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August 01, 2015

Should CMS Prohibit Arbitration in Nursing Home Admission Contracts?

Erica F. Wood

(The pdf for the issue in which this article appears is available for download: (Bifocal, Vol. 36, Issue 6).)

Update: The Centers for Medicare and Medicaid Services (CMS) issued  a final rule in July 2019 on arbitration in nursing home contracts. Since this 2015 BIFOCAL article was published, regulatory proposals and rules have shown an astonishing turnaround, ending up somewhere in between.  A 2016 CMS rule instituted an outright ban on pre-dispute, binding arbitration agreements in nursing home admission contracts.  The rule spurred litigation by the nursing home industry, which in turn brought about a suspension of enforcement by CMS.  In 2017, CMS issued a new proposed rule that went to the other extreme, not only allowing pre-dispute, binding arbitration, but also allowing nursing homes to make signing the arbitration agreement a condition of admission.  A new final rule in July 2019 allows nursing homes to use pre-dispute, binding arbitration agreements, but does not allow signing of the agreements to be a condition of admission.  Moreover, the new rule includes a number of important safeguards for residents.  See an article written by Charlie Sabatino,  “Our New Nursing Home Arbitration Mandate: Educate, Educate, Educate." 

Suppose your 90-year-old mother was seriously injured or sexually assaulted as a result of poor care in a certified nursing home. You seek redress in court, only to be told that trial by jury is barred because upon admission two years ago, she signed a contract that included an arbitration clause. You will have no day in court, and the case will never be brought to public scrutiny.

If this scenario troubles you, now is the time to make your voice heard. The Centers for Medicare and Medicaid Services (CMS) have issued a comprehensive proposed rule on Reform of Requirements for Long-Term Care Facilities (Federal Register, Vol. 80, No. 136, July 16, 2015). The proposed rule includes conditions on use of arbitration clauses, and invites comments on “whether binding arbitration agreements should be prohibited.”

Arbitration is a method of dispute resolution in which a neutral decision-maker selected by the parties, rather than a judge or jury, makes a decision about a dispute. In an arbitration agreement, a party agrees voluntarily to waive the right to trial by jury, in return for a speedy and cost-effective settlement. Since the 1925 enactment of the Federal Arbitration Act (9 U.S.C. §2), court decisions have affirmed the broad reach of the Act.

While arbitration in some contexts may have significant advantages over costly litigation, it is fundamentally unfair for nursing home residents if the agreement is made before any dispute arises—that is, if it is “pre-dispute” arbitration. Post-dispute arbitration clauses in many circumstances can be advantageous, and residents should continue to have the choice to use it to resolve issues that already have arisen. However, residents and families faced with pre-dispute clauses are forced to make a critical decision without knowing anything about the occurrence at hand. They have a “take it or leave it” situation in which any semblance of true informed consent is lacking.

When entering a facility, the resident and family are not thinking of litigating poor care. They cannot envision they may be involved in disputes about pressure sores, choking, dangerous bedrails, dehydration, sexual assault, or even death. Yet the arbitration agreement covers every aspect of their care and lives in the facility, and bars a hearing a court of law, no matter how egregious the actions.

Moreover, the resident and family may not understand the agreement, which is generally couched in legal phrases and included in a confusing array of papers required at the time of admission. Prospective residents are frail, have chronic health conditions, and are frequently coming directly from the hospital. They and their families are usually under extreme pressure to be admitted. There is generally no time to seek the advice of a lawyer, and there may be no other beds available for the same level of care and payment source within the geographic area.

Indeed, residents and families often feel compelled to sign, and this would likely continue to be so even with the conditions proposed in the rule—that the facility explain the agreement and that the explanation be acknowledged by the resident, that it be voluntary, that it provide for selection of a neutral arbitrator and convenient venue, and that admission not be contingent on signing the agreement. The conditions, while theoretically useful, are not enough to create a fair and balanced bargaining opportunity, and in fact may actually worsen the situation by allowing facilities to use the rule as a shield for actions for which they should be liable. CMS should recognize that truly informed and voluntary consent to a binding arbitration agreement is rarely, if ever, possible in the highly charged context of nursing home admission and should be prohibited.

A strong and welcome theme throughout the proposed rule is resident-centered care and maximizing the voice of the resident. Yet the proposed arbitration provisions would directly contravene this emphasis, continuing to allow forced choices without genuine consent that will undercut the very quality of care and quality of life requirements the rule highlights.

In 2009, the American Bar Association adopted policy that “opposes the use of mandatory, binding, pre-dispute arbitration agreements between a long-term care facility and a resident of such facility or person acting on behalf of such resident.” We suggest that the proposed CMS rule should simply prohibit pre-dispute agreements for binding arbitration with its residents.

If you have views on—or specific cases about—the use of arbitration in nursing home admissions contracts, consider commenting by September 14.
See the proposed rule at: ■


Erica F. Wood

Erica Wood is Assistant Director at the ABA Commission on Law and Aging in Washington, DC.