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October 01, 2016

New CMS rule bans pre-dispute binding arbitration clauses in nursing home contracts

The Centers for Medicare & Medicaid Services (CMS) published a new final rule Oct. 4 for nursing homes that includes a provision prohibiting the facilities from requiring pre-dispute binding arbitration to settle disputes over residents’ care.

The final rule, which goes into effect on Nov. 28 for facilities participating in the Medicare or Medicaid programs, is the first comprehensive update to nursing home regulations since 1991 and contains numerous changes to strengthen long-term care. The new rule will apply to approximately 1.5 million nursing home residents.

The language relating to binding arbitration bans such agreements unless they are entered into after a dispute arises – a position that closely mirrors a recommendation made by the ABA in comments submitted to CMS in September 2015.

The agency quoted extensively from the ABA’s comments to explain the decision to amend its original proposal, which would have retained pre-dispute arbitration agreements while establishing minimum procedural requirements.

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.

In its comments, the ABA maintained that the conditions set forth in the proposed regulation would have worsened the current situation by allowing facilities to use the rule as a shield for actions for which they should be liable.  

The ABA recommended prohibiting pre-dispute agreements for binding arbitration between the 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. 

The ABA comments pointed out that anticipating the possibility and nature of future disputes with a facility is the last thing on a resident or family’s mind when seeking nursing home care, and there is generally no time to seek the advice of a lawyer to address secondary issues such as methods of resolving future disputes. On the other hand, post-dispute arbitration in many circumstances can be advantageous, and residents should continue to have the choice to use it to resolve disputes after a dispute arises, the association stated.

In addition to banning pre-dispute binding arbitration, the final rule also expands regulations regarding food and medical treatment for residents as well as proper training for staff focusing on the care of residents with dementia and the prevention of elder abuse. The final rule also requires nursing homes to develop infection prevention and control programs and plans for monitoring the use of antibiotics.


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