February 20, 2020 Practice Points

CMS Issues New Arbitration Rule for Nursing Homes

A resident’s right to continue to receive care at a long-term care facility must not be contingent upon signing an arbitration agreement.

By Mark Kantor, Karl Bayer, and Beth Graham

During the Obama Administration, there was controversy over the use of mandatory pre-dispute arbitration agreements by nursing homes. 

In October 2016, the Centers for Medicare & Medicaid Services (CMS) of the U.S. Department of Health and Human Services promulgated a rule barring long-term care facilities (e.g., nursing homes) from Medicare and Medicaid programs unless the facility gave up provisions requiring pre-dispute binding arbitration agreements between long-term care facilities and their residents.

In November 2016, the rule was preliminarily enjoined nationwide by the U.S. District Court for the Northern District of Mississippi as a result of litigation brought by the American Health Care Association and a group of affiliated nursing homes. Promptly thereafter, CMS issued an instruction calling for non-enforcement of the rule’s pre-dispute arbitration agreement provisions. In 2017, the new Trump Administration issued proposed revisions to the 2016 rule. CMS sought public comment on the 2017 proposed rule, receiving over 1,000 comments including many from groups that advocate for the rights of older adults, residents in nursing homes, or people with disabilities, as well as state offices of the Long-Term Care Ombudsman.

In July 2019, CMS finalized and issued a revised 2019 final rule at 84 Fed. Reg. 34718, making some changes to its proposed revised rule but retaining the removal of the core prohibition on pre-dispute arbitration agreements for long-term healthcare facilities. Significantly, the final rule keeps important provisions from the 2016 rule “banning facilities from requiring that residents sign arbitration agreements as a condition of admission to a facility” or “specifying that a resident’s right to continue to receive care at the facility must not be contingent upon signing an arbitration agreement.” The 2019 final rule also modifies in some respects the transparency requirements offered in the 2017 proposed rule.

It will be interesting to see if the nursing home industry opposes this rule as well, in reliance on the reasoning of Epic Systems Corp. v. Lewis. Whether or not there is a potential conflict between Epic Systems and CMS’s 2019 final rule, the industry may simply believe it has won enough in the political battle to step away from the legal battle.

Mark Kantor is a member of the College of Commercial Arbitrators in Washington, D.C. Karl Bayer is the founder of Karl Bayer Dispute Resolution in Austin, Texas. Beth Graham is associate corporate counsel at UShip and legal content writer at Karl Bayer in Austin, Texas.

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