vague on this point, ask for written clarification before signing.

A Note About Negotiation

Most nursing homes use standardized contracts, and families may have limited room to negotiate individual terms. This is the reality. However, you can and should request written amendments for any clause that conflicts with federal or state law (such as an illegal discharge provision or a mandatory arbitration requirement). If the facility refuses to correct a clause that violates resident rights, that refusal is itself useful information. It may be reason to choose a different facility.

The goal of this worksheet is not to turn every family into a contract lawyer. It is to help you spot the provisions that matter most and know when to seek help.

The 10-Point Worksheet

Use this checklist when reviewing any nursing home contract. Mark each item as Pass, Fail, or Needs Clarification. Request written amendments for any failures.

Skilled vs. custodial care defined. Does the contract clearly distinguish skilled nursing from custodial care and tie each to specific payment sources (Medicare, Medicaid, private pay)?
Medicare and Medicaid terms explained. Are coverage periods, coinsurance amounts, bed-hold policies, and refund procedures stated in writing?
Discharge reasons limited to federal law. Are the listed grounds for discharge consistent with 42 CFR § 483.15, and are notice periods (typically 30 days) stated?
Arbitration is separate and optional. Is there a clearly labeled, standalone arbitration addendum that the resident can decline or revoke within 30 days?
All extra charges itemized. Does the contract list every ancillary fee (therapy, supplies, laundry, personal items) with current dollar amounts or a current fee schedule?
Room change and care level procedures clear. Does the contract explain how room changes and level-of-care upgrades are handled, including consent requirements and rate adjustments?
Revocation or cancellation period verified. Check whether your state requires a contract revocation period (commonly 3 to 30 days). If the contract does not mention one, request a written cancellation policy before signing.
Resident rights listed. Does the contract reference the resident's rights to visitation, access to medical records, participation in care planning, and filing grievances? These rights are guaranteed under federal law.
No hidden liability waivers. Are there any clauses that waive the facility's liability for negligence, abuse, or failure to provide adequate care? Such waivers are unenforceable but should not appear at all.
Contract signed by authorized representative. Is the facility signatory someone with actual authority to bind the facility and, if needed, approve amendments?

For any item marked "Fail," consider whether the issue can be resolved with a written amendment or whether it signals a deeper problem with the facility.

Where to Get Free Help

You do not have to review a nursing home contract alone. Several free resources exist:

Your state Long-Term Care Ombudsman. Every state has an ombudsman program that advocates for residents of nursing homes and can help families understand contract terms. Find yours through the National Long-Term Care Ombudsman Resource Center.
Area Agencies on Aging (AAA). Many local AAAs offer free contract counseling or can refer you to a legal aid attorney who specializes in elder law. Locate your local AAA through the Eldercare Locator or by calling 1-800-677-1116.
State Medicaid offices. Because Medicaid bed-hold rules, refund timelines, and eligibility vary by state, your state Medicaid agency is the authoritative source for local requirements. A list of state Medicaid programs is available at Medicaid.gov.

If you are also working on advance directives or powers of attorney, our Advance Directives Explained: A State-by-State Guide covers those documents in detail.

This article provides general information about nursing home contracts and federal regulations. It is not legal advice. Laws vary by state, and families should consult a qualified elder law attorney or their state long-term care ombudsman for guidance specific to their situation.