CMS Finalizes Rule on Nursing Home Pre-Dispute Arbitration Agreements

By Mark Kantor

Kantor Photo (8-2012)

You will recall the controversy during the Obama Administration over the use of mandatory pre-dispute arbitration agreements by nursing homes.  Last week, the Centers for Medicare & Medicaid Services (CMS) of the U.S. Department of Health and Human Services finalized a revised rule (the 2019 Final Rule) removing the prohibition in the 2016 Rule on pre-dispute arbitration agreements for long-term healthcare facilities but keeping provisions from the 2016 rule “banning facilities from requiring that residents sign arbitration agreements as a condition of admission to a facility” and “specifying that a resident’s right to continue to receive care at the facility must not be contingent upon signing an arbitration agreement.”

Many thanks to Beth Graham and Karl Bayer’s Disputing Blog for following these developments – see www.disputingblog.com/cms-issues-final-rule-allowing-pre-dispute-nursing-home-arbitration-agreements/ .

As M-and-A participants will recall, CMS promulgated a rule in October 2016 barring long-term care facilities (e.g., nursing homes) from Medicare and Medicaid programs unless the facility gave up provisions requiring pre-dispute binding arbitration agreements between LTC facilities and their residents.  The 2016 Rule:

“prohibit[ed] LTC facilities from entering into pre- dispute, binding arbitration agreements with any resident or his or her representative, or requiring that a resident sign an arbitration agreement as a condition of admission to the LTC facility. It also required that an agreement for post-dispute binding arbitration be entered into by the resident voluntarily, that the parties agree on the selection of a neutral arbitrator, and that the arbitral venue be convenient to both parties. The arbitration agreement could be signed by another individual only if allowed by the relevant state’s law, if all of the other requirements in this section were met, and if that individual had no interest in the facility. In addition, a resident’s right to continue to receive care at the facility post-dispute could not be contingent upon the resident or his or her representative signing an arbitration agreement. The arbitration agreement could not contain any language that prohibited or discouraged the resident or anyone else from communicating with federal, state, or local officials, including but not limited to, federal and state surveyors, other federal and state health department employees, and representatives of the Office of the State Long-Term Care Ombudsman. In addition, when a LTC facility and a resident resolved a dispute through arbitration, a copy of the signed agreement for binding arbitration and the arbitrator’s final decision was required to be retained by the facility for 5 years and be available for inspection upon request by the Centers for Medicare & Medicaid Services (CMS) or its designee.

The 2016 Rule was preliminarily enjoined nationwide by the U.S. District Court for the Northern District of Mississippi in November 2016 as a result of litigation brought by the American Health Care Association and a group of affiliated nursing homes.  Promptly thereafter, CMS issued an instruction calling for non-enforcement of the 2016 Rule’s pre-dispute arbitration agreement provisions.  In 2017, the new Trump Administration issued proposed revisions to the 2016 Rule.  CMS sought public comment on the 2017 proposed rule, receiving over 1,000 comments including many from groups that advocate for the rights of older adults, residents in nursing homes or people with disabilities, as well as State Offices of the Long-Term Care Ombudsman.

Last week, CMS finalized and issued a revised 2019 Final Rule at 84 Fed. Reg. 34718 (July 18, 2019, available at https://www.govinfo.gov/content/pkg/FR-2019-07-18/pdf/2019-14945.pdf), making some changes to its proposed revised rule but retaining the removal of the core prohibition on pre-dispute arbitration agreements for long-term healthcare facilities.  Significantly, the final rule keeps important provisions from the 2016 Rule “banning facilities from requiring that residents sign arbitration agreements as a condition of admission to a facility” or “specifying that a resident’s right to continue to receive care at the facility must not be contingent upon signing an arbitration agreement.”  The 2019 Final Rule also modifies in some respects the transparency requirements offered in the 2017 proposed rule.  The CMS short summary of the Final Rule states as follows.

We have reviewed all of the comments received and considered the concerns raised by all stakeholders. As a result, we have made some revisions to the proposed rule in response to public comments. Specifically, as discussed in detail below, we are finalizing our proposals to remove the requirement at § 483.70(n)(1) precluding facilities from entering into pre-dispute, binding agreements for binding arbitration with any resident or his or her representative, and the provisions at § 483.70(n)(2)(ii) regarding the terms of arbitration agreements. We are not finalizing the proposed removal of the provision at § 483.70(n)(2)(iii) banning facilities from requiring that residents sign arbitration agreements as a condition of admission to a facility. Therefore, facilities will continue to be prohibited from requiring any resident or his or her representative to sign an agreement for binding arbitration as a condition of admission to the facility. In addition, to address commenters’ concerns that facilities may still coerce or intimidate the resident and his or her representative into signing the agreement, the facility must explicitly inform the resident or his or her representative that signing the agreement is not a condition of admission and ensure that this language is also in the agreement. We are finalizing provisions requiring that arbitration agreements be in a form and manner that the resident understands. However, we are not finalizing the proposed transparency related provisions that the facility must ensure that the agreement for binding arbitration is in ‘‘plain language’’ and that the facility post a notice regarding the use of agreements for binding arbitration in an area that is visible to residents and visitors. We are not finalizing the proposed removal of the provision specifying that a resident’s right to continue to receive care at the facility must not be contingent upon signing an arbitration agreement. Finally, based on comments, we are adding a requirement that facilities grant to residents a 30 calendar day period during which they may rescind their agreement to an arbitration agreement.

The full revised Final Rule can be found here – https://www.govinfo.gov/content/pkg/FR-2019-07-18/pdf/2019-14945.pdf.  It will be interesting to see if the nursing home industry opposes this Rule as well, in reliance on the reasoning of Epic Systems Corp. v. Lewis.  Whether or not there is a potential conflict between Epic Systems and CMS’ 2019 Final Rule, the industry may simply believe it has won enough in the political battle to step away from the legal battle.

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Mark Kantor is a CPR Distinguished Neutral. Until he retired from Milbank, Tweed, Hadley & McCloy, Mark was a partner in the Corporate and Project Finance Groups of the Firm. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). Additionally, Mr. Kantor is Editor-in-Chief of the online journal Transnational Dispute Management.

This material was first published on OGEMID, the Oil Gas Energy Mining Infrastructure and Investment Disputes discussion group sponsored by the on-line journal Transnational Dispute Management (TDM, at https://www.transnational-dispute-management.com/), and is republished with consent.

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