Health Law Daily CMS proposes revised requirements for LTC facility arbitration agreements
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Wednesday, June 7, 2017

CMS proposes revised requirements for LTC facility arbitration agreements

By Harold Bishop, J.D.

CMS has issued a Proposed rule that would preclude an outright ban on binding pre-dispute arbitration agreements between long-term care (LTC) facility residents or their representatives and the facility. The Proposed rule, if finalized, would reverse the October 4, 2016 Final rule (81 FR 68688) that prohibited these pre-dispute arbitration agreements or requiring that a resident sign an arbitration agreement as a condition of admission to a LTC facility. The Proposed rule would also strengthen requirements regarding the transparency of arbitration agreements in LTC facilities. The proposal is consistent with CMS’ approach to eliminating unnecessary burdens on health care providers.

2016 Final rule. In addition to banning pre-dispute arbitration agreements and requiring an agreement prior to admission, the 2016 Final rule also required that an agreement for post-dispute binding arbitration must be entered into by the resident voluntarily, that the parties must agree on the selection of a neutral arbitrator, and that the arbitral venue must be convenient to both parties (see Arbitration out, quality in under LTCF rule, October 4, 2016). The rule also stated that an 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 an 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 five years and be available for inspection upon request by the CMS or its designee.

Court action on the 2016 Final rule. On October 17, 2016, the American Health Care Association and a group of affiliated nursing homes filed a complaint in the U.S. District Court for the Northern District of Mississippi seeking a preliminary and permanent order enjoining agency enforcement of the prohibition on pre-dispute arbitration agreements regulation. On November 7, 2016, 34 days after the issuance of the October 4, 2016 Final rule prohibiting pre-dispute arbitration agreements, the district court preliminarily enjoined enforcement of that regulation.

The district court held that the plaintiffs were likely to prevail in their challenge to the 2016 final rule (see CMS’ ban on pre-dispute arbitration agreements temporarily stopped, November 8, 2016). It concluded that it would likely hold that the rule’s prohibition against LTC facilities entering into pre-dispute arbitration agreements was in conflict with the Federal Arbitration Act (FAA). The court also reasoned that it was unlikely that CMS could justify the rule, or could overcome the FAA’s presumption in favor of arbitration, by relying on the agency’s general statutory authority under the Medicare and Medicaid statutes to establish rights for residents or to promulgate rules to protect the health, safety and well-being of residents in LTC facilities.

As a result, on December 9, 2016, CMS issued a nation-wide instruction to State Survey Agency Directors, directing them not to enforce the 2016 final rule’s prohibition of pre-dispute arbitration provisions during the period that the court ordered injunction remained in effect (S&C: 17-12-NH).

Proposed rule. CMS now believes that a ban on pre-dispute arbitration agreements needs to be revisited and that a policy change will achieve a better balance between the advantages and disadvantages of pre-dispute arbitration for residents and their providers. The Proposed rule would remove: (1) the requirement precluding facilities from entering into pre-dispute agreements for binding arbitration with any resident or resident’s representative, which CMS does not believe strikes the best balance between the advantages and disadvantages of pre-dispute arbitration; (2) the prohibition banning facilities from requiring that residents sign arbitration agreements as a condition of admission to a facility; and (3) the provisions regarding the terms of arbitration agreements.

The Proposed rule would retain current provisions that:

  • protect the interests of LTC residents in situations where a facility chooses to ask a resident or his or her representative to enter into an agreement for binding arbitration (whether pre-dispute or post-dispute);
  • require the agreement to be explained to the resident and his or her representative in a form and manner that he or she understands, including in a language that the resident and his or her representative understands;
  • require the resident to acknowledge that he or she understands the agreement;
  • the agreement not contain any language that prohibits or discourages the resident or anyone else from communicating with federal, state, or local officials, including but not limited to, federal and state surveyors, other federal or state health department employees, and representatives of the Office of the State Long-Term Care Ombudsman; and
  • require when the facility and a resident resolve a dispute through arbitration, a copy of the signed agreement for binding arbitration and the arbitrator’s final decision must be retained by the facility for five years and be available for inspection upon request by CMS.

The Proposed rule would also add requirements that: (1) the facility ensure that the agreement for binding arbitration is in plain language; (2) if an agreement for binding arbitration is a condition of admission, it must be in plain writing in the admission contract; and (3) facilities post a notice in plain language that describes its policy on the use of agreements for binding arbitration in an area that is visible to residents and visitors.

CMS believes this revised approach is consistent with the elimination of unnecessary and excessive costs to providers while enabling residents to make informed choices about important aspects of his or her healthcare.

The Proposed rule will officially publish in the Federal Register on June 8, 2017. Comments must be received within 60 days of publication.

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