My father has been living in a nursing home for about four months. Even though they already told my mom he would be a permanent resident, they're now saying he can go home because he has made cognitive improvements (he has vascular dementia) and mobility improvements (he has a below-the-knee amputation). But when he falls again (and he WILL fall again), my mom will once again not be able to pick him up, and once again, he'll hurt himself and be hospitalized. That's not to mention his continuing incontinence, the times he's left the stove turned on, the times he's threatened my mom with violence, and his inability to call 9-1-1 in an emergency--or the fact he promises to wear his prosthesis and be more independently mobile, even though he has *already* made that promise time and again for years, to no avail.

If he's truly doing better, I'm confident it's because of the structured environment the nursing home provides, which was the very reason he was admitted to begin with. Sending him home now is, from my point of view, like putting away your umbrella because you're not getting wet.

My mom would be tasked with watching him 24/7. Since he has been placed in the nursing home, her affect has improved tremendously, she has lost weight, she is exercising more, and she has stopped taking antidepressants. Can she refuse to take him if the nursing home discharges him? If so, then what happens?

What should she/we do?

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Sounds like he was admitted under short term rehab. You need to find out how to transfer him over to long term care, different animals. Talk with social work.
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The NH may be discharging him because he wants to go home now and they can't keep him against his will. However, you mother is not legally required to be his caregiver. He can be discharged to assisted living if that is the choice. No one can force someone to be a caregiver in the US, although many people feel societal and family pressure.

I am sure there is more to this story. If he is a paying resident and qualifies to be in the NH, then they probably wouldn't discharge him. They must feel he no longer qualifies, so that other options could be better for him.
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