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U.S. Nearing Approval to Abandon Ban on Nursing Home Arbitration Agreements

By: Shane T. Roeber

The White House is nearing approval of a regulatory change that would allow pre-dispute arbitration agreements in nursing homes participating in Medicare or Medicaid.

On January 30, 2019, the White House Office of Management and Budget (OMB) began the review of a final rule (first published June 8, 2017) that would permit binding pre-dispute arbitration in long-term care facilities that are Medicare or Medicaid participants.

The new rule would negate a pre-dispute arbitration ban implemented under the Obama administration in 2016. However, before it could take effect, the ban was stayed by the U.S. Court of Appeals for the Fifth Circuit and an injunction was granted. The injunction is still in force today.

The OMB states that the proposed new rule “removes provisions prohibiting binding pre-dispute arbitration and strengthens requirements regarding the transparency of arbitration agreements in long-term care facilities.” Further, “this rule supports the resident’s right to make informed choices about important aspects of his or her healthcare. In addition, this rule is consistent with our approach to eliminating unnecessary burden on providers.”[1]

The proposed rule is opposed by both members of the industry and beneficiaries for different reasons.[2]

The Centers for Medicare & Medicaid Services (CMS) proposed the rule in 2017 which would allow for pre-dispute arbitration agreements but impose certain requirements on them (for the requirements, see U.S. Abandons Ban On Nursing Home Arbitration Agreements, located at https://www.dkattorneys.com/publications/u-s-abandons-ban-on-nursing-home-arbitration-agreements/). The American Health Care Association (AHCA) opposes the proposed rule. It maintains that the proposed regulations “are unnecessary – state law already addresses the potential fairness concerns that the regulations would target.”[3]

Further, AHCA takes the position that the proposed regulations violate the Federal Arbitration Act (FAA) and Kindred v. Clark, stating that the U.S. Supreme Court in Kindred confirmed that the FAA requires that arbitration agreements be treated the same as any other contract. AHCA believes that CMS cannot impose special conditions on arbitration agreements, as it would violate Kindred, and therefore should simply pull the 2016 rule and not regulate arbitration agreements at all.[4]

Beneficiary advocates have also opposed the proposed rule, stating it would “deprive beneficiaries of protections” and that CMS does not have the authority to do so. The AARP has stated the concern that the federal standard would “undercut protections for citizens in states with stronger state laws.”[5] Nonetheless, the OMB is moving forward with reviewing the proposed rule.

Currently, pre-dispute binding arbitration agreements are still permitted for nursing homes and other long-term care facilities as long as they meet standards for substantive and procedural fairness. Providers may continue to offer pre-dispute arbitration agreements that meet these standards. In addition, providers should consider adopting the proposed requirements from the 2017 rule.

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, the author linked above or the related practice group chair linked here.

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[1] https://reginfo.gov/public/do/eAgendaViewRule?pubId=201804&RIN=0938-AT18

[2] https://insidehealthpolicy.com/daily-news/omb-reviewing-final-rule-reverse-nursing-home-arbitration-ban

[3] InsideHealthPolicy, Industry, Beneficiaries Oppose CMS’ Long-Term Care Facilities Arbitration Proposal For Different Reasons

[4] American Health Care Association August 7, 2017, Comment Letter

[5] InsideHealthPolicy, Industry, Beneficiaries Oppose CMS’ Long-Term Care Facilities Arbitration Proposal For Different Reasons