CMS’ New Rule on Arbitration: A Win and A Loss

Earlier this month, the Center for Medicare and Medicaid Services (“CMS”) issued a final rule repealing its’ prior rule prohibiting long-term care providers (“LTC”) from entering into pre-dispute, binding arbitration agreements with their residents. This change takes effect September 16, 2019 and comes after years of protracted rule-making efforts, public comment, and litigation that began in October 2016 when CMS issued a final rule prohibiting the agreements in nursing facilities and ended up in the U.S. Supreme Court in May 2017.

This new final rule represents a win, albeit a limited one, for the long-term care industry. On one hand, the ability to pursue arbitration represents a real opportunity for facilities to reduce liability and minimize the costs of potential litigation with residents by eliminating discovery, attorneys’ fees, and other related litigation expenses. On the other hand, the final rule contains a number of provisions, intended to protect nursing home residents, which may cause providers concern as they evaluate the benefit of adding these provisions to their Admission Agreements.

For example, the Final Rule:

  • Prohibits the facility from mandating execution of the Arbitration Agreement (“AA”) as a condition of admission or a prerequisite for continued care;
  • Requires the facility inform the resident (or his/her representative) of their right to refuse to sign the AA;
  • Mandates that facilities utilizing AAs explain the document to its residents and secure the residents’ acknowledgment of understanding;
  • Necessitates that a neutral arbitrator and convenient venue be agreed upon by both parties
  • Allows the resident (or his/her representative) to rescind the Agreement within 30 days after executing it; and,
  • Obligates the facility to keep a copy of the signed agreement and any arbitration decisions for 5 years, available for inspection by CMS.

Providers should carefully evaluate their Agreements and their Admissions procedures at large, and, if needed, update their policies and practices to insure not only that they are compliant with the new CMS rule and the Supreme Court’s guidance on the issue, but also to insure they are maximizing cost-saving mechanisms available to them.  

1"Medicare and Medicaid Programs; Revision of Requirements for Long-Term Care Facilities: Arbitration Agreements” (84 FR 34718) (2019 Final Rule).

2 “Reform of Requirements for Long-Term Care Facilities” (81 FR 68688) (2016 Rule) and Kindred Nursing Centers L.P. v. Clark, 510 U.S. ____ (2017) (citing the Federal Arbitration Act as the basis by which any state rule is prohibited from discriminating against arbitration). 

 Stotler Hayes Group LLC
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