The Centers for Medicare & Medicaid Services (CMS) issued a final rule last week that prevents the inclusion of arbitration clauses long-term care facility contracts.
[The CMS press release can be read here.]
The rule — which goes farther than many observers expected — aims to bring new protections to consumers and facility residents, who would previously have had to turn to private arbitration to sort out claims of elder abuse and wrongful death.
But nursing home industry groups reacted negatively to the new CMS rule.
First, a primer on the changes brought by the final rule, as outlined by the National Law Review:
As anticipated, the Centers for Medicare & Medicaid Services (CMS) has released new regulations addressing the use of arbitration agreements in nursing home admission agreements applicable to facilities that participate in Medicaid and Medicare programs. However, the scope has far exceeded what was expected. The proposed regulations only sought to ban mandatory arbitration agreements as a condition of admission. The actual regulations prohibit “pre-dispute” arbitration agreements instead.
The regulation, 42 CFR § 483.70(n) (Binding Arbitration Agreements), states:
We are requiring that facilities must not enter into an agreement for binding arbitration with a resident or their representative until after a dispute arises between the parties. Thus, we are prohibiting the use of pre-dispute binding arbitration agreements.
The regulation further provides that if, after a dispute between the facility and a resident arises, a facility chooses to ask a resident or the resident’s representative to enter into an agreement for binding arbitration, the facility must ensure that the agreement is explained to the resident/resident’s representative in a form and manner that he or she understands, including in a language the resident/resident’s representative understands, and the resident acknowledges that he or she understands the agreement.
Additionally, the arbitration agreement may not condition a resident’s right to remain in a facility upon the resident/resident’s representative signing a binding arbitration agreement; nor can it contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state or local officials (such as surveyors or other health department employees), and representatives of the Office of the State Long-Term Care Ombudsman.
The industry reaction, from the New York Times:
Mark Parkinson, the president and chief executive of the American Health Care Association, a trade group, said in a statement on Wednesday that the change on arbitration “clearly exceeds” the agency’s statutory authority and was “wholly unnecessary to protect residents’ health and safety.”
[…]
The nursing home industry has said that arbitration offers a less costly alternative to court. Allowing more lawsuits, the industry has said, could drive up costs and force some homes to close.
Finally, Wendy Salkin, writing on a Harvard Law School blog, gives her initial musings on the implications of the rule:
Some initial impressions on this prohibition on arbitration clauses in LTC contracts: first, this prohibition has the potential to bring alleged wrongdoing on the parts of nursing homes and other LTCs out of the shadows of arbitration. Second, as CMS itself suggests, it shifts the power between LTC residents (and their families) and LTCs at least modestly in the direction of the residents and their families, who often sign these contracts under conditions where the residents-to-be are living with “dwindling mental acuity” and their family members are “emotionally vulnerable.” Still, caution is warranted as the new rule comes into effect, as LTCs’ increased exposure to litigation costs may bring with it a corresponding hike in nursing home costs for residents and their families—costs that are already exorbitant. It’s also worth keeping an eye out to see whether any court challenges are brought against the new rule, which is scheduled to go into effect on November 28 of this year.
