Skip to content Skip to navigation

Fight brewing over proposed CMS arbitration rule

October 23, 2015
by Bob Gatty
| Reprints

A proposal by the Centers for Medicare & Medicaid Services (CMS) to strengthen long-term care facility patients’ rights regarding the use of pre-dispute binding arbitration agreements has drawn stiff industry opposition—as well as calls from numerous members of Congress for even tougher protections and from 16 state attorneys general for an outright ban on such agreements. At issue is the following language contained in a new CMS rule, now under consideration, that would impose sweeping new requirements on the LTC industry:          

“Binding Arbitration Agreements: We propose specific requirements for the facility and the agreement itself to ensure that if a facility presents binding arbitration agreements to its residents that the agreements be explained to the residents and they acknowledge that they understand the agreement; the agreements be entered into voluntarily; and arbitration sessions be conducted by a neutral arbitrator in a location that is convenient to both parties. Admission to the facility could not be contingent upon the resident or the resident representative signing a binding arbitration agreement. Moreover, the agreement could not prohibit or discourage the resident or anyone else from communicating with federal, state, or local health care or health-related officials, including representatives of the Office of the State Long-Term Care Ombudsman.”

Industry opposition

Both the American Health Care Association (AHCA) and Argentum (formerly, the Assisted Living Federation of America) filed comments earlier this month with CMS opposing that new language.

In its submission, AHCA said the proposal should be withdrawn because:

  • they exceed CMS’ statutory authority;
  • they are not necessary to protect resident health and safety; and
  • many of the stated factual and legal grounds for the proposals are wrong.

Argentum, in its submission, said the proposed CMS limitations “would do more harm than good.” “Arbitration provides a fair and typically less costly alternative to traditional litigation and binding arbitration can be faster and less burdensome for both the resident and the community,” the organization said.

AHCA argued that federal and state courts have repeatedly rejected efforts to regulate the use of arbitration agreements between nursing facilities and their residents, adding that Congress also has repeatedly rejected efforts to regulate the use of such agreements. Furthermore, AHCA said a complete ban on the use of arbitration agreements between SNFs/NFs and their residents would clearly exceed CMS’ legal authority.

The association also contended the proposal is unnecessary to protect resident health and safety and is largely based upon speculation and, in the end, would result in new and costly lawsuits rather than having disputes being resolved in a less confrontational and costly arbitration setting.

“Implementing a regulation with the intended effect of forcing more disputes into court could cause SNFs/NFs to cease doing business altogether in geographic markets where arbitration has brought some semblance of reason back to the dispute-resolution process,” AHCA cautioned, adding that liability insurance rates would also skyrocket.

Post-dispute agreements proposed

Meanwhile, in a letter to CMS Acting Administrator Andy Slavitt signed by 32 House members led by Reps. Henry C. “Hank” Johnson, Jr. (D-GA) and John Conyers, Jr. (D-MI), argued that pre-dispute arbitration agreements can take advantage of vulnerable residents and that such agreements should only be permitted after a claim arises.

Calling forced arbitration “fundamentally inferior to the American justice system,” the lawmakers said the practice often takes place behind closed doors “enabling parties to keep their wrongdoing confidential and hidden from public scrutiny.”

“There is also overwhelming evidence that forced arbitration creates an unaccountable system of winners and losers,” they wrote.

State AGs seek ban

In their comments to CMS, the state attorneys general (AGs) flatly said CMS “should prohibit arbitration clauses in long-term care facility contracts.”

Such “take it or leave it” provisions contained in fine print buried in contracts signed by incoming patients who are often ill and distraught are inherently unfair.

“Only after tragic events do many people discover that the contract contains a binding arbitration clause requiring that claims against the facility—even for cases of abuse or neglect—must be brought before a private arbitration provider chosen by the nursing home,” they wrote.

The AGs pointed out that their job is to represent the state agencies that certify long-term care and nursing home facilities that participate in Medicare and Medicaid, as well as licensing authorities that oversee the facilities and their direct care staff. Among those agencies’ responsibility, the letter said, is enforcing the nursing home residents’ bill of rights adopted in state law, which often provide remedies that allow the resident to seek damages and/or injunctive relief.

“Pre-dispute binding arbitration agreements in general can be procedurally unfair to consumers, and can jeopardize one of the fundamental rights of Americans: the right to be heard and seek judicial redress for our claims,” they said, pointing out that even the American Arbitration Association has recognized that pre-dispute arbitration agreements are not appropriate in the healthcare context.