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August 31, 2017

ABA opposes proposed rule to authorize mandatory pre-dispute arbitration in nursing home contracts

The ABA urged the Centers for Medicare & Medicaid Services (CMS) this month to withdraw a proposed rule that would authorize the inclusion of mandatory pre-dispute arbitration provisions in long-term care admission contracts, saying the proposed rule “fails to protect residents’ rights and interests.”

The proposal also would permit nursing homes to require residents to agree to such arbitration provisions as a condition of admission to a facility.

The proposed rule would replace a rule that was blocked by a preliminary injunction just before it was scheduled to go into effect in November 2016. That rule, which mirrored ABA policy, sought to prohibit nursing homes participating in the Medicare or Medicaid program from requiring pre-dispute binding arbitration to settle disputes over residents’ care. 

In the ruling − which was 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, determined that CMS exceeded its authority in issuing the rule and that the binding  arbitration issue should be addressed by Congress through federal legislation rather than by CMS.

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, theoretically in return for a speedy and cost-effective solution, 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 opposes the use of binding forms of alternative dispute resolution involving residents in disputes with long term care facilities unless the parties agree to do so voluntarily and knowingly after a dispute arises.” ABA Governmental Affairs Director Thomas M. Susman wrote in an Aug. 7 comment letter to CMS.

Susman emphasized that nursing home admission is an extremely emotionally and physically challenging event for the prospective residents and their family. “It is virtually impossible for an applicant or family representative to give fully informed, voluntary consent to arbitration provisions relating to facility admission,” he explained in his letter.

He also wrote that it is a “mistaken” view that the recent Supreme Court ruling in Kindred Nursing Center v. Clark interpreted the Federal Arbitration Act (FAA) as prohibiting bans on pre-dispute arbitration in long-term care admissions contracts. The ruling states that arbitration agreements may only be found invalid based on legal rules that would apply to any contract.

“While Kindred clearly prohibits singling out arbitration agreements for disfavored treatment, nothing in the court’s reasoning or under the terms of the FAA requires singling out arbitration agreements for favored treatment. Yet, this is exactly what CMS is doing by its proposed total embrace of mandatory pre-dispute arbitration provisions in admissions contracts,” Susman said.

He reiterated the association’s support for the final rule crafted in 2016 and said the rule, which would permit arbitration agreements only after a dispute arises, treats arbitration on a par with or better than other resident contract rights that are properly regulated by CMS. While the 2016 rule is consistent with the person-centered paradigm at the core of the long-term care regulatory framework, the new proposed rule would give special deference to arbitration agreements and, as a result, ignores and contradicts the entire regulatory purpose and context of Medicare and Medicare long-term care law and regulation, he said.

In related action, Sens. Al Franken (D-Minn.) and Ron Wyden (D-Ore.) spearheaded an Aug. 7 letter from 31 senators to CMS opposing the proposed rule. Forced arbitration clauses in nursing home agreements “prevent many of our country’s most vulnerable individuals from seeking justice in a court of law and instead funnel all types of legal claims, no matter how egregious, into a privatized dispute resolution system that is often biased toward the nursing home,” the letter said.    


Back to the August 2017 Washington Letter