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Nursing Home Arbitration Rule Challenged in Court

By Alec Dobson

The nation’s largest association of long-term care providers filed a lawsuit this week asking a federal court to block enforcement of new federal regulations that will prohibit pre-dispute arbitration agreements in nursing homes and other long-term care facilities participating in Medicare and Medicaid.

The Centers for Medicare & Medicaid Services (CMS) published the new regulations on October 4, 2016. 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 take other steps to help ensure the resident’s understanding and not impede residents from contacting government regulators. The arbitration rules are discussed in more detail here.

Given the uncertainty of the outcome, it remains prudent for long-term care facilities to review their arbitration agreements and their procedures for execution, in anticipation that the new rules will go forward. Unless the court grants an injunction, the new rules take effect November 28, 2016.

The lawsuit by the American Health Care Association (AHCA) and other plaintiffs states that the arbitration rule violates the Federal Arbitration Act and exceeds the statutory authority for CMS and its parent agency, the U.S. Department of Health and Human Services (HHS). According to the lawsuit, the federal Medicare and Medicaid Acts do not give those agencies the power to regulate alternative dispute resolution procedures. The lawsuit further alleges that the arbitration rule is arbitrary and capricious because it will needlessly deprive facilities and their residents of the benefits of arbitration; divert resources toward litigation costs and away from resident care; and represents an unjustified reversal by CMS and HHS from their earlier guidance allowing pre-dispute arbitration agreements.

In enacting the rule, CMS said it found evidence that pre-dispute agreements harm the quality of care for Medicare and Medicaid residents and were “fundamentally unfair.” 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.

The lawsuit seeks a declaratory judgment that the arbitration rule is unlawful and an injunction against enforcement of the rule.

The lawsuit was filed Monday in the U.S. District Court for the Northern District of Mississippi by the AHCA, the Mississippi Health Care Association and three nursing homes in Mississippi and Texas. The Defendants are the secretary of HHS and the acting administrator of CMS.

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

Other aspects of the wide and deep revisions to CMS regulations published this month are discussed here.

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 /