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Nursing Home Arbitration Rule Put on Hold

By Alec Dobson

A federal rule that was to have banned pre-dispute arbitration agreements in nursing homes and other long-term care providers was put on hold by a federal judge on Monday.

The new rule, which would apply to facilities participating in Medicare or Medicaid, was to go into effect on November 28, 2016. The rule was postponed indefinitely by Monday’s ruling by U.S. District Judge, Michael P. Mills of the Northern District of Mississippi. The ruling granted a preliminary injunction preventing the U.S. Centers for Medicare and Medicaid Services (CMS) from enforcing the rule. CMS had published the new rule only a month ago, on October 4, 2016 (the rule is further discussed here).

The injunction was requested by the American Health Care Association (AHCA), the nation’s largest association of long-term care providers, and other parties (their lawsuit is further discussed here).

The ruling is only preliminary, which postpones the rule from taking effect until the AHCA’s lawsuit is settled. The final word from the courts, whenever it arrives, could uphold the rule. Therefore, providers should still review their agreements, and their procedures for executing them, so they will be in compliance when and if the new rule goes into effect.

Indeed, the court acknowledged concerns about pre-dispute arbitration agreements in nursing homes. Those concerns included facilities obtaining signatures from residents who might lack mental competency or from relatives who lack authority under a power of attorney. The court also expressed concerns over residents or their relatives signing arbitration agreements during the admission process, when many would be “prepared to sign anything to gain admission.”

However, the court ruled that CMS did not prove that nursing home arbitration has the negative effects claimed by CMS, which only offered quotes from comments received when CMS proposed the rule. CMS should conduct its own investigation of these issues in order to justify the ban, Judge Mills wrote. Judge Mills further stated that the ban raises serious concerns about conflict with the Federal Arbitration Act (FAA), which supports arbitration. CMS could reconcile its ban with the FAA if it focuses on the issue of mental competency, the judge wrote.

The ruling emphasized concerns over separation of powers, regarding CMS’ “breathtakingly broad assertion of authority” on the basis of vague language claiming to “protect and promote the rights of each resident.” Although the court may be sympathetic to the public policy concerns surrounding pre-dispute arbitration, it is up to Congress to act, not a federal agency, the court wrote. Additionally, Judge Mills wrote that he would expect the U.S. Supreme Court to apply significant scrutiny to CMS’ decision to ban a particular form of arbitration.

Putting this significant change into effect on November 28 would be “virtually certain” to harm nursing homes across the country, Judge Mills wrote, including losing signatures on agreements they likely would never regain, as well as the administrative expenses of revising agreements and retraining staff. On the other hand, he wrote, there is no harm in delaying the rule and maintaining the status quo until the lawsuit is resolved.

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 regarding this article, please contact your Davis & Kuelthau attorney or the author, Alec Dobson, at 262.792.2413 /