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CMS Reverses Course on Pre-Dispute Arbitration

June 06, 2017

Eight months after publishing a final rule on the Revised Requirements of Participation for Nursing Facilities banning pre-dispute arbitration agreements for nursing home residents and family members, CMS is issuing new proposed rules that rescind resident protections against these unfair provisions.

According to CMS, it “now believe[s] that an outright ban on pre-dispute arbitration agreements and the further restrictions on post-dispute arbitration agreements do not strike the best policy balance,” and also that “a ban on pre-dispute arbitration agreements would likely impose unnecessary or excessive costs on providers.”  The proposed rule was placed on Public Inspection at the Office of the Federal Register on Monday, June 5, and is scheduled to be officially published in the Federal Register on Thursday, June 8, 2017.

In the proposed rule, CMS removes the requirement preventing facilities from entering into pre-dispute arbitration agreements, and also removes the provision banning facilities from requiring these agreements as a condition of admission.

Instead, CMS requires that an agreement for binding arbitration be explained to the resident and his/her representative in a manner that s/he understands, and that the resident acknowledges that s/he understands the agreement.   The agreement may not prohibit or discourage the resident or anyone else from communicating with federal, state, or local officials, including the survey agency and the long-term care ombudsman program.  CMS kept the provision that when a dispute is settled through arbitration, a copy of the signed agreement for binding arbitration, as well as the arbitrator’s final decision must be kept by the facility for 5 years and be available for inspection upon request by CMS or its designee.

Additionally, CMS requires that the arbitration agreement be in plain language; and if it is a condition of admission, that it be in plain writing in the admission contract.  Lastly, CMS is proposing that facilities be required to post a notice describing its policy on the use of agreements for binding arbitration in an area that is visible to residents and visitors.

Gone from the rule is not only language banning pre-dispute arbitration as a condition of admission, but also requirements from the 2016 final rule for post-dispute binding arbitration that the agreement be entered into voluntarily by the resident, that a neutral arbitrator be mutually agreed upon, and that the venue for arbitration be convenient to both parties.  

Shortly after publication of the final rule in October 2016, the American Health Care Association and affiliated nursing homes filed a lawsuit against CMS seeking an order stopping enforcement of the provision.  The district court concluded that the rule was likely in conflict with the Federal Arbitration Act and ordered the preliminary injunction.  On June 5, 2017, the government filed a notice with the court that they will seek a stay of the injunction, pending the completion of the rule making process.

Comments on this forthcoming proposed rule will be due 60 days from the date of publication in the federal register, or on or about August 7, 2017. 

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