An About-Face for Nursing Home Protections

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Last year’s victory for the rights of nursing home patients to avoid arbitration was short lived. Last November, CMS changed its regulations to prohibit nursing homes from using “pre-dispute arbitration clauses” – contracts requiring a patient to submit to arbitration to resolve complaints as a condition for admission to the nursing home. At the time, the new regulation was hailed as a victory for nursing home patients.

In its evaluation of pre-dispute arbitration clauses in 2016, CMS noted that people being admitted to nursing homes are under tremendous emotional distress and often do not read or understand the terms of the admission contract. It also expressed concern that the pre-dispute clauses often include a requirement of confidentiality that prevented families from notifying federal or state agencies about poor care or conditions in nursing homes to the detriment of the general public.

As soon as the new regulations went into effect, the American Health Care Association, the major trade association representing the interests of nursing home owners, sought to prevent the enforcement of the new regulation in a federal district court in Mississippi.

In a 40-page decision, the judge issued an injunction barring the enforcement of the new regulation, on the basis that it violated the Federal Arbitration Act. CMS appealed the ruling, and its brief on the appeal were due on June 2, 2017. However, by June, there was a new President in office, and the Department of Health and Human Services dropped the appeal. Instead, on June 5, 2017 it issued new proposed regulations, reinstating the right of nursing homes to use pre-dispute arbitration clauses.

This proposed regulation does address some of these issues through the following requirements:

  • The contract has to be worded in an easily understandably way
  • The contract has to be in a language that patients or their representatives understand
  • The person signing the contract has to explicitly agree to the pre-dispute clause, presumably by initially the language, so that the provision will not be overlooked
  • A facility may not prohibit communications with federal, state or local officials about quality concerns as part of the pre-dispute clause
  • A facility must keep a copy of any arbitration decision on file for five years to allow for CMS review

The comment period for the proposed regulation is now over. The attorney generals of 17 states31 senators, the AARP, and the American Bar Association all filed objections to this new proposal. Pre-dispute arbitration clauses are part of a larger issue of balancing the rights of consumers against the financial burden of litigation on corporations. The new head of CMS maintains that arbitration resolves disputes more quickly and at a lower cost and that the burden of protracted litigation and the cost to the corporation outweighs the individual right to litigate. It is expected that the regulations reinstating pre-dispute arbitration clauses will go into effect in the near future.

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