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New Federal Regulations Prohibit Pre-Dispute Arbitration in Long-Term Care

By Alec Dobson

Disputes over care in nursing homes and other long-term care facilities will increasingly be decided in litigation, rather than arbitration, as a result of new federal regulations banning pre-dispute arbitration agreements in facilities that participate in the Medicare and Medicaid programs.

The Centers for Medicare & Medicaid Services (CMS), an office of the U.S. Department of Health and Human Services, on Tuesday published new, sweeping regulations that govern long-term care. In addition to the new rule on arbitration agreements, the regulations make major revisions to rules regarding staffing, care planning and many other aspects of long-term care. The regulations set standards for participation in Medicare and Medicaid and do not apply to facilities that do not participate.

Long-term care facilities using arbitration agreements should review their agreements, and their procedures for executing them with residents or residents’ representatives, to ensure compliance with the new rules.

The new arbitration rules take effect November 28, 2016. They do not apply retroactively and have no legal effect on the enforceability of existing pre-dispute arbitration agreements.

The rules allow post-dispute arbitration agreements, but such agreements may only be entered into voluntarily, and not as a condition of remaining at the facility. The rules also require facilities to:

  • Explain the agreement to the resident in an understandable manner,
  • Have the resident acknowledge his or her understanding, and
  • Not include language discouraging or prohibiting residents from contacting government regulators.

CMS said it was prohibiting pre-dispute arbitration agreements because it found evidence that such agreements harm the quality of care for Medicare and Medicaid residents. The agency also said pre-dispute agreements were “fundamentally unfair” because it is “almost impossible” for residents or their decision-makers to give fully informed and voluntary consent before a dispute has arisen. CMS also stated that Medicare and Medicaid beneficiaries are old and disabled or ill, often lack resources to litigate, and have less bargaining power than long-term care facilities. For these reasons, CMS has determined that pre-dispute agreements are, by definition, unconscionable.

CMS acknowledged that arbitration benefits both parties by being generally faster and cheaper than litigation, but it said residents or their decision-makers must make an “informed and voluntary” choice.

To address concerns over “secrecy” of arbitration, the new rule requires facilities to retain, for five years, the arbitration agreement and the arbitrator’s final decision, and to make these documents available for inspection by CMS. The arbitration proceedings can remain confidential.

The rules only address arbitration agreements and do not apply to rules regarding mediation.

CMS published its proposed new regulations on arbitration and other topics July 16, 2015, and received almost 1,000 comments before issuing the final rules. The nursing home industry opposed the new arbitration rule. “That provision clearly exceeds CMS’s statutory authority and is wholly unnecessary to protect residents’ health and safety,” the American Health Care Association (AHCA) said in a written statement. The AHCA represents more than 11,000 long-term care providers.

The arbitration regulation is codified at 42 C.F.R. § 483.70(n).

Davis & Kuelthau attorneys are available to assist you with compliance with these and other federal and state regulations governing nursing homes and other long-term care providers in Wisconsin. If you have any questions about this article, please contact your Davis & Kuelthau attorney or the author, Alec Dobson, at 262.792.2413 /