November 01, 2016

District judge blocks nursing home binding arbitration ban

A federal judge has blocked a final rule issued Oct. 4 by the Centers for Medicare & Medicaid Services (CMS) that seeks to prohibit nursing homes from requiring pre-dispute binding arbitration to settle disputes over residents’ care.

The CMS rule, which was scheduled to go into effect Nov. 28, would apply to nursing facilities participating in the Medicare or Medicaid programs and would benefit approximately 1.5 million nursing home residents. The final rule mirrors a recommendation made by the ABA in comments submitted to CMS regarding the proposed rule in September 2015, and the agency quoted extensively from the ABA’s comments to explain the decision to amend its proposed rule to reflect the ABA’s views.

Arbitration is a method of dispute resolution in which a neutral decision-maker is selected by one or both parties to resolve a dispute. In an arbitration agreement, a party agrees to waive the rights to sue and to a trial by jury, to participate in a class action lawsuit, or to receive any type of judicial review apart from the very limited grounds applicable to setting aside arbitration decisions.

The ABA recommended prohibiting pre-dispute agreements for binding arbitration between a facility and its residents while permitting voluntary, post-dispute arbitration agreements as long as certain conditions are met and the residents have provided informed consent. 

In response to a suit brought by nursing home groups, including the American Health Care Association, Judge Michael P. Mills, of the U.S. District Court for the Northern District of Mississippi, indicated Nov. 7 that the rule appears to be based on sound public policy, but found that the binding arbitration issue should be addressed by federal legislation rather than CMS rules.

Acknowledging that some nursing home residents do not have the capacity to understand what an arbitration agreement involves, Mills wrote: “The court believes that Congress might reasonably consider this inefficiency, as well as the extreme stress many nursing home residents and their families are under during the admissions process, as sufficient reason to decide that arbitration and the nursing home admissions process do not belong together.”

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